All entries for Wednesday 27 April 2011

April 27, 2011

Challenges of ERP implementation in manufacturing

ERP is integrated software application system used to control different aspects of enterprise management. The final aim of ERP is reducing cost and enhancing efficient. The early ERP is developed on the base of MRP, MRP II and CIM. Thus, the modern ERP software tools are powerful in the supply chain mangement and customer management.  

It cannot conceal the great advantages of ERP application in manufacturing industry. However, manufacturing is totally different from service and merchandising business. There are several challenges stopped the expanding of ERP software during manufactors.

1. Bottleneck of software tools

The information system in manufacturing is based on the CAD technology. With several years development, manufacturers already have CAD, CAM, PDM, PLM, Virtual factory and so on. However, it is difficult to integrate these technologies within ERP system. 

For example, there is a need of a process to deal with the order change. Because manufacturing is based on the customer requirements and the customers would change their mind during the production. Thus, the modification process is one of the most important workflow in manufacturing arena. But there is not a good ERP software can handle the order change in different departments quickly and perfectly. 

Another example is CAD drawing and BOM. We can build and link the CAD drawing and BOM in CAD system now. But the bill of materials used in ERP is different. And there is no tool can change the information of CAD drawing into the BOM used in ERP software automatically. Even a manufacturer implemented the ERP system, they need lots of people and time to do the work between the different systems. 

2. Industry complex

Compared with service and merchandising business, manufacturing has more complicated workflow. For example, the material purchase planning is quite different with that in merchandising business. In a merchandising company, a purchaser can easily get the information of purchase quanlity and time from the suppliers and customers. However, the purchase planning in manufacturing needs to consider the production schedule and factory capacity which have relationship with many other departments. The information collection and analysis would be a challenge work for ERP implementation team.

3. Repetitive investment

Most of modern manufactors already have more than one information systmes, not only CAD/CAM, but also OA, HR, CRM system. But these systems are rather separated. They cannot share or exchange information with each other automatically. So they need update regularly by operators. If there is something change in one link of the business, it would take a long time to make the change reach every department of the enterprise. For the head of the enterprise, implementation a new ERP integrated system means giving up the previous information systems and waste a lot money. However, there is not a formal solution for manufacturers to created a integrated platform with existing information systems.

4. Background of staff

Manufaturing is a very old industry and has developed for centuries. ERP is a mixture of industury and computer science and only has developed decades. There are lots of new concept and technologies in ERP which are different from traditional manufacturing. So it takes long time and a great sums of money to let the staff of manufacturing understand the new concept and apply the new systems.  

Basically, ERP system is a kind of software. So the most of the system developers and consultants have the background of computer science or IT. It is a hard work to make these IT workers to understand the processes and requirements during the production without engineering background knowledge. In the implementation, there always be a lot of time wasted on the communication between the two backgrounds. Thus, there is a need of someone have both knowledge of engineering and experience of the information systems. 

5. High cost

No matter the ERP system or other information systems have a rather high price. It would take a lot of money to implement, operate and maintain the systems, especially in manufacturing industry. For SMEs, they cannot offer these expenses. So they need a simple and cheaper solution for their business which would not be so powerful but fix their current problems and keep the potential of development in the future. 

All in all, it is a greater challenge to implement ERP system in manufacturing than in other business. 

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