Can Small, Custom Manufacturers Benefit from an ERP

The manufacturing sector has evolved quite a bit in the last decade. Making it increasingly difficult to remain competitive. Reducing expenses, improving communication, and real-time data management, all while delivering more projects in less time are necessary to scale.  Enter ERP systems.  

On average, enterprise resource planning software:

- increases on-time deliveries by 24%.

- decreases operational expenses by 25%

- improves decision-making accuracy by 21%.

Statistics like this can’t be ignored, especially while growing a business.

To date, defense and aerospace have the highest adoption rate of ERPs. While it’s true that many large manufacturers, especially those who build standard products have implemented an ERP, we can see that small teams benefit substantially from a similar system. The caveat, however, is that these manufacturers build the same item(s) over and over. For Custom Machine Builders who rarely make the same thing twice, finding and implementing a system is more difficult.

So, it’s understandable that small Custom Machine Builders (try linking to WP streamlining ETO manufacturer) would hesitate and wonder if an ERP can help them in the same way.

Yes, it can. Perhaps even more so.

Here, we’ll take a quick look at some of the areas within your organization that will improve after implementing an ERP.

Small Manufacturers See Big Changes in Sales

Without accurate data, it’s difficult to properly estimate and quote a project. Real-time insights are a primary benefit of an enterprise resource planning solution. Panorama Consulting Solutions revealed that 87% of teams using ERPs in manufacturing reported improved access to critical information.

With the right ERP, an Integrator, Panel Shop, or OEM can easily capture change order information. They can also record and track estimates to completion for an accurate percentage complete revenue recognition.

Engineering is Improved With an ERP Designed for ETO

By integrating your ERP and CAD, it’s easy to bring your BOM in, without leaving CAD and with no double entry. This is one of many ways engineering departments become more efficient with an enterprise resource planning system.

For Engineer To Order manufacturers, the right ERP will also:

• let teams copy parts from a past project’s BOM to a new BOM.
• allow designers to cost out the BOM before purchases are made.
• search the system for previously used parts and their complete history.
• Track changes to the BOM at any stage of the project and ensure the information is shared across departments.

Time and Money Saved in Procurement

The purchasing department is one of the top departments where manufacturers see improvements.  In fact, the return on investment for an ERP averages 220% in procurement. Success here is partially due to improved efficiency. With an ERP designed for Engineer To Order manufacturers, procurement can issue and revise RFQs and POs with just a few clicks. They can also save time by grouping common parts or suppliers across multiple projects.

Improvements in procurement can also be attributed to reducing lead times. When engineering can release the BOM in stages, purchasers get a head start on long-lead components. Timely and dependable procurement helps ensure a reliable flow of materials when needed. This prevents production disruptions. In fact, 72% of manufacturers report supply chain improvements after their ERP implementation.

Additionally, Statista research shows us that manufacturers see a 23% reduction in excess inventory. Engineer To Order manufacturers are used to dealing with a lot of design changes, even after they’ve started to build.  That means a surplus of parts is common for Custom Machine Builders, but as we’ve seen, it doesn’t have to be.

An ETO ERP Simplifies Manufacturing

While on the subject of parts and materials, it’s important to note the improvements manufacturers see in the quality of parts. With an ERP, Integrators, Panel Shops, and OEMs can route parts between tasks, tracking both internal and external processes. Teams will know where their parts are in the fabrication process at all times. They can ensure parts are inspected, knowing who completed the inspection. It’s also easy to record and follow up on quality issues on the shop floor, from engineering, or for purchased parts with embedded non-conformance reports.

Small Custom Machine Builders can Integrate Their Accounting

Finding an ERP system that can be integrated, seamlessly with your current accounting software is a relief. By keeping your existing accounting system, such as QuickBooks or Sage, the learning curve is significantly improved. Efficiency and reliability also increase:

• Accounting departments can match AP invoices against received goods by supplier or PO.
• Payment milestones can be set up in your sales orders, automatically triggering AR for invoicing.
• Have customized workflows created to streamline T&M invoicing.
• Report on percentage complete numbers for revenue recognition. By using internal change orders to track material and labor budget changes, your team is able to make more informed decisions.

What is the ROI for an ERP

The return on investment for ERP software can be impressive. A study by Nucleus Research found that for every dollar invested in an ERP solution, manufacturers received an average of $7.23 in return. It’s also easy to see why the ROI can increase as a business relies on it more and more. As a small custom manufacturing business transforms into a larger organization, the benefits scale with them.

Statistics like this are a testament to the transformative power of an ETO ERP used in manufacturing. It should be noted, however, Custom Machine Builders benefit the most when using an ERP designed for their unique workflow. Integrators, Panel Shops, and OEMs are part of the Engineered To Order (ETO) marketplace. If using an ERP designed for standard equipment builders, they cannot collect the accurate data needed to succeed or streamline processes. Implementation is much more likely to fail. Or, if they are able to rely heavily on customizations and complete implementation, their ROI is drastically reduced.

The Best Option for ETO Manufacturing

The Engineer To Order sector has been growing in recent years. Since Total ETOs inception over 20 years ago, it remains the only ERP designed for ETO, by ETO. Our enterprise resource planning system integrates with all major CAD and accounting platforms. This makes all of the improvements discussed in this article, including those in sales, engineering, procurement, manufacturing, and accounting possible.

So, can small manufacturers benefit from and ERP?

Yes!

See the incredible improvements for yourself, book a demo today.