Growing Smart with ERP

ERP SystemWith over 30 years’ experience working with clients in the manufacturing and distribution industry as well as participating in the trials and triumphs of a family owned tool and die company, I have spent a lot of time observing why some companies thrive, some coast along, and some do not persevere. Though timing may be different for every company, at some point, if you want your company to keep growing and succeeding, it may be wise to let outside resources bring their experience and expertise to your table.

Unless you acquired or were hired into a company of size, many of the manufacturing and distribution company’s out there started with one, two or three skilled people with experience in a particular area of manufacturing or distribution. They were very hard working and had the entrepreneurial heart to strike out on their own. They started out small and sometimes kept their prior position while they tested the waters. Being small, they had very good control over the manufacturing process, the marketing and sales, and the income and expenses. Some of these companies stayed small on purpose and thrive. However, sometimes, if you are good at what you do, it is hard to stay small and the entrepreneurial drive to grow is hard to resist.

As a company begins to grow the control tends to wane. The owner cannot be everywhere at once. Since growth does not happen overnight, and often takes place over years, the loss of control is not noticed or not taken seriously. It may start out with handing over the bookkeeping duties to a secretary or wife. As the number of production employees grows one is made foreman. As kids grow up they may be brought in and given positions in sales. Some companies are at this point, some stay at this point and some disappear once the original owner retires, sells, or goes out of business for any number of reasons. We have clients that stay at this level and are very happy staying there.

There are also the companies that grow. For some, the growth is not a good thing, as it results in less than desired results, but for others it works and they thrive. The owners of these companies are skilled in the manufacturing arena. However, they are also skilled at maintaining tight controls in all areas of their business. They have hired good, dedicated plant managers, marketing and sales forces, and a good controller. They have implemented systems of quality control and continuous improvement. What I often see in the companies that thrive and consider key, is that they have realized the importance of utilizing good outside resources, with experience in their industries. The very large manufacturers do this and the successful smaller and medium sized manufacturers do this. In this article I’ll discuss several outsourced investments a manufacturer or distributor should make as part of their overall strategy for continuous improvement and profitability

A good Enterprise Resource Planning (ERP) system is a must. With a history of over thirty years, ERP has become a mature business application. The right system should improve on-time deliveries and inventory control while reducing administrative time and costs. It should give you visibility throughout your organization and streamline the manufacturing process. There are a lot of them out there now and selecting the one that is the best fit for your business takes research and time. Talking to your business consultants, members of trade organizations you belong to and other users in your industry is one way to start. While cost reduction, customer satisfaction and ability to support growth are key factors in selecting the right system for all companies, one system does not fit all. Purchasing and implementing the right system for your company is just the start. Once it is implemented it is very important that it be fully utilized, upgrades installed and results constantly measured. There has to be buy in by everybody in the organization starting at the top and working on down from there.

While a good ERP system is a must for all manufacturers and distributors, there is a certain price point or size which should be reached before it makes sense to retain the input of other advisors to this industry. While these advisors will be able to offer advice and help make improvements for any company, the savings to a smaller operation may not justify the cost. If I were to throw out a number, I would say once a company hits $20 million in sales the savings that could be achieved using these consultants could be substantial. Most of these consultants have worked in the manufacturing industry and have backgrounds in industrial engineering, business engineering, lean manufacturing or related fields. Some specialize in plant relocations, warehouse management, layout design, material handling techniques, product design, cycle times, inventory management, quality assurance, quick change over and a host of other areas where cost savings can be achieved.

The best proof that the services provided by these advisors to the manufacturing and distribution industry work is when users of the services refer them to others in the industry or call them back for new projects. We would be happy to share the names of consultants in these areas we have confidence in and who have a fairly impressive list of companies they have helped. If you would like additional information on them or how they might help your operations, give us a call.

Dan Corbett

Dan is a founding member of the firm, and is the Principal-in-Charge of the Assurance Group. His industries of concentration are manufacturing and distribution, construction, leasing, and food and produce preparation. http://www.cdhcpa.com
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