In the 1960s, a tractor manufacturer teamed up with IBM to create a system for tracking inventory and production. The idea caught on, and soon other manufacturers were using similar systems, called material requirements planning (MRP). Those systems evolved to become enterprise resource planning (ERP) software, which is like an MRP but covers more business functions, from human resources to customer relationship management, all while keeping tabs on essential production processes. Today, many industries use ERP systems — even those that don’t deal with physical products.
Enterprise resource planning (ERP) software combines all the apps and systems companies use to run their businesses. Instead of having separate systems for tasks like tracking inventory and managing sales leads, an ERP provides a streamlined platform that seamlessly connects departments.
So, many industries have adopted ERPs, but they remain just as important in manufacturing. In fact, manufacturers need them now more than ever, as market competition demands modern business processes.
Benefits of Enterprise Resource Planning Software
ERP benefits vary depending on your starting point. If, for example, you're using old-school methods like paper notes and unwieldy spreadsheets, you'll quickly gain efficiencies because manual tracking can be messy and leave room for human error.
But even if you already use software for something like inventory tracking, an ERP can save you time and headaches by offering a broader view of the business. It pulls everything together in one digital space.
Linking sales projections with inventory is an obvious win, but you can also gain more subtle benefits. Take human resource management. If employee time cards are linked to your ERP, it can eliminate steps from the manager’s to-do list by automatically relating time cards to payroll. Plus, if you see from the sales notes that a big order may come in soon, you can make sure you have enough staff to handle the influx of work.
How Manufacturing ERP Can Help With Market Trends and Challenges
Manufacturers face many challenges, including labor shortages, supply chain disruptions, and net-zero emissions efforts.
An ERP isn’t like waving a magic wand to eliminate industry-wide challenges, but it can be part of a larger strategy. For instance, it won’t prevent supply chain disruptions, but it could help you see the impacts and find workarounds such as ordering a replacement for a crucial component that's delayed.
An ERP can also help you formalize and report your progress on sustainability initiatives. IndustryWeek sums it up well: “Within a manufacturing environment, each production element of a finished good carries some inventory of carbon footprint, which ERP systems are well suited to track as they would other items in inventory.” Imagine having a single spot where you could track the carbon "costs" linked to raw materials, machine time, and labor — that’s the ERP.
Common ERP System Features
Most ERP platforms have some basic components in common, including modules (pieces of software) for finance, human resources, supply chain management, manufacturing, sales, and customer relationship management. For manufacturers, modules for facility management, employee and site safety, compliance, maintenance and reporting, and inventory management are especially important.
The great thing about ERP systems is that those different modules can work together and share data, giving you valuable insights. For example, you could use an ERP to create automated workflows between purchase and work orders.
An ERP is essential to your tech stack and provides all the benefits we've described here. You can also extend your ERP’s core functions with add-on software from third parties. These extras can add functionality and tailor the ERP to fit your needs. If you want to enhance your ERP's capabilities, Quickbase connects to your ERP and allows for app creation and additional functionality to enable you to get more out of your existing system.
Choosing the Right ERP for You
You have countless ERP offerings to choose from, ranging from enterprise solutions to smaller, industry-specific options. There's no obvious “best” ERP — it all depends on matching solutions to your needs.
Here are the most important factors to consider when comparing ERPs.
On-Premise vs. Cloud
Decide whether you want an on-premise or cloud-based system.
An on-premise ERP usually comes with higher upfront costs and needs some specialized know-how to set up and run. But the big plus is you get full control over everything.
On the flip side, a cloud-based ERP can be a simpler choice since the provider takes care of all the behind-the-scenes details. Plus, it offers the ability to scale up and down and push out updates like security patches.
Business Size
Some ERPs have amazing features, but will you use them? If you're a smaller manufacturer, you may be able to get away with a free or basic ERP. If you're a larger organization with many moving parts, you may need a more robust or specialized solution.
Usability
Some ERPs have extensive capabilities that require specialized training to implement. While this could be a great option if you're a large, well-staffed manufacturer, you may want a more intuitive system. Ask the software provider about the training it recommends and the anticipated learning curve, and try a free demo to see if the interface feels modern and easy to use.
Scalability
When weighing different options, consider whether you need to scale up and down to meet seasonal demands. If your business is expecting and planning to grow, you don’t want to have to start over and switch vendors in the future.
Modules and Features
Consider whether you need a lot of modules or if the core capabilities are plenty. Does the ERP have manufacturing-specific modules, or is it more general? For example, you need to track safety and compliance, but not every business needs that capability, so not every ERP will include it.
Customization
Think about if you need to add modules and software to tailor the ERP to your needs or if a more generalist type of ERP will work. Ask the provider if customization requires hours of coding or if it's more of a drag-and-drop situation.
Vendor Services and Security
When you’re looking at vendors, price might be your first consideration, but keep a few other factors in mind, too. Check out the customer service the vendor offers, whether it understands your industry, and how well its system integrates with your existing tech.
And don’t forget about security! ERP systems hold a lot of valuable information that hackers find appealing. For instance, one cybersecurity researcher discovered 769 million records containing access tokens, API keys, secret keys, bank account numbers, tax identification numbers, and 381,224 email addresses were publicly available through an ERP. So ensure the provider has strong security measures in place.
How to Set Up Your New ERP
No matter which ERP you choose, your IT team will handle deploying and integrating it. But you may want to get involved in the set-up process to ensure the configuration matches how you plan to use the system. For example, an IT administrator may assume you want to automate as many functions as possible, but you may prefer to stay more hands-on due to gaps between the ideal production line and the actual environment.
You may also want to clean up your existing data so you don’t bring old problems into your shiny new software. This process can take time but can help you get the most valuable insights from the ERP. Delete old information that's no longer relevant to the business, fix any glaring errors such as misspelled product names, and merge any duplicate entries.
When you’re ready to integrate the ERP with your other systems, your IT department or a representative from the ERP provider will likely set up application programming interfaces (APIs), which are middleware, or software layers to connect different systems together. They can also configure any add-ons to ensure your ERP meets your business needs, although you won't need help from IT if you use a user-friendly low-code application development platform like Quickbase. It is designed to be easy with a visual interface and pre-built components that you can use to create custom applications.
As a last step, test the system and train anyone who will use it.
What’s Next: Success After Setup
Just as you'd regularly clean and maintain a machine on the shop floor, continuously check on the ERP to ensure it functions properly. Regularly update the software, which can fix bugs, create security patches, and potentially add new functionality. Even if the software updates are automatic (which is the case with most cloud-based ERPs), be aware of updates so you don’t get caught off-guard by changes.
Also, set a schedule for regular data cleaning and ongoing maintenance. Your original configuration may not suit your future needs, so don’t be afraid to reach out to the provider for support if you need help making changes.
Examples of ERPs in Action
Atlanta-based ABC Compounding, an industrial cleaning chemical manufacturer with roughly 150 employees, previously printed reports and manually handled work orders. When the manufacturer transitioned to an ERP, it eliminated many manual steps and experienced higher efficiency, cost savings, and improved customer service.
Similarly, Valmet (formerly Metso), a leading process performance provider in the oil and gas, mining, and aggregates industry, built a suite of Quickbase applications focused on streamlining the order management process. Data from ERP, inventory, and data warehouses were updated regularly to Quickbase applications. Valmet saw an annual cost savings of $1 million from improvements to order management, engineering, and inventory processes.
Enterprise resource planning is a real game changer for project and production managers who are in charge of daily activities and timelines. It gives them a clear overview of the shop floor and allows them to dive into the details whenever they need to.
Meeting Your Digital Business Goals
There’s a high chance that one of your business goals includes digital transformation and moving to a smart factory model. This is definitely where the industry is headed, and while the fourth industrial revolution (aka Industry 4.0) creates many potential gains, it also adds yet another challenge.
You probably already have a ton of data about the shop floor, and you’ll likely collect even more soon. But let's be honest — it’s not helpful if it’s all over the place. An ERP can help you wrangle the disparate systems you have today and any new ones you bring on board in the future.
