Today's competitive environment for manufacturing companies revolves primarily around cost savings. Manufacturers are now experiencing pressure to control and reduce production costs due to rising costs for raw materials, labor, and energy, all while maintaining product quality. Manufacturing ERP software can help factories reduce production costs by 5%-20% and improve overall operational performance.
This article will show, with the help of relevant examples, what production ERP software, manufacturing software for small business and ERP for manufacturing can do to reduce production costs and improve efficiency closely tied to profitability.
The costs of production include all expenses associated with the production process. This includes:
- Materials and other components
- Labor and labor costs
- Energy and utilities
- Maintaining and depreciating machinery
- Overhead expenses, i.e., rent and insurance and administration
Costs driven by inefficient processes, waste, and unplanned downtime add to these production costs. Most management methods lack the visibility needed to obtain and take advantage of these opportunities. Hence the arrival of manufacturing ERP software.
One of the top causes of higher production costs is poor inventory management. When a company has too much inventory, it ties up capital and requires too much warehouse space. However, if the company has too little inventory, it may face production delays and expedited purchase costs.
A manufacturing ERP software will provide real-time inventory tracking, automated reordering, and integration with procurement and production modules. Some benefits of this are:
- Being able to keep optimal stock levels
- Lowering storage and obsolescence costs
- Reducing material waste
- Avoiding emergency purchasing and rush orders
Ineffective production scheduling and the manual coordination of departments can result in machinery sitting idle, lengthy production times, and increased labor costs.
Production ERP software assists factories:
- Scheduling production based on demand and resource availability
- Monitors the work-in-progress status in real time
- Automates the assignment of tasks for workers and machines
- Identifies bottlenecks and takes actions to eliminate them
When factories improve scheduling and resource allocation, they can lower labor costs, reduce machine idle time, and improve throughput.
Many factories simply do not realize that unplanned machine downtime is a hidden cost. For every hour that a machine sits idle, money is being lost and labor is wasted.
With predictive maintenance modules in manufacturing ERP software, you can:
- Monitor machine health in real-time
- Notify operators of possible issues ahead of time of a failure
- Plan maintenance during non-peak hours
- Reduce the costs of emergency repairs
Labor inefficiency increases production costs. Manual processes, repeated errors, and Vague expectations can stall operations.
Manufacturing software for small businesses helps production facilities:
- Efficiently assign tasks according to worker availability and skill set
- Monitor employees performance
- Provide relevant updates and alerts
- Minimize errors with workflow automation
Factories can save on wages, overtime, and rework costs by optimizing labor allocation and minimizing human error.
Wasted materials result in additional costs to the producer. Misused, spoiled, or overproduced materials directly impact costs and profit.
With manufacturing ERP software, you can:
- Follow real-time consumption of materials
- Calculate accurate production requirements
- Integrate inventory and production planning
- Report on detail to improve and to review practices
Utility expenses for electricity, water, and gas constitute a significant percentage of production costs. ERP solutions offer analytics to assess energy usage and find efficiencies.
- Track energy consumption of each machine or production line
- Pinpoint energy-intensive operations to optimize production
- Minimize peak hour and overtime energy use
- Align production schedules to utilize cheaper energy usage
Manufacturing ERP software can help users manage energy usage and translate it into savings. In fact, energy usage is sometimes 5-10% of production costs.
Using data to drive decisions is a requirement for reducing production costs. ERP software collects data from production, inventory, purchasing, and financial data stores and adds value by providing actionable insights.
- Identify machines or processes that are not performing to standard
- Predict how much material to keep on hand to avoid excess production
- Evaluate supplier performance to negotiate better pricing
- Look at trends in labor productivity to manage and allocate human resources accordingly
Even smaller shops can access significant cost savings through manufacturing software for small business:
- Reduced inventory and storage costs
- Reduced labor costs through workflows
- Reduced waste and cost of energy
- Improved production efficiency and throughput
- Better decision-making with real-time dashboards
When selecting an ERP solution to cut production costs, consider:
Characteristics/Functions Specific to the Industry: Planning production, managing inventory, and predicting maintenance.
Scalability: Ensure that your system will grow with your factory and accommodate multiple lines or facilities in the future.
Integration: Connect production cognitively with finance, human resources, and supply chain areas, for overall cost control.
Analytics & Reporting: Real-time dashboards and access to key performance indicator (KPI) tracking.
Vendor support: Implementation support, training, and after deployment support.
The right ERP for manufacturing ensures your investment translates directly into measurable cost savings and efficiency improvements.
The next-generation manufacturing ERP software combines AI, IoT, and cloud technologies:
- Insights Utilizing Artificial Intelligence: Anticipate maintenance needs, streamline production schedules, and predict material demands.
- Integration of IoT: Track machines and energy consumption in real-time.
- ERP as a Service: Decrease costs associated with the IT infrastructure and connectivity.
- Mobile Accessibility: Field operators can update field processes from any location, increasing responsiveness.
These innovations further enhance the ability of ERP systems to cut production costs while maintaining quality.
With the proper manufacturing ERP software in place, it can be possible to reduce production costs by 20%. By improving inventory, production processes, labor, maintenance, and energy, factories can achieve significant savings, with more efficient and productive operations.
Regardless of whether you are a large manufacturing facility, or a small operation with manufacturing software for small business, a production ERP software (or the best ERP for manufacturing) should deliver:
- Lowered costs of operations
- Better use of resources
- Better decision making
- Increased competitiveness in the market
Factories in India that adopt ERP solutions today will be better prepared to lower costs, improve quality, and grow quickly in anticipation of future growth.