Don Valentine, Absoft’s Commercial Director and ADIMA ERP Lead, talks to us about transforming SME manufacturing and how the UK’s manufacturing sector has responded well to the challenges of recent years.
The UK’s manufacturing sector has responded well to the challenges of recent years – not least by bouncing back from the ‘brutal’ 10% decline in output in 2020. Investment in staff training, automation and technology, as well as investment in R&D, have created a sector that is now one of the largest in the world.
Yet too many of the UK’s SME manufacturing businesses still lag when it comes to end-to-end automation and technology adoption. Most have achieved pockets of innovation, both on the shop floor and within administrative functions such as finance and sales. Yet there is a continued disconnect between business areas that is compromising agility and responsiveness as inflationary pressures, as well as global supply chain disruption, start to take their toll.
Investing in ERP is the obvious step, providing a single, end-to-end solution that can transform productivity, cost control and competitive position – but how can SME manufacturers attain ERP quickly, effectively and at an affordable price point? Don Valentine, Absoft’s Commercial Director and ADIMA ERP Lead, explains why a pre-configured ERP solution tailored to meet the specific functional requirements and cost-effectiveness needs of SMEs is changing the game.
Business-critical challenges
Soaring raw materials prices and global supply chain disruption are creating huge pressures for a manufacturing sector already reeling from COVID-19 lockdowns and an unexpected depletion of the labour force. With 85% of UK manufacturers reporting rising purchase prices, businesses are wrestling with a new set of challenges. What proportion of these additional costs can be passed on to the customer? How will delays in the supply chain affect the production process – and will that incur penalties from customers if products arrive after the promised date? How will both delay and price rises affect customer demand?
Traditional business decision-making based on accepted trends in raw materials pricing and customer demand have been thrown into total disarray. Companies cannot rely on last year’s data to make this year’s decisions – that will be a fast track to profit erosion and business loss. But without complete, end-to-end visibility across the entire business, companies are not in a position to make the right decisions at the right time.
And far too many are operating blind, with a mix of different solutions, in different departments; one for finance, one for sales and marketing, for example, and another for operations and supply chain. The only way to join up the business processes and decision-making is to painstakingly feed sales demand into production, replenishment, procurement and distribution processes – something that few companies have the time or resources to achieve.
Fast tracking ERP deployment
This current set of financial and operational challenges is just one more reason to make the leap to a single, end-to-end, ERP solution that provides complete, accurate and real-time visibility of the entire operation. To be fair, most manufacturing companies recognise the value of ERP systems – such as SAP S/4HANA – which provide a single source of business information, support process automation and transform efficiency.
SME manufacturers are, however, understandably concerned about the cost and disruption associated with traditional ERP deployment. Designed to support every type of organisation from banking to defence, logistics to the public sector, traditional ERP solutions need to be so feature-rich and offer so many options that they can end up being all things to all men – rendering the initial process of determining the functionality required and the workflows daunting, at the very least.
This is where the out-of-the-box, preconfigured solution designed specifically to meet the needs of SME manufacturers changes the game. With this approach the ERP solution is preconfigured upfront, delivering the core features and functions required by manufacturers while eradicating the time consuming and expensive configuration process. As a result, implementation timeframes can be radically reduced – rather than a 12-month project, the full ERP solution can be in place within 12-16 weeks. With the option of cloud-based deployment, manufacturers can move away from the complexity and resource demands associated with on-premises systems, further releasing both cash and in house resources.
Transforming competitive position
With a single ERP solution, a manufacturer can gain immediate control over the entire business process and focus on the core areas of business pain. If just-in-time stock management is the priority, purchase decisions can be automatically driven by real-time sales demand, reducing the risk of excessive, expensive raw material stockpiles. If the goal is to mitigate the risk of spiralling raw materials, combining sales demand with information about materials costs and delivery timescales will enable informed, timely purchasing decisions.
Plus, of course, with complete visibility of the entire process, vendor management will improve. Finance will not inadvertently pay for delayed deliveries and any potential impact on manufacturing caused by supply chain problems can be assessed and immediately shared with customers. Indeed, the entire customer interaction is transformed. Arming the sales team with real-time information on desktops, tablets or mobiles provides immediate access to customer history, what is on order, when it is due, their credit status and invoice position. Sales staff are empowered to make intelligent, achievable customer offers, without the risk of discounts that could compromise the bottom line – a position that delivers a tangible competitive advantage.
Linking the operational production systems with the ERP optimises the entire manufacturing process. Sales orders are automatically converted into production orders, which then drives just-in-time stock management on the shop floor. All of these are visible at a glance by staff – either on a mobile device or workstation. This reduces the frustration of chasing instructions and increases the time spent on expert activities, from using a robot welder to sampling elements and checking quality, boosting morale throughout the company.
Conclusion
Despite the investment in training and automation that has improved the productivity of UK manufacturing in recent years, almost three-quarters (74%) of manufacturing and engineering companies post-pandemic are still relying on ageing legacy systems and spreadsheets to get tasks done, believing this inflexible, often out-of-date, disconnected data is sufficient to support corporate decision making, according to research from Forrester Consulting.
Yet, with labour shortages and rising staff wages adding to the challenges facing SME manufacturers, the pressure is now on to gain control – and that means better information to support vital decisions, more efficient processes and a way of optimising staff time and satisfaction. ERP is no longer out of reach for businesses of any size. With minimal up-front costs, an Opex rather than Capex investment model, a cloud-based, preconfigured ERP solution provides rapid access to the automation and business information manufacturers require, fast.