Manufacturing ERP: what a small or mid-sized manufacturer actually needs.

What a manufacturing ERP covers

A manufacturing ERP connects sales orders, materials, production and stock so that everyone plans from the same numbers. For a small or mid-sized manufacturer, the core is eight areas, and few businesses need all of them on day one.

Get BOMs and routings right first

Bills of materials and routings come first because MRP, scheduling and costing all calculate from them. If a BOM has the wrong quantity or a routing an out-of-date run time, every plan and cost built on it is wrong too.

• Use one code per item, with consistent units and conversions, such as buying cable by the reel and issuing it by the metre.
• Build multi-level BOMs for sub-assemblies, so a change to a component flows to every product that uses it.
• Include expected scrap or yield where it is significant, so material plans and costs are realistic.
• Control revisions with an ECN (engineering change notice), so production always builds to the current version.

Start with the products you make most often; clean data for those beats a complete but unreliable catalogue.

Where to start: make-to-stock, make-to-order or engineer-to-order

The right first module depends on what triggers production. A make-to-stock manufacturer builds to a forecast and ships from stock; a make-to-order manufacturer builds standard designs once a customer orders; an engineer-to-order manufacturer designs or adapts the product for each customer.

Many plants are a mix. Start with the flow that causes the most late orders or rework, run it alongside the old method for a short, agreed period, and add the next module once the team relies on the first.

Planning and the shop floor: MRP, scheduling and MES

MRP tells you what to buy and make, scheduling tells you when and on which machine, and shop-floor data capture tells you what actually happened.

MRP is different from a reorder point. business.gov.au describes a reorder point as the smallest amount of an item you want in stock before ordering more, which suits items sold at a steady rate. Components depend on what you plan to make, so MRP works backwards from orders and forecasts through the BOM instead of waiting for stock to run low.

Scheduling can start with work orders in priority order against due dates. When a few machines or skilled people decide delivery dates, APS (advanced planning and scheduling) adds finite capacity, loading each work centre only with the hours it really has.

An MES (manufacturing execution system) records what really happens on the floor. Many small manufacturers start with a tablet or barcode scanner at each work centre to record start, finish, good quantity, scrap and downtime reasons. That is enough to compare plan with actual every shift.

Quality, traceability and ISO 9001 records

Traceability means you can show which material lots went into each finished batch or serial number, and which customers received it. A lot or batch is a quantity made or received together; a serial number identifies one unit. Recording them at receiving, issue and dispatch lets you trace back from a complaint and forward from a faulty material.

Some sectors require it. Food Standards Australia New Zealand states that food manufacturers, wholesale suppliers and importers must be able to recall unsafe food and have a written recall plan, which it advises should include batch codes and contact details of everyone the product was sent to.

ERP records also support ISO 9001, the international standard for quality management systems. Inspections, nonconformances, corrective actions, calibration and training can be recorded as work happens, so evidence is ready for an audit. ISO itself does not certify organisations; an independent certification body does. Our certification and compliance service prepares the management system and coordinates accredited certification bodies, which issue the certificate.

Costing and the link to accounting

Costing in a manufacturing ERP adds material, labour and overhead into a standard cost per unit, then compares it with what each work order actually used. The differences, called variances, show where scrap, extra labour or price changes eat margin.

• Material cost comes from BOM quantities and purchase prices.
• Labour and machine cost come from routing times and agreed rates, then from actual times recorded on the floor.
• Overhead is applied at an agreed rate, so each product carries a fair share of factory costs.
• Work in progress (WIP) is valued from materials issued and operations completed, so month-end figures are not guesses.

Keep invoices, GST, BAS and payroll in the accounting software you already use, such as Xero or MYOB, and connect the ERP so sales invoices, supplier bills and stock values flow across. Agree with your accountant how stock and WIP are valued and posted before go-live.

If packaged products do not fit how you make things, a custom ERP for manufacturers can be built around your production model one module at a time. For how plan, production, quality and stock signals come together day to day, see our manufacturing industry view.

At Optivise AI, custom ERP modules can include PLM, MRP/APS, MES, WMS and QMS on one set of data. Each typically takes about a week to build, plus testing, and is accepted before the next starts.