Why ERP systems in mechanical engineering are necessary?

What is told by the theory

In terms of the theory application of the systems of the class ERP in mechanical engineering is necessary in order that the enterprises could fully take all advantage of methodology of MRPII implemented in "production" ERP systems and also additional functions of resource management systems of the enterprise. From this position use of similar program (and methodological) providing should provide economic optimization of all production and related processes.

In particular, uniform planning process of MRPII from the volume of the received orders to determination of optimal production volume on nomenclature positions and "back" to optimization of loading of the equipment, optimization of raw material stocks, component parts and semi-finished products, optimization of purchases and transportation costs should provide further decrease in production and transaction costs, acceleration of accomplishment of orders, decrease in warehouse and transportation costs, in some cases, reducing costs of personnel, etc.

EAM functions of ERP systems allow to manage fixed assets, to control a status and to plan maintenance and repairs of industrial equipment, buildings and constructions, communications, etc. that gives the chance to prevent accidents, a stop of production and the economic losses connected with it.

The HRM block provides full human resource management that positively affects loyalty of personnel, labor productivity and costs of the enterprise.

Financial functions allow to carry out the accounting and planning of all financial transactions, to quickly reduce and prepare the reporting, to perform calculations with employees and partners, to reduce a set-up time and processings of payment documents and also number of errors them therefore also the corresponding losses are reduced.

Management tools flows of works (Workflow) and document flow provide more accurate interaction of both different services and divisions, and individual employees with each other and also give the chance to control passing of documents and their execution. They are complemented with the functions of ERP systems on project management allowing to implement project-oriented enterprise management.

The CRM functions allow to optimize processes of advertizing, promotion and is actually sold finished goods, to systematize work with buyers, to keep track of their preferences, to plan expansion of the range, to organize sales channels, partner networks, etc. and also to trace unfair buyers that provides reduction of receivables.

Also, ERP systems are useful and as information source for the persons making decisions. As all transactions pass only through an information system and are fixed in it "forever", the management has an opportunity to understand what really happens to the enterprise (it also significantly simplifies audit and tax audits).

The unity of data in a system provides impossibility of "digital" discrepancies between divisions when, for example, data of personnel department do not match data from workshops and, already together, do not match data of accounting. Possibilities of "immersion" in data (Drill down) allow to reach from the aggregated indicators final transaction and/or the document of primary reporting by means of what it is possible how to reveal factors and zones of growth of efficiency, and to estimate real results of work of managers of an average and lower link and also linear specialists. Means of consolidation of the reporting of the enterprises with the distributed structure and also an e-business intelligence supplement this functionality.

Thus the ERP system which is, theoretically, implemented in commercial operation should become for users a source of complete, timely and reliable information about all economic aspects of activity of the enterprise, an optimization appliance of all costs and revenues of the enterprise at all levels of management and also the instrument of carrying out corporate policy and observance of corporate economic strategy. As a result of use of a similar system at economic level (at which business in general and production in particular is considered) what cannot be optimized on technology (on which specific items and processes of their production are considered) that will allow to receive the maximum return from activity of the enterprise will "be finished".

What in practice?

At the practical level the answer to the question "Why ERP Systems in Mechanical Engineering Are Necessary?" sounds a little differently. Unlike the theory, in real life not all can be formalized and entered in a framework of ERP therefore a part of management processes, motivations of personnel, productions, etc. remains beyond the scope of a single corporate system. Also, except economic aspects of activity of engineering enterprise exist still technical and technology: products should be projected, project technical documentation should prepare, be stored, processed and updated, be executed modeling, be created prototypes, be organized serial production, it is, also, necessary to manage the equipment and technology processes, product quality, etc.

As a result the basic position of ERP systems – all processes and data in one system – in practice is never executed. Always, and especially on industrial enterprises, ERP systems are used together with a number of specialized information systems, such as MES, SCADA, CAD/CAM/CAE, PLM. Besides, instead of in "family" of modules of ERP systems the solutions of third-party suppliers, best in the class (best of breed), for example, of the workflow system, are often used by HRM, SCM, WMS, SRM, CRM (and in domestic conditions use also separate financial accounting systems), which, for some reason, suit the enterprises more than offered as a part of the ERP system.

Besides, not all functions of the systems of the class ERP in general are really demanded by the customer. In particular, according to results of the research Aberdeen Group, the American engineering enterprises use on average 10.5 modules from 24 "standard" (according to analytical company) the modules ERP systems. Functions of accounting, purchase management, deliveries, orders and also "production" functionality are the most demanded. At the same time the scope of functionality of the used modules makes about 71% today, and possibilities of ERP systems in general are used a little more than for 30%.

The similar Russian research conducted by Direktoriya company based on poll of 50 companies of North-West Region showed that in rather large number of the companies at implementation of ERP systems the MRPII block ("production" functionality) was not implemented at all. Among the revealed purposes there are implementations of ERP on the first place – "For understanding of a current status", it was specified by 79% of respondents, on the second place (42%) – centralization of information, on the third (38%) – performance improvement of office employees, 33% of respondents specified "Decrease in costs/stocks", 25% – "The general development of the enterprise" and 17% – "Compliance to external requirements".

Thus, real industrial enterprises use ERP systems for ensuring accounting of all business operations, preparation of the corresponding reporting, a business intelligence, order management and deliveries, stocks and purchases and also cost efficiency of production processes.

At the same time – for the large companies – also simultaneous use of several ERP systems from different producers is not a rarity. For example, in management company of holding one system, and on the industrial enterprises entering into it – others can be used (and at each enterprise there can be ""). In such cases, as a rule, "production" functionality and also integration of specific ERP systems into the solutions MES and PDM/PLM is the reason of "disparate" in systems.

In general, main advantages of ERP systems are quite available to the enterprises which implemented them not only in the theory, but also in practice. Cost optimization on production, the maintenance of stocks and purchases and also setting of accounting and correct reporting quite noticeably affect an economic situation of the enterprise. It is just necessary to consider that dealing of effect from ERP system use essentially depends on specific conditions at the enterprise, its specialization and a number of additional factors.

In particular, most likely, the effect of ERP will be more noticeable at the enterprise which is turning out the differentiated products small batches than at the enterprise with pipeline production of identical products. Similarly, the effect of implementation of the ERP system will be more explicit at the enterprise with the arranged business and technology processes, an accurate management structure and rather effective production. At non-compliance with these conditions or the ERP system will just cease to be used really eventually, or at the enterprise there will be a change and it "will be tightened" to requirements of ERP.