How can an ERP tackle the big issues facing small UK manufacturers today?

Introduction

Businesses in many sectors are now seeing the benefits that ERP systems can bring. From hospitality to professional services, the software provides an ever-growing raft of functions, as well as a central repository for operational and financial data. It drives efficiency, productivity and growth – something for which every forward-thinking firm strives. 

While ERP software is enabling teams across a myriad of industries to optimise complex processes and make smarter decisions, its origins are rooted firmly in manufacturing. As such, ERP software remains most closely associated with industrial sub-sectors. 

ERP technology has transformed industrial companies over the years and is set to become a key enabler for Industry 4.0. As 3D printing, artificial intelligence (AI), Internet of Things (IoT) and blockchain all become accessible to small manufacturers, they’ll need a single point from which to manage all of their data and processes.

Compared to some older solutions, a modern cloud-based ERP system for small businesses is easy-to-implement and low-cost. It can also streamline increasingly complex industrial and business processes, from production and inventory management, to sales, accounting and business intelligence. Solutions like these can help small firms to be leaner and more innovative, and respond better to external forces such as Covid-19, Brexit, rising energy and wage costs, and the drive to achieve Net Zero. 

There’s no doubt that ERPs have driven up performance and standards across the board, to the extent that it’s extremely difficult (if not impossible) to achieve success without one. 

Revenue in the ERP market is expected to grow over the coming years, a sign that adoption will continue to climb, too – so getting ahead now should put small manufacturing companies in a stronger position compared to any competitors still lagging behind.  

In the following sections, we’ll look at the current pressures facing different sub-sectors of manufacturing, and how a good ERP can help to overcome them. 

Furniture and accessories

While China produces the most mass-produced furniture globally, the UK is home to around 6,355 producers. 

The sub-sector spans everything from iconic brands such as ercol, whose factory is in Buckinghamshire, and G Plan in Wiltshire, to small-scale manufacturers specialising in hand-crafted goods. There are also a number of sawmills producing timber goods such as fencing and decking for consumers and the trade, and textiles firms making soft furnishings.

Also in this category are the commercial furniture producers, responsible for fitting out offices, restaurants, shops, hotels and other public spaces. 

Furniture manufacturers have to adapt quickly to design trends and consumer behaviour each season, as well as unexpected events. Covid-19 lockdowns drove up demand for furniture, especially outdoor pieces, at a time when producers were experiencing severe labour and materials shortages. Faced with longer lead times, they had to manage their supply chain carefully to reduce the impact of shortages on retail customers and consumers. 

The recent crises notwithstanding, there are other challenges for furniture manufacturers. Their processes might involve a number of materials (textiles, metal, wood, plastics), each with differing lead times and assembly techniques. Limited edition and bespoke items also require specialist materials and skills, so any errors or quality issues are costly, and it can be difficult to store, ship and process returns on these often bulky and fragile items. 

It’s therefore essential for furniture makers to choose an ERP for furniture manufacturing that helps to achieve on-time, in full (OTIF) delivery, meet the quality standards required and respond to changing tastes and styles. 

Mixed production methods are a common way to reduce inventory costs and delivery times, savings which can be passed on to wholesalers, retailers and consumers. 

Even if they can’t compete with the likes of China on pricing, UK-based furniture manufacturers can use ERP to be more reactive to changes in the market. Whereas supplies from the Far East might have a six-month lead time, local manufacturers are able to respond quickly to an influx in demand; it doesn’t matter how cheaply products can be bought from overseas if orders can’t be fulfilled.  

In order to protect margins, especially when faced with factors outside the span of control, an ERP provides a complete view of operations – helping furniture manufacturers to accurately predict what materials and purchases are needed, while keeping a close eye on costs. 

By grouping materials requirements together, and aligning them with demand, furniture manufacturers can produce more accurate estimates to keep cash flowing and reduce waste. And, in an increasingly complex supply chain, the ERP system should integrate with pricing software to automatically provide the latest information and allow for updated deadlines. Further efficiencies can be found in automating processes because it allows staff to be redeployed on tasks that deliver value – not the routine, yet time-consuming ones.
A configurator is another important tool in furniture manufacturing software, since it allows for customisation of finished goods while lowering the costs and inefficiencies tied to higher volume of data (increasing the risk of error). The configurator also helps furniture manufacturers tailor a work order to customer requirements – not just raise work orders by sales orders.

Electronics

Serving a broad range of customers, including ones in automotive, aerospace, energy and consumer electronics, this area of manufacturing makes a valuable contribution to the wider industry, and the UK economy. It is composed of everything from manufacturers of electronic components and connectors, to designers and manufacturers of electronic cards, including electronic subcontractors who offer a number of services, ranging from prototyping, small or medium series, to testing.

The growing appetite for digital devices, solar panels, electric vehicles, medical devices, and the rise of the Internet of Things (IoT), will only drive up global demand further, paving the way for new innovations and the creation of more highly-skilled jobs. However, UK businesses face fierce competition from the Far East (particularly China), where production and wage costs are lower. Like other areas of manufacturing, the electronics industry has experienced shortages recently as demand for computer chips and lithium outstripped supply. 

Latest government figures give us an idea of how tough conditions are for manufacturers in this sub-sector – with the production of computer, electronic and optical products dropping by 4.5% in April 2022 compared to the previous month. 

One question facing electronics suppliers is whether to outsource or even relocate to another low-cost country, or to use their proximity to larger UK customers to their advantage. In the wake of Covid-19, and the efforts to achieve Net Zero, there’s certainly a case to be made for shorter and perhaps less risky supply chains, as well as keeping lead times down.

Whatever decision they make, it’s vital that electronics manufacturers have an ERP that helps them reduce costs to stay competitive and manage any shortages more effectively. Using integrated business intelligence, electronics manufacturers can plan further ahead to prevent long delays and get the best price, while maintaining the highest quality and traceability standards. 

An ERP for electronics manufacturers, with a MRP function, makes the purchasing process easier and more accurate, too, no matter how many parts they have. It allows them to manage multiple suppliers in one place, or invite them to tender, helping to reduce lead times and achieve OTIF.  

Thousands of different components might comprise just one circuit board, and you could be making hundreds of different boards, so your bill of materials (BoM) will be extensive. 

Companies producing electronic equipment will be subject to the same quality and compliance standards as any other manufacturer – the big difference is the number of parts involved and the fact that customers demand that they come from certain manufacturers. Electronics manufacturers also have a stronger need to version products (both software and hardware), to show traceability, and to deliver customer and after-sales services.

Managing multiple suppliers, many of whom are likely to be based in the Far East, is no easy task when relying on manual purchasing processes. On top of that, electronics manufacturers need to factor testing into the manufacturing process – and calibrate testing equipment to ensure the highest levels of accuracy. 

Last, but by no means least, it’s important to remember that electronics suppliers are an important contributor to the UK’s digital economy. Their customers are continually innovating, and the use of cloud ERP systems can be a clear sign that an electronics manufacturer shares their vision of a digital future. 

Metal fabricators

The metals industry is another ‘workhorse’ of UK manufacturing, which according to the UK Metals Council, is composed of 11,100 companies, employs around 230,000 people, and directly contributes £10.7bn to the UK economy. As well as OEM fabricators, metals covers subcontractors and suppliers to manufacturers in a range of industries – such as automotive, defence, medical equipment, energy, defence, jewellery-making, tech and construction. 

Just before the pandemic, the UK produced 7million tonnes of steel alone – although it was dwarfed by China’s output which stood at 996 million tonnes. 

Companies operating in the metalworking and mechanical engineering sector deploy a long list of specialist production techniques. They include foundry, hot forging such as stamping, cold stamping, machining, bar turning, precision mechanics, sheet metal, 3D printing, grinding and the surface treatments of parts. 

Like other areas of manufacturing, the metals industry experienced shortages during the period of supply chain disruption. Along with lithium, there has also been high demand (and price inflation) for other metals such as aluminium and copper.

An increasingly uncertain global supply chain, and competition from China and other countries, means that metal manufacturers must ensure they’re working as efficiently as possible to keep prices low and proactively forecast any potential delays. Leading companies lean heavily on their ERP to manage complex industrial processes, while keeping inventory costs low and responding quickly to changes in the market. Their ability to consistently deliver quality products OTIF is what sets them apart from the competition. 

Using the EDI (electronic data interchange) function in their ERP, metal fabricators can communicate more effectively with customers and import technical product and design data from their CAD software to save time and reduce the chances or error. 

A strong cloud ERP solution can also support current and future integrations with other software, including CRM (customer relationship management), WMS (warehouse management) and Internet of Things (IoT) devices. A connected supply chain, the characteristic of Industry 4.0, is a way to improve visibility and efficiency, and enable staff to work more productively because they don’t need to manually import and export information every time. 

Working in the metals manufacturing sector, companies need a wide range of tools for tasks such as punching and bending – and their calibration needs to be tracked. 

Doing this manually is both time-consuming and error-prone, and staff might end up using old or incorrect tools because the latest calibration data isn’t available. However, by storing all data in a central and easy-to-access location, metal fabricators can be confident that it is fully updated and available to everyone who needs to see it, so they don’t inadvertently use tools that compromise product quality.

Similarly, a cloud ERP makes it easier to adhere to quality standards such as ISO 9001, AS 9100 (aerospace) and ISO/TS 16949 (automotive), and that products and components pass the third-party quality inspections that customers often commission. 

As mentioned above, using a metal fabrication ERP to ensure your tools are in good working order is essential – but it also provides visibility of parts, materials and orders, so they can be traced throughout the supply chain. Any issues, like defective parts or quality issues caused by human or machine error, or poor-quality tools, are quickly flagged up so damaged parts don’t fail testing, nor are sent out to customers.

Automotive and engineering

Automotive equipment manufacturers and subcontractors drive the UK car industry with everything from precision parts for chassis systems to car seats, electronics and, increasingly, components for electric and hybrid vehicles. 

Generating almost £12billion for the economy, the UK automotive industry supports more than 2,500 suppliers and 10 engine manufacturers. One of the biggest challenges, or opportunities, for manufacturers is rising demand for electric vehicles and laws banning the sale of new petrol and diesel cars over the coming decade or so.

It’s therefore important to choose an ERP that meets the standards of automotive manufacturers, and use it to manage compliance certificates, serial number and batch traceability, and evaluate suppliers. The software should help to standardise processes, avoid error and satisfy inspectors. 

In a fast-changing market, insights from an automotive ERP system will help companies in the automotive sector forecast demand accurately and ensure they have the right inventory in stock. This visibility allows them to plan two, five or even 10 years ahead – including how they might adapt their business model to meet demand for electric vehicles and comply with new legislation. Having this knowledge means they’re able to design their business strategy with confidence, possibly by developing and diversifying the product range, or subcontracting production to specialists elsewhere. 

Equally, when subcontracting services to other manufacturers, it’s important that automotive manufacturers have complete visibility of work-in-progress, purchasing, suppliers and stock in order to provide precise lead times and prices. Without this insight, they risk letting down customers.

Choosing your first ERP

The number of ERP solutions on the market today can make the selection process daunting, especially when time, budgets and IT expertise are tight. Much depends on the number of users who need access to the system, ease-of-use and your operational requirements. For example, do you mass-produce components, make-to-order or work on a project basis? 

A good manufacturing-centric ERP solution has a robust level of functionality out of the box, and should allow you to manage your supply chain much more easily and effectively. It must provide you with the visibility you need to reduce risk with more accurate forecasts, and coordinate materials planning (MRP), production and assembly to minimise lead times and maintain the highest quality standards. Stock forecasting is another area where an ERP developed specifically for manufacturing is essential. Events such as Covid-19, Brexit and the war in Ukraine disrupted global supply chains, leading to shortages of key materials and components.

After checking for the basics, it is also important to consider the area of manufacturing you work in. Metal fabricators, furniture makers, food producers and so on all have their own requirements, including different ISO certifications – and a generic solution may offer limited benefits and sometimes needs extensive customisation. An industry-specific solution, on the other hand, is developed with features for your industry by people who know it. Although it can be more expensive, at least on paper, this type of solution typically delivers better ROI because it can be rolled out quickly with no need for customisation. 

Download here A five step guide to choosing your ERP: 40 questions to ask yourself and your vendor

Another important consideration is how well your vendor knows your industry and the challenges you face. Their experience and long-standing relationships with customers helps to inform the development of the software so you benefit from new and updated features that can support your business now and in the future. It’s also a good idea to choose a vendor who understands the needs of small businesses, and their growth ambitions. 

In the end, an ERP might not alleviate every single issue you face, but it will solve some of them and, undoubtedly, free up your team to focus on higher-value activities. Greater efficiencies across your business processes will save you time and money, so that you can continue to improve customer acquisition and retention, even in challenging times. 

Final thoughts

The diverse range of small businesses that make up the UK manufacturing sector all have their own company-wide and industry challenges to contend with and regulations to comply with. 

Medical devices manufacturers, for instance, must adhere to ISO13485 and be able to offer complete traceability of every component to prevent patients suffering. Meanwhile, perishability of goods, and the risk of contamination, is a significant risk for food and drinks producers if they don’t have adequate stock control and traceability processes in place. 

Whatever sector you supply to, defective or poor-quality parts, leading to scrapped parts, or product recalls, will cost you business, repeat orders and, sometimes, your reputation. In the most serious cases, where an end-user is harmed, you could even face legal action.

Offering visibility of production and business processes, an ERP can help you achieve top-quality standards and offer full traceability, while enabling you to achieve more with the same number of employees.

As discussed above, there are pros and cons associated with industry-specific and generic ERPs. The ‘middle ground’ is often the best choice for smaller companies, who need an affordable ERP that combines the best features of both – resulting in a modern, out-of-the-box solution with industry-specific features that can be quickly configured and implemented. 

Assuming the ERP is a cloud-based SaaS solution, it will also likely be able to deliver rich functionality, both on the desktop and on mobile devices. If the solution has open APIs, it can be connected with external machines, suppliers, customers and applications, creating seamless and accurate transactions across the supply chain. 

Whatever software you choose, it should be easy to implement and operate, without requiring high levels of IT expertise or eating into production time. Furthermore, it must be able to be customised to meet users’ needs with a modern interface and clear dashboards displaying relevant information, tasks and objectives. When you have all of this in one ERP, you can ensure your ERP works for you, and your industry – not the other way around.

Fortee is a brand new ERP solution from Forterro, developed for small-scale manufacturers in key industries such as metal, electronics, furniture-making, medical devices and others. Cloud-based, it is low-cost and zero-risk, with an implementation and training time of just 40 days. Contact us to find out more.