Why is There an Increased Need for ERP Systems in Manufacturing Industry?

In the present dynamic business scenario, every organization needs perfect synergy between departments, right from input to output. ERP thereby plays a pivotal role in integrating the inter and intra-departmental processes like – billing, production, and supply chain. ERP helps in reducing timelines, enhancing processes and minimizing the cost of operation.

In manufacturing companies, an ERP system allows businesses to gain information at all time without hindering any internal resources and processes. ERP systems provide a better managerial capability for managing the product data.

ERP Systems in Manufacturing Industry

Market Value of Indian Manufacturing ERP

An online published report states that in the year 2018, the Indian Manufacturing ERP market accounted for $262.7 billion and is estimated to contribute $712.7 billion by the year 2027. During the forecasted period (2019-2027), this market segment is expected to show a contribution growth CAGR of 11.9%.

During the above-mentioned forecasted period, the positive approach followed for implementing the strict regulatory compliances, and its growing need will be driving the Indian manufacturing ERP market. There are specific challenges as well for the market to grow. These challenges are related to high upfront costs during the implementation process and upgradation.

Segmentation of Indian Manufacturing ERP Market

India Manufacturing ERP Market is classified into the three major categories, namely- by enterprise size, by deployment type and by end-users.

  • In terms of enterprise size, this market is segmented down as- SMEs and Large Enterprises. In the forecasted period, the SME segment is going to witness maximum growth. The same report says that the Indian manufacturing market usually consists of nearly 60% SMEs. ERP helps this market segment to rise in the value chain in terms of its market credibility and enhanced confidence between the stakeholders.
  • In terms of deployment type, the market is segmented into- Cloud and on-premises. For the deployment type segment, the Cloud segment will show the maximum growth as the cloud services are being used for providing the availability of services at all times with minimum costs.
  • In terms of the end-users, this market is segmented as- automotive, consumer electronics, metallurgy, pharmaceuticals, energy, food & beverage, chemicals, retail & garments.

Manufacturing Industry Challenges

There has been an increased demand for an ERP system to address various challenges and issues that the manufacturing industry today faces.

These issues include the following

  • Lack of transparency about the availability of raw materials
  • There is no proper monitoring of the accounts in manufacturing companies
  • Manual intervention often leads to inefficiency and inaccuracy
  • The data present at silo database systems often leads to non-uniformity

How ERP Systems Are Deployed in Various Manufacturing Stages

The necessary information of the customer gets fetched into the ERP software that is responsible for managing order solutions. This automated procedure helps every department to keep track of the order progress at every stage and scheduling the tasks.

  • Supply Chain Management

The supply chain component of an ERP software allows the manufacturers to effectively manage their product flow right from the pre-production stage to the time it reaches the end consumers. It also helps the manufacturers to serve their customers with real-time updates on their orders and the associated costs.

  • Purchases

The purchasing module in an ERP software works together with the supply chain management and inventory modules. This module helps in managing the procurement of materials by providing comprehensive insights on supplier listing, quotations, purchase orders, stock updates, and other vital processes. This electronic data exchange eases the process of purchase orders and other transactions.

  • Manufacturing Process

An ERP software helps in aligning the manufacturing processes using automated planning, scheduling and enhancing the speed of manufacturing and accuracy. Modern-day ERP software also has inbuilt support for make-to-stock, make-to-order, configure-to-order, engineer-to-order, just-in-time manufacturing and materials control, and lean operations.

  • Orders Processing

Post fetching the user information, the processing of automated events takes place, thereby allowing the order process to be monitored and controlled. Once the sales order gets generated, resource allocation initiates raw material procurement from the inventory. The order now reaches the production stage and is guided until the end of the assembly line.

  • Material Management

An ERP system helps the companies in organizing and categorizing their inventory, monitor the movement of products and provides comprehensive management of warehouse data.

  • Quality Control

Most of the ERP systems today have in-built quality assurance features. The ERP systems help the manufacturing businesses to manage their quality, capturing the non-compliant as well as corrective measures in a single database. These businesses can perform a complete audit process such as planning, executions, and follow-ups.

  • Warehouse and Inventory Levels

ERP systems help businesses to optimize their inventory by determining the stock levels. It also facilitates the process of minimizing shortages and reducing delivery costs based on inventory levels.

Significance of ERP Systems in Manufacturing Industry

  • Automates and Streamlines Business Processes

A complete ERP solution helps in aligning and automating business processes that fuel automation for the business organizations involved in manufacturing. With all the processes getting streamlined, the entire organization’s data is made available in a centralized location, along with complete transparency across all the departments. ERP systems also help the manufacturing personnel to monitor the production status in real-time without having any dependencies on other teams. An ERP system increases the efficiency in the manufacturing process, enhancing productivity and making the manufacturing organizations compliant to the commitments made to their customers. With automation of the critical processes, the manufacturing companies can also reduce their dependencies on manual processes. The issue related to errors and profitability gets resolved to a great extent.

  • Quick Responses to Market Conditions

ERP systems provide real-time and rapid analysis of data for the businesses to estimate and plan as per the changing dynamics of the market. The key decision-makers in the manufacturing industry often refer to the reports generated by the ERP system regularly for planning and strategizing their business plans to cater to the variable market demands and encash on their customer behavior trends towards purchases. ERP system reports provide a holistic view to the managers by reducing the errors and capitalize on the upcoming opportunities in the market.

  • Strategic Decision Making

An ERP solution helps in improving the decision-making process of a manufacturing organization. It gives a comprehensive insight as well as transparency about every department in the organization, helping them with an informed, accurate and faster business-related decisions. ERP systems offer access to key performance areas of an organization by aligning them to their preset goals and carry out the necessary internal decisions if they are needed. Complete transparency of the internal processes along with the departments helps the management to optimize their daily operations.

  • Lowers Cost

A dynamic and efficient ERP software helps the manufacturing organizations to cut down their overall operational costs since the manual and time-consuming processes are being replaced by automated processes backed with real-time information related to business. An ERP solution also helps in overcoming the additional labor expenses, providing enhanced levels of precision and accuracy with lower error rates to cut-short the unwanted losses. ERP system gives the complete visibility of inventory tracking by eliminating the extra inventory and warehousing costs.

  • Improves Customer Satisfaction

With accurate planning of production and better control over inventory along proper synchronization between the various distribution channels helps the manufacturers to enhance the on-time delivery of their products to the end customers. The timely delivery of products helps in improving customer satisfaction levels. With ERP systems providing real-time data to the decision-makers, they can get a realistic idea of the inventory at any instance of time.

Concluding Notes

Manufacturing organizations need to address various vital concerns if they are looking to gain a competitive edge in today’s dynamically changing business ecosystem. With a web-based ERP system deployed in their organization, manufacturing organizations can efficiently address the issue of information fragmentation. An effective ERP system helps in aligning complete business processes and strategies to the various software blocks needed across all functional areas in the business. Lastly, an ERP system acts as a bridge to fill in the gap and enhance integration amongst all functional areas present in the manufacturing industry.

Rishabh Sinha