How To Choose A Right-sized
Manufacturing System
Chapter #3
Identifying Specific Objectives
Copyright © 2010 Manufacturing Information Systems, Inc.
All Rights Reserved.
About the author. David Brown began his professional career in 1972 with Prime Computer, Inc. where he designed peripheral interface equipment with particular focus on manufacturing and testing issues. In 1977 Mr. Brown left Prime to develop manufacturing control software targeted to small- to medium-sized manufacturing firms. Brown and his associates first produced the MISys Manufacturing System for proprietary microprocessor-based computers and then in 1985 ported the software to the IBM PC running MS-DOS. The MISys system was soon integrated with Accpac, a PC-based accounting system now owned by Sage Software, Inc. and marketed as Sage Accpac ERP. The MISys manufacturing and the Accpac accounting software has been co-marketed successfully for over 20 years and has 7,000 installations worldwide. In 2007 Manufacturing Information Systems (MISys) released a new Microsoft .NET version of its software which continues to work with Accpac and also integrates with a number of popular small business accounting products. Today MISys has strategic relationships with Sage (the makers of Accpac ERP, Peachtree Quantum, and Simply Accounting) as well as Intuit (the makers of QuickBooks). Mr. Brown frequently writes on the subject of manufacturing control best practices for small businesses and is a popular speaker at trade shows as well as manufacturing and accounting conferences.
About this series. This series of whitepapers is intended to help owners and managers of small- to medium-sized manufacturing firms choose a manufacturing software system that is sized right for the needs of their company. Mr. Brown notes “In our 20+ years as developers and installers of software for small- to medium-sized manufacturing firms, we’ve learned a lot about what works (and doesn’t work) for companies of all shapes and sizes. In this series of whitepapers we’ve tried to distill the key elements of what has proved to be successful – with fair warning about certain pitfalls into which the uninitiated are likely to fall.”
While writing these whitepapers, the author (who is usually involved in the sales and marketing of a specific software product) has remained as objective as possible, sticking to broad topics and specific elements related to the acquisition of manufacturing software in general, and carefully avoiding reference to any specific product.
About this chapter. This chapter of How To Choose A Right-sized Manufacturing System discusses the various objectives you may have in implementing a computerized manufacturing control system.
Identifying Specific Objectives
Back in Issue #1 we posed the first great question you should ask when trying to choose a right-sized manufacturing system: “What do I want to achieve?” As you ponder this question, you should be developing a list of specific objectives such as these:
The list of objectives won’t be the same for every type of manufacturer. For example, better coordination with Sales will be critical to a Make-To-Order manufacturer, less relevant to a Make-To-Stock manufacturer, and irrelevant to a Job Shop. Tracking vendor performance may be irrelevant to a Process manufacturer, but vital to a Make-To-Stock manufacturer.
Regardless, your list of objectives will fall into three categories: objectives that will immediately affect your company’s profitability, those that can affect changes that will ultimately produce measurable financial results, and those that have no financial measure but will improve your company’s operations in any case.
Immediately Measurable Objectives
When compiling your list of objectives, you may focus on things that can be measured in terms of the profitability of your company. If your CFO is involved in selecting a right-size manufacturing system (and he/she should be) then the question will invariably be asked “How long will it take to pay off a system like this?”
If a manufacturing control system can help you reduce your annual inventory financing costs by, say, $10,000, then any system costing $9,999.99 or less will make your CFO smile. Pay-back in less than one year is a lot to ask, but systems do exist in this price range.
If you wish to evaluate manufacturing software on this basis, make sure you have up-to-date and reliable information on 1) the value of your raw materials and WIP inventory (not counting your finished goods inventory) and 2) the interest rate you pay your lender to finance this inventory.
If, through careful control of purchasing and production activities, a manufacturing system can reduce your inventory holding costs by 25% (and knowing your lender’s interest rate) you should be able to quickly calculate the potential pay-back.
In my experience, systems offering a pay-back in less than 36 months are very attractive.
Indirectly Measurable Objectives
A manufacturing company assisted by a right-sized manufacturing control system can achieve better results in less time than any company operating by the seat of its pants. Many tasks can be accomplished by software in seconds that would require many hours to complete manually.
Consider updating the cost of finished goods whenever raw material costs change (aka cost roll-up). When several levels of sub-assembly exist, this task becomes so time consuming that it is often overlooked. And yet, accurate costing of finished goods is critical to your success as a company. Software can roll up your costs in moments -- and never make a mistake.
While it is tempting to focus on inventory reduction as a justification for a new manufacturing system, I believe these indirectly measurable objectives can be far more valuable in the long run.
Impossibly Measurable Objectives
Every manufacturer knows the pain of completing production after some critical customer ship date has passed. The blame goes around and around, but the damage is done. Could you place a dollar value on a planning tool that would help you avoid such unfortunate experiences in the future?
In addition, the act of acquiring a new manufacturing control system will require many people in your plant to re-examine, re-evaluate, and re-establish policies and procedures. This reorganization, in and of itself, will be reflected an increased efficiency and profitability.
ADVERTISEMENT
The MISys Manufacturing System was designed specifically for small- to medium-sized manufacturing firms like yours.
For more information, including demonstration videos and trial copies of the software, visit the MISys website.