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What is ERP? Is it a smart choice for a small manufacturing company?

What is ERP? Is it a smart choice for a small manufacturing company?

Growing companies eventually get to a point where spreadsheets no longer cut it. To optimize their procedures and facilitate growth, they conclude that they need some software package. But which one is the best choice? Most business professionals have heard the term “ERP,” but they may not know exactly what enterprise resource planning software is or if this is exactly what they need for their company. Below we explain what ERP is, how it works, and how to choose the right solution for your business.

Table of contents:

  1. ERP / MRP / MES and other manufacturing software for production scheduling and control. read more →  
  2. Why do manufacturing ERP or MRP systems not be the best idea, and Why most MRP or ERP systems fail in a small manufacturing company? read more →  
  3. What you think You need from manufacturing ERP / software, and what You really need? or which is better to choose: ERP / MRP software for production scheduling? read more →  
  4. Which manufacturing software or ERP system is best for small production planning and scheduling (depending on the industry you represent and your company’s size). read more →  
  5. What are free or inexpensive alternatives to ERP / MRP, and why free ERP systems are generally costly? read more → 
  6. Why should you avoid using offline ERP manufacturing software, and what are the best trends to consider? read more → 

ERP definition

When you type in google search engine the phrase “manufacturing software”, you are spoilt for choice. Thousands of companies have a wide range of products and services, and after spending hours researching, you are none of the wiser. Some basic definitions should make things clearer, considering that top google positions occupy large companies selling sophisticated resource planning systems, which might not necessarily be synonymous with what you are looking for.

ERP is an acronym that stands for enterprise resource planning (ERP). It’s a business process management software that standardizes, streamlines and integrates business processes across finance, human resources, procurement, distribution, and other departments. Typically, ERP systems use an integrated software platform operating on a single database, which collects and organizes key business information that helps organizations run lean and efficient operations as they expand.

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How does ERP function?

Once information is compiled in that central database, leaders gain cross-departmental visibility that empowers them to analyze various scenarios, discover process improvements and generate major efficiency gains. That translates to cost savings and better productivity as people spend less time digging for needed data.

ERP has evolved from a human resource management application to a tool that spans IT management. That’s why for many users, an ERP is a “do it all” system that performs everything from the entry of sales orders to customer service. It attempts to integrate the suppliers and customers with the manufacturing environment of the organisation. 

ERP modules

ERP belongs to a category of business software, but its systems comprise various modules, each addressing a specific business requirement. The names and numbers of modules in an ERP system provided by various software vendors may differ. The most popular modules of ERP target:

  • engineering data control (bill of materials, process plan and work centre data); sales, purchase and inventory (sales and distribution, inventory and purchase); 
  • material requirement planning (MRP); 
  • resource flow management (production scheduling, finance and human resources management); 
  • works documentation (work order, shop order release, material issue release and route cards for parts and assemblies); 
  • shop floor control and management and others like costing, maintenance management, logistics management and MIS. 

Also, the modules of ERP include areas such as:

  • Finance (financial accounting, treasury management, enterprise control and asset management). This lays at the basics of the ERP concept.
  • Logistics (production planning, materials management, plant maintenance, quality management, project systems, sales and distribution), 
  • Human resources (personnel management, training and development and skills inventory), 
  • Workflow (integration of the entire enterprise, with flexible assignment of tasks and responsibilities to locations, positions, jobs, groups or individuals).

ERP in practice

How does it look in practice? For instance, the customer relationship management (CRM) module tracks all communications with clients, assists with lead management and can enhance customer service and boost sales. Professional services automation plan and track projects, including the time and resources spent on them. It can simplify client billing and encourage collaboration among staff members working on a project. The Working Time Management (WTM) module keeps track of attendance and hours spent at work, and in some systems, can also manage payroll. It can record absenteeism and productivity by department, team and an individual employee. The list can go on forever. 

Each module pulls information from and pushes information into the central database that is a key component of an ERP system. This common data repository provides visibility into all departments. It thus allows leaders to evaluate and compare the performance of different business areas and understand the full impact of decisions. 


A brief history of ERP

The ERP system traces its roots commencing from standard inventory control packages to material requirements planning (MRP) in the 1960s. Manufacturers used MRP software to plan production schedules, make sure they had all the necessary supplies for production runs and track finished inventory. It was one of the early business applications, which did not belong to the finance and accounting area. MRP at its core is a time phased order release system that schedules and releases manufacturing work orders and purchase orders, so that sub-assemblies and components arrive at the assembly station just as they are required. Some of the benefits of MRP are reduction of inventories, improved customer service, enhanced efficiency and effectiveness.

MRP evolved and expanded to include more business functions such as product costing and marketing. In the early 1980s, MRP expanded from a material planning and control system to a company-wide system capable of planning virtually all the firm’s resources. This expanded approach was MRPII. A major purpose of MRP II is to integrate primary functions (i.e. production, marketing and finance) and other functions such as personnel, engineering and purchasing into the planning process to improve the efficiency of the manufacturing enterprise.

ERP – the term is born

The Gartner Group of Stamford, the USA, coined the term ERP in the early 1970s to describe the business software system that is the latest enhancement of an MRP II system (encompasses all MRP II modules).

A key difference between MRP II and ERP is that while MRP II has traditionally focused on the planning and scheduling of internal resources, ERP strives to plan and schedule supplier resources as well, based on the dynamic customer demands and schedules.

Who uses ERP?

ERPs were originally designed for manufacturing companies but have since expanded to service industries, higher education, hospitality, health care, financial services, and government. Each industry has its own ERP peculiarities. For example, government ERP uses contract lifecycle management (CLM) rather than traditional purchasing and follows government accounting rules. Banks have back-office settlement processes to reconcile checks, credit cards, debit cards, and other instruments.

Different solutions cater to a wide variety of organizations and requirements. Industries that use ERP to run their businesses include: advertising and digital media, consulting, education, energy, media and publishing, manufacturing, food and beverage, retail, transportation and logistics, wholesale distribution and many more.

Key features of ERP systems

ERP systems typically cover all aspects of business operations and commonly provide:

  • An integrated system
  • Common database 
  • Real-time operation
  • Support for all applications/components
  • Common user interfaces across application/components.
  • On-premise, cloud-hosted, or SaaS deployment.

ERP software has the ability to collect and compare metrics across departments and provide a number of different reports based on roles or specific user preferences. The data collected synchronizes reporting and automation by reducing the need to maintain separate databases and spreadsheets that would have to be manually merged to generate reports. This collection offers valuable insight, such as where to cut costs and streamline processes, providing the information  to make real-time business decisions.

How does the ERP system work?

As companies’ needs change and they expand, their systems should keep up with this process. ERP systems work by using a defined, standard data structure. Information entered by one department is immediately available to authorized users across the business. This uniform structure helps keep everyone on the same page. For example, say a local printing shop chain has multiple locations that often share stock and personnel. As quality, sales and employee data from these sites is fed into the ERP system, it’s formatted to indicate which location it comes from.

Data is then woven into business processes and workflows across departments. Leaders can see if one location is doing significantly better than a sister site a few towns over and work to figure out why, while operations can make sure staffing levels align with traffic patterns. Finance can compare sales to rents to help executives decide whether to consolidate.

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Different types of ERP systems

Various ERP models address the needs of different organizations, but there are four main types of ERP based on deployment options:

  • On-Premise ERP software is implemented onsite and maintained in physical office space within an organization, hosted on the company’s own computers and servers for full control, support and ownership of the entire system once implemented.
  • Cloud-based ERP software is a web-based solution, known as Software as a Service (SaaS), where an organization accesses and stores data on any device with an internet connection, usually through a subscription. The software provider ensures continual support, updates, training, and flexible customizations.
  • “Hybrid” ERP software refers to a combined implementation of cloud-based and on-premise ERP system solutions. The combination of hosting and deployment services vary – some companies may turn to cloud solutions for certain business needs while sticking with their on-premises systems for other functions. Either way, the cloud systems must be linked to the on-premises platform to ensure a steady flow of information—often easier said than done.
  • Open-source ERP: Like other open-source applications, open-source ERP is an inexpensive, and sometimes free, alternative that’s suitable for some companies. Many open-source ERP providers allow businesses to download their software for free and charge a low annual fee only if the customer wants cloud access. With more modern web-based interfaces and a growing number of modules, these solutions have improved, but companies need to understand what they’re taking on with an open-source ERP. Support from the provider will be minimal, and configurations and system improvements will fall on the client. That means you need technical staff with a deep knowledge of how to develop and configure the software.

ERP Systems by Business Size

No single system will be best for every small, midsize or large company, respectively. But there are features specific to these segments as well as favored deployment models.

Small-business ERP: Small firms should map out their requirements before starting a search to avoid software that has far more functionality than they need. That’s why cloud ERP is generally the best option for small businesses — it offers the scalability to meet the business’s needs as it grows.

Midsize-business ERP: Midsize companies should demand a platform that can support all its business functions with specialized modules and, like smaller firms, select a vendor capable of scaling to meet future needs.

Enterprise ERP: Enterprises should opt for software that can support different components of their businesses. Corporations require systems that can capture, process and interpret a vast amount of data and handle the demands of many business units.

Benefits of ERP Systems

Today’s ERP solutions have rich feature sets that bring countless benefits to businesses. Here are key universal advantages ERP delivers:

1. Workflow visibility: With all workflows and information in one place, employees with access to the system can see the status of projects and the performance of different business functions relevant to their jobs. This visibility may be particularly valuable to managers and leaders, and it’s far faster and easier than searching for the right documents and constantly asking colleagues for updates.

2. Reporting/analytics: Data is useful only if companies can analyze and understand it, and an ERP helps with that. Leading solutions have impressive reporting and analytics tools that allow users to not only track KPIs, but display any metrics or comparisons they can dream up. An ERP provides an audit trail by tracking the lifecycle of each transaction, including adherence to required approval workflows

3. Automation: By automating many simple, repetitive tasks, you minimize errors and the need to add employees at the same rate as business growth. Cross-company visibility makes it easier to spot inefficiencies that drive up costs and leads to better deployment of all resources, from labor to inventory to equipment. 

4. Business insights/intelligence: Because ERPs can access data from across the company, these systems can uncover impactful trends and provide extensive business insights. This leads to better decision-making by organizational leaders who now have easy access to all relevant data.

5. Risk management: ERP technology reduces risk by strengthening financial controls. More-accurate data heads off mistakes that could lead to lost sales or fines. 

6. Collaboration: ERP solutions make it easy to share information — like purchase orders, contracts and customer-support records — among teams. 

Disadvantages of ERP Systems

Although ERP systems have certain values they have some disadvantages due to the tight integration of application modules and data. Huge storage needs, networking requirements and training overheads are frequently mentioned ERP problems and the major reasons for ERP dissatisfaction. The other shortcomings of the ERP systems include:

  1. High costs of this system. It is calculated that customers spend between three and seven times more money on ERP implementation and associated services compared to the purchase of the software license or some simple cloud-based manufacturing software solution. ERPs require a time and financial investment hence the technology is much more affordable to larger enterprises. High cost prevents small businesses from setting up an ERP system. 
  2. Specialized training. Lack of trained people may affect ERP’s efficiency. The ERP’s functionality depends on proper training and many of the staff might be resistant to that. An ERP system is loaded with features, and that can be daunting to your workforce. You need to hire a company to direct the implementation process and still the project might be painful, and customisation costly and time-consuming. Not only does a company need an IT staff to handle patches, security and required system upgrades, it often has to pay the vendor or a third-party service provider for its expertise.
  3. Data. When moving to a new ERP, you may need to convert some data into a format that’s compatible with the new platform. This can lead to unexpected costs and delays, so review your databases, and work with your IT team or an integration partner to identify potential data compatibility issues early on.
  4. Flexibility. To fully use any ERP software you must feed it a lot of data. That can jeopardize the flexibility, especially in a small company. Unless you enter every single detail into the system, it won’t allow you to make any quick adjustments. So you might feel limited by that. 
  5. Doesn’t solve process and policy issues: If you have error-prone or inefficient processes, an ERP won’t necessarily fix them, even though it may increase accuracy. The same goes for policies that hold the organization back — it’s up to you to adjust those and then configure the system to support better ways of doing business.
  6. Company culture. You should remember that an ERP system is not just a pure software package to be tailored to an organisation, but an organizational infrastructure that affects how people work. It is as if it imposes its own logic on a company’s strategy, organisation, and culture. 

The point is that ERP systems are not the evil of this world, and we criticize them just as competitive solutions. Many companies may benefit from implementing an ERP system, just not a small manufacturing business. 

Is an ERP a smart choice for a small manufacturing company?

Manufacturing magician

Suppose you are an owner of a fast-growing manufacturing business you want to keep up with the company needs. You picture yourself as a successful businessman thriving over rivals, leading your manufacturing company into changes and the digital revolution. As a manager, you wish to be like a magician performing in front of the cheering crowd of spectators. The wizard pulls stunt after stunt, and the audience admires his dexterity and mastery. He expertly deals cards in the centre of the stage, and although you don’t believe in magic, nonetheless, feel charmed by his performance. When you think it’s the end of the show, he still manages to surprise you with having an ace upon his sleeve and gathers a round of applause.

You might ask, what’s this got to do with production scheduling and the choice of  online software? Managing manufacture is a serious business, after all, not just tricks and fun. Well, let me explain the analogy and show you that having the upper hand proves very practical, in both cases: magician’s performance and surpassing your manufacturing rivals. Thanks to easy-to-use online management software, you can take the centre of the stage and deal with all the cards. How is that possible? Read on.

Once you’ve got a good grasp of what ERP is, it makes sense to discover different ways to help your business stay organized — optimizing your costs and operations to help you make data-driven decisions that improve your business performance. 

What manufacturing software ERP / MRP / MES a small company needs for production scheduling and control?

ULTIMATE GUIDE WHICH HELPS YOU TO CHOOSE MANUFACTURING SCHEDULING SOFTWARE. 

Choosing the right system

For the majority of small manufacturing companies the decision of choosing the right software is very important. Moving from chaos, paper notebooks, and little or almost none traceability / working time management into a paperless, digitized environment is a huge step. 

On the other hand midsize organizations lack large IT teams, sophisticated equipment, big implementation budgets.To lower expenses of digital revolution they search for user-friendly, inexpensive solutions designed for a company that has limited technical expertise. 

No matter what size is the company, owners and managers are generally focused on outcomes — using the information to achieve objectives, like increasing efficiency, reducing costs and responding to changing consumer needs or market conditions.

Purchasing manufacturing software is a big decision, so take the time to thoroughly evaluate all options.

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Why is the ERP system not the best idea in a small manufacturing company?

Theoretically speaking, ERP systems are for manufacturers a dream come true. That’s why you might be surprised to learn that most implementations end up in disappointment, where a small company spends thousands of dollars on investment and returns to Excel or other simple solutions, such as Prodio.

 ERP disappointments

The most important difference is that a small manufacturer assumes the system will automatically guess what they need, but unfortunately, it doesn’t work like that. Advanced ERP systems are incredible technological and mathematical creations. This allows them to automate technological processes in large factories where thousands of elements are produced. When there are thousands of orders at the production line every day, and a man can’t monitor them, all  ERP systems thrive. They make sure the right parts are at the right place, at the right time—pure magic. ERP needs data regarding the present situation, the number of employees at the shop floor, their holiday schedule, production line status, and the queue of tasks for 2-3 months upfront. Only having completed these conditions you can plan production.

You can take the best, worth a couple of million ERP systems with artificial intelligence, but there is no way it would work in a small manufacturing company.

Why is ERP a bad idea?

  1. Flexibility and custom production: in a small manufacturing business, there isn’t time for the team to spend 1 hour on entering all data into the system, dividing the product into smaller parts, logistic minimum, surplus material, or material loss. The Client places an order, and its due date is “for yesterday,” which means all these preparatory jobs have to be skipped, and the system lacks operational data from the start. 
  2. Imprecise data: in a small company, nobody cares about the % of losses, creating alternative technology, additional stock/ inventory, or schedules of machine downtime, not to mention even more advanced data. 
  3. Mistakes copied from the production panels create chaos in the whole system Let’s assume that an employee makes a typo writing ex. 10 pieces instead of 100, or they click the wrong product. ERP systems count automatically and take away the given number of items from the stock, which works like a domino effect and spurs even more incorrect decisions.
  4. Sometimes there is a need to pass-by the system due to its inflexibility. A good ERP system won’t let you send an order to production when there isn’t a suitable raw material entered or technology, even though you know that this material is available and the technology could be completed on the go – well, that’s the trouble with using ERP. 

Many years of experience have proved that most companies that implement Prodio want something which would make their life easier. They work not only with ERP but also with Excel. Why? If you can’t trust everything you have in your ERP system, there has to be somewhere else where you store your data safely, so naturally, you put your trust in Excel.

The alternative – simple manufacturing software

Manufacturing software can automate many error-prone tasks, like order processing, and provide the information teams need to operate more efficiently. When you run a small or mid-size company, you look for certain features that help you organize and manage workflow more efficiently. 

ERP system
Online manufacturing software

You wish to:

  1. Organize your production by regaining control and learning about real cost and productivity, 
  2. Identify patterns and flagging anomalies that require investigation. 
  3. Provide fast communication between the manager and shop floor, clear vision of working schedule and parameters.  
  4. Secure quick effects, functionality, simplicity (reducing functions that aren’t necessary).

Simple manufacturing software such as Prodio helps you organize and manage your orders so your team can work faster and smarter. Anticipate off times, vacations, sales reservations and get accurate availability information.

Other upsides include:

  • Access to data from anywhere: Employees no longer need to shuffle through piles of papers or files scattered across a desktop. With cloud-based manufacturing software, a warehouse manager can log in from a mobile device while on the shop floor, or a salesperson can check inventory while at a customer site.
  • Information is always up-to-date: Because the system is continually receiving information from various sources, it’s updated immediately. This provides a major advantage because decision-makers are basing their choices on up-to-the-minute data.
  • Business decisions based on the same data: With a common database, all decision-makers are on the same page. There are no duplicate or conflicting sources of information, and companies have the ability to schedule and distribute dynamic reports automatically. 
  • Communication and cooperation: Simple online software knocks down walls between departments by giving employees appropriate access to data on related business functions. The communication flow is easy, and that results in fewer mistakes, increases transparency and minimizes complaints.

An ERP is a critical business system that must mesh with how each company operates, so there is no one “best” platform. Required capabilities, preferred deployment model and company size will all affect your decision when choosing a production management system. 

It is a good idea to start with something simple and build from there. Mid-size companies often begin with a Prodio manufacturing software to automate basic accounting tasks and allow managers to easily view the flow of money into and out of the organization. Products-based companies typically want to digitize inventory and order management right away as well as they want to simplify employee time and resource tracking and project billing.

Purchasing and implementing manufacturing software can be intimidating, even overwhelming. But the solutions available today allow companies to take it one step at a time and add what they need when they need it. Never before has this been within reach for even the smallest companies, and it is good to take advantage of that. 

Which production management software / ERP is the best for a small manufacturer?

Practical guide to help you choose the best production planning and production accounting software, and which will protect you from bad investments.


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(MES) Manufacturing Execution System – production control and tracking software in small business

(MES) Manufacturing Execution System – production control and tracking software in small business

ULTIMATE GUIDE WHICH INTRODUCES YOU TO
(MES) MANUFACTURING EXECUTION SYSTEM AND PRODUCTION TRACKING SOFTWARE.

Gain full control over your manufacturing process and enjoy a real-time workflow. 

Welcome to the next part of our series about manufacturing software for small business, where you can find tips on the best tools for production scheduling, control and cost tracking for small manufacturing companies. 

Sometimes it is not easy to see the signs suggesting that changes are much needed in your company. It can start with little things, delays, lack of organization, a few missed deadlines, complaint. But when it gets repeated and repeated, you might not be able to stop the chain of negative consequences.


10 signs, pointing out that you need manufacturing control and tracking software for your business

If you can spot in your company one of these problems described below you should read this article and consider implementing a simple tool such as MES (Manufacturing Execution System) to control production as an addition to your manufacturing scheduling software:

  1. Sales department and office staff have to travel between the shop floor and their offices or make phone calls to know whether the product is ready to be able to give feedback to a client because they can’t see real-time progress in company system;
  2. Production manager or the owner spend hours and days to modify production schedule, sacrificing family time and their leisure to monitor the progress of production orders;
  3. The office workers receive information about jobs done in paper notebooks, or paper orders which isn’t clear. Next, the data is copied by you or your office staff into Excel;
  4. You can’t say how much it really costs to make the product or calculate the costs of labour (no matter if we talk about serial or unit production); your pricing is based on rough estimates;
  5. There is a discrepancy between planned and real income each month, although according to the number of invoices paid, the company should make a nice profit;      
  6. When your workers come to negotiate their bonus, you have no data regarding their productivity nor arguments, so you can’t compare their efforts objectively;
  7. You don’t know how much productive time is at your production hall – how much time people spend working on valuable activities in comparison to time spent unproductively;
  8. When you happen to receive a complaint from your customer or spot a defect yourself, you can’t say who was responsible for the botched job;
  9. You have a QMS ISO 9001 system, your clients require batch number tracking and production traceability, or there are often audits in your industry and you are snowed under paperwork required to get a green light to continue work.

You can listen to an mp3 about 10 signs, pointing out that you need manufacturing control and tracking software for your business.

The minimum of functions needed from MES and manufacturing control and tracking software in small business and its benefits.

Large companies use extended MES – Manufacturing Execution Systems, which usually are connected to machines and ERP systems with artificial intelligence to manage production, but their implementation costs thousands of dollars. The price, the difficulty, lack of flexibility due to multiple options make them useless in small companies. It is a solution, but very often, the gigabytes of data aren’t used in any way, and the effort put into collecting goes to waste. The scheduling takes more time than only performing it.

Meanwhile, it turns out that it is possible to use the most straightforward approach, the solution which you can introduce in 15 minutes to benefit from manufacturing control software in a small business. You will save a lot of time, improve control over your business, and last but not least, increase productivity based on collected data. The best way to understand whether this solution is suitable for you is to try it (TRY FOR FREE)!

MES’s minimum functions will allow you to get rid of paper notebooks and move your production to a higher level.

 

cloud based manufacturing software

Most SaaS (Software as a Service) companies have trials, but only some of them, such as Prodio will let you test all functions for free. (TRY FOR FREE). This will help you understand why production planning is crucial and optimize your production process with some good manufacturing control software. 

The most basic information from the (MES) manufacturing execution system enables calculating the cost of production and estimating the manufacturer’s optimal price for the client.

  • The employee registers the START of a performed production operation. The system automatically receives information who (namely), when, and what kind of task or product has just started to produce.
  • The employee registers the end of a production operation by clicking a STOP button. They add the number of pieces made and comment on potential defects.
(MES) Manufacturing Execution System – mobile application at the shop floor

These two simple records in the system present great opportunities; you’ve never dreamed about:

  • You see the recorded time of all operations – a kind of a log book with information about who, when, and what they did. There is no need to go physically to the production hall to search for things or ask your workers;
  • You can see real-time progress and the stage of each production order. Thanks to this, you can answer straight away all clients’ questions and make quick changes to the production schedule.

The time passed between the START, and the STOP of each operation helps you to see:

  • how long took an operation on that particular machine for each product;
  • how much time worked different employees;
  • total time for orders/products/operations

(MES) manufacturing execution system by dividing working time by the number of pieces made shows:

  • The productivity calculation for each production employee and different operations. You can use this data to compare people or prepare an assessment report; 
  • You can adjust your products’ price list to genuine production norms. 

You get an average time from all operations, so you can check if your productivity norms are correctly calculated:

  • All orders have numbers, so every time an employee checks in the system, you see which order they are working on. In case of a complaint, it is easy to trace who’s responsible by going back to the right order and checking working history.

Add these 3 simple elements to your (MES) manufacturing execution system to get ahead of 80% of your competitors.

1. Once you have a computer in your production hall it would be a waste not to use it to display a simple production schedule/the list of production tasks for your employees. 

The simple production schedule where workers can click to register production tasks have many advantages:

  • It is a platform for seamless communication between you and the staff. The tasks are assigned to particular people, and the status of each task is visible for everybody.
  • Workers can leave comments and update the progress (visible for different departments of the company). It is clear what should be produced, in which order and who is responsible. People see the queue of tasks and follow their daily routines. They click to start work on the tasks, and their work is registered. Without an online production schedule, manufacturing control software is only a virtual notebook. Once you connect it to a production schedule and display it at the production, you get a complete, and reliable system.
  • The number of check-in mistakes is minimal – the moment a worker clicks to start work on the production order, they can see its status changed to active in the system. In Prodio manufacturing control software, the orders “in progress” are orange, as all production schedules are colour. The other production operations are visible on the timeline, which shows the complete view of all production hall activities.

2. The very same computer or tablet can serve as a work check-in/check out registration board (with break/lunchtime included). Thanks to that you:

  • Save the time and money, because you have everything in one place, on one device;
  • See who is at work (and what time they checked in/out) and what are they working on;
  • Can compare total time spent on the premises with the machine/operations time to increase productivity and monitor whether people don’t just laze around.

3. In the comments to operations, workers can give the number of deficiencies and the reason for them: 

  • The defects make up for the large percentage of hidden production costs, which are often missed. At times workers “forget” to report some of the flaws; 
  • The simple defects analysis helps to calculate better real production costs, make estimates and comparisons.  

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5 more ideas about why you should choose paperless production to get rid of paper production orders while using a simple Manufacturing Execution System (MES).

  • Register the use of raw materials to get the better idea of real costs and their availability in stock; Production control means that you always have an actual overview of your manufacturing, all information about your inventory is quickly accessible, you know everything about real-time workflow, and you are ready to react in an unforeseeable situation immediately.
  • Print ID cards/ pallet cards directly from your MES system – your products will look more professional, and your shop floor will stay organized;
  • Use batch /lot number tracking to identify the raw material used for a particular order. In case of a problem, it will be possible to withdraw from the market the faulty batch.
  • Monitor breaks and hold-ups, and learn why they appear. Make sure you use optimally working time. Without it, efficiency is unreachable.
  • Add product photos, technical drawings and other documents to have all company know-how in one place. 

Great production control is a competitive advantage because it gives you great confidence in your manufacturing system. When you use production tracking software, you are sure that you have all the necessary raw materials, know your capacity, and you know how much it is possible to produce at any given time. You need it even if you are a small make-to-order company. You will feel confident in front of a client when you can quickly make accurate estimates. It will give the client a sense of safety and confidence in you. Right after getting the order, you will quickly schedule everything needed, and it will become a part of your production schedule.

Manufacturing Execution System (MES) and manufacturing control software –  essential elements of production planning.

When you try to find the answer to why production planning fails (including implementation of production planning software and ERP systems) look no further than the lack of connection between production planning and manufacturing control and tracking tools. 

There were many articles on production planning, so below there are only the highlights:

  • Without MES / Manufacturing Execution System (MES) system, even the best production schedule, just one minute after planning and sharing with employees, becomes only a wish list. It is automatically out of date because it doesn’t show the real-time view or progress. That’s why it is crucial to see which orders are on hold, in production or delayed. When you can read workers comments, add your own insight, or make flexible changes, you have the real-time scheduling. The master production schedule is shared online, without the need to visit your shop floor. 
  • A right MES / Manufacturing Execution System (MES) system means not only a simple registration of work. It helps to present and share the production plan with all staff.  It is a great advantage when corrections are visible straight away at the production hall. You don’t have to call the foreman or visit the shop floor to pass new instructions or write things down on the board or change paper orders. Communication equals effectiveness, and that’s what you get. 
  • When you don’t have sufficient data on the productivity of your manufacturing company at hand (paper orders on your desk, which you are snowed under, don’t count) or it is impossible to access this information while you make a production schedule, the tasks you delegate might have little to do with reality and productivity. 
MES view
  • Once your manufacturing control software contains the registration of a working time module (which we definitely recommend), you can see how many people there are at the shop floor, who’s off or on sick leave/vacation, and adjust the production schedule to the current situation. 
  • Above all, when you mix production planning, manufacturing control software and online access, like in the Prodio system, you will be able to manage your production from any place in the world from your smartphone, because there is a mutual exchange of information. 

Read more on production calculation, real production times and product making costs.  

MES

Improve manufacturing control software to track production better, spending only 15 $ on equipment with RFID readers

Majority of small companies regard key-fobs and RFID technology as complicated and don’t even want to test it in their production halls. This fear is unfounded and can cost them losing of great opportunities.  

Meanwhile, with the benefit of technological progress, it costs only 15 USD to ensure that a company hiring up to 10 employees can use inexpensive RFID technology.   

How does it work – check out this short tutorial:

Why is it recommended to use RFID check-in/out system with manufacturing control software:

  • Much faster registration time – instead of clicking the right order, then searching their name on the list, entering and confirming the password, the whole process is shortened to two simple steps. The employee selects the order and clicks RFID key-fob/card.
  • It is much safer and way easier to monitor  – it is smoother to swap with another person, give them your password to cover an absence. With RFID cards, it is much more challenging. 
MES SYSTEM VIEW
  • It creates an impression that the company moves with the times – it is a modern enterprise in managers, employees, contractors, and clients’ eyes. 
  • It offers greater possibilities regarding tablets/touch devices on machines because it means less clicking.
  • It is a good opportunity to integrate manufacturing control software with the registration of working time to register the time of check-ins/check-outs (you can read more about why RFID production control system is so important).
MES

How to introduce inexpensive RFID code readers for employees, which will be compatible with (MES) manufacturing execution system:

What is worth focusing on is the cost and the time of implementing such a solution. Actually, it is really affordable, and the MAJORITY OF OUR CLIENTS IS SHOCKED AT THE FACT HOW CHEAP AND EASY IT IS!

What kind of equipment do you need:

  • a computer/a tablet with the Internet connection, Google Chrome browser and an active USB port,
  • RFID reader with USB port, which costs between 5-8 USD (below the screen of any first in line offer found on the amazon.com): 
mes
  • RFID key-fobs for employees to check in/check out (about 6-7 USD for the pack of 10) 
MES system

On the side of the software:

  •  all you need is an online simple manufacturing control software such as Prodio (try for free) 

Read about RFID technology and equipment.

Manufacturing Execution System (MES) / manufacturing software is a great aid with QMS ISO 9001/ FPC and Client’s audits.

Correctly implemented manufacturing software and simple online production planning can be a lifesaver if Quality Management System (QMS) is required in the company following the guidelines of ISO 9001:2015 norm, Factory Production Control (FPC) or other similar regulations. 

Easy to use in production planning and practical manufacturing software such as Prodio can impress auditors because: 

  • You have complete traceability, registration and production tracking – and this is one of the most difficult elements of the quality. It requires you to note who was precisely involved in each production activity connected with a given batch of goods. Instead of paper notes moved from place to place, everything is happening in the background, once an employee checks in the start and finish of operation in the system. You can return to a desired moment in the work history, especially if you connect this system with printed orders. 
  • There is traceability at the production hall – you can use printed production orders and put them on the particular order batches (you get the printed order with just two clicks from MES such as Prodio) or write down their numbers. 
  • There is also a great information flow (products’ parameters, client’s requirements, attachments with drawings/photos) between production hall and a floor level application – which is required by the norms and creates a big problem for many manufacturing companies.  
  • You can register deficiencies and faulty goods directly from your production management system.

..and all of these happen automatically and offer you a great production management tool. There is more information about it in the article about ISO 9001 and production control, so you know how production management software co-operates with MCS.

Simple MES / manufacturing software an easy solution for a paperless production hall and professional image of the company

Why it’s important to use manufacturing software instead of paper orders:

Registration of progress and work efficiency with old fashioned paper orders is going to end in  a failure: 

  • Employees make mistakes, cross things out on paper orders, make wishful data – and you do not control it at real-time,
  • data is entered in the system by a person who copies paper orders into Excel. It costs extra to pay for this job and still does not prevent human error. 
  • You access all data with delay, so you can’t react fast enough; some of the indicators are analyzed much later, once you find them in gigantic tables. 
MES system small

That’s why in 2021 electronic registration of work ex. using simple manufacturing software such as Prodio is not a luxury, and it’s a NECESSITY. Without such a system, most well-meant advice on production planning won’t be possible to implement because of insufficient, reliable data. 

Imagine how your work could change if you can manage your production from the comfort of your house? Having your morning cup of coffee, you can open an application and in 2 minutes catch up on what’s happening in your production hall – what, by whom and how effectively was produced, who is at work, which orders are in progress.

Once you have manufacturing software, why don’t you use it to label your goods?

Using printed marking (product labels/ batch cards) at the production hall has MANY BENEFITS:

  • It is much easier to keep things in order – you can mark goods in production, so you always know what’s what, 
  • It is much better to indicate finished products/batches – you save time, and look more professional in front of your customers.
  • Thanks to the assigned order number, you can go back in work history to see the details in case of complaint. 
  • There is a 100% compatibility between your products’ names, and the risk of mistakes is minimized because the labels are made based on products’ names.

What’s next? How to start using MES and manufacturing tracking software?  

If you liked the idea of paperless production, when you are always in control of what’s happening, and the employees know their tasks, hence you have more free time? It turns out to be relatively easy to start. 

All you need is:

  • about 30-45 minutes of set up time, before you put a computer at the production hall, 
  • 97 USD a month fee (for a manufacturing company up to 10 employees), 
  • any computer at the production hall. 

Thanks to modern cloud technology, instead of spending thousands of dollars for implementing an extensive system, you can enjoy the benefits of manufacturing software, using it directly via your browser. There is no time like today, so try Prodio for free for 14 days. Our friendly team will help to make your vision come true.

On top of a clear display of production tasks at the shop floor, real-time progress registration, Prodio offers:

  • your products database built over time with precious company know-how save in one place,
  • easily accessible always-updated list of orders with their due dates,
  • working history and analyses modules to make sure your data can translate into fast real-life decisions,
  • simple inventory module, registration of working time and many more.

SEE YOU IN THE APP – CLICK 🙂 

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Kaikaku method

Kaikaku method

Kaikaku method – how does it work?

Kaikaku method

Today’s business environment is characterized by strong global competition and fast-paced changes. That’s why production functions of manufacturing companies must have a capacity of undertaking large-scale improvement of a radial and innovative nature.
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Kaikaku definition

Kaikaku is a Japanese word meaning change or reformation. The Kaikaku method tends to entail large-scale changes involving wide ranging activities. Changes are made in, for instance, production processes, pieces of production equipment, culture in organizations, manufacturing strategies, leadership styles, information systems, and management processes. In some cases, the scope of the change was not only the production systems but also all production functions or the whole company. It often involved implementation of lean production. 

Nowadays companies must be proficient in radical innovation in production to maintain their advantages. They must be capable of creating new knowledge and constantly developing and implementing new production technologies, processes, and equipment which helps them to keep competitive edge and make “unique” goods. Kaikaku offers improvement that involves fundamental rethinking and radical design of systems and processes related to production, performance of the production system which is frequently measured in terms of cost, quality, speed, and flexibility. 

Kaikaku implementation

Kaikaku is a deliberate effort initiated by top and senior management and requires a strong direction from the management, as the implementation and the result significantly impact business. Since Kaikaku often changes the processes that involve different groups, divisions, or departments in the organizations, coordination and direction from the high-level management are needed. The Kaikaku method can be characterized as a top-down approach, but this does not necessarily mean that changes are never collaborative and participative. Sometimes the actual changes are driven by employees at lower levels of the organization. 

Kaikaku form

Kaikaku uses a definite time period with specific targets to be achieved at the end of the period. Therefore, it is typically seen as a large project or an initiative. The large project often contains smaller ones conducted at different points of time during the overall initiative. The time frames of the Kaikaku initiatives ranged from a few months to a few years. 

Kaikaku process

The Kaikaku process consists of several stages:

  1. Preparation

It is important here to ensure management commitment, identify necessary changes,  set up strategy and targets, prepare smaller projects and allocate tasks, together with educating staff on further steps.

  1. Redesign 

This phase allows us to analyse processes and make necessary adjustments as well as  test and evaluate solutions.

  1. Implementation

Finally it’s time to implement new systems and processes, provide training for employees  and monitor changes. 

Kaikaku projects

Kaikaku projects can be of four different types:

  • Locally innovative implementation – for example introducing a solution well-known to the industry, but new to the company;
  • Locally innovative methodology – for example introducing new methods, well-known to the industry, but new to the company;
  • Globally innovative implementation – for example introducing a new solution to the industry;
  • Globally innovative methodology – for example introducing a new production theory to the industry.

Some of the Kaikaku projects result in improvements in the range of 30-50% due to their radicality.

Organization structures and resources need to be prepared to support the mentioned types of Kaikaku. A process of Kaikaku can be seen as a series of unfolding smaller improvements or development projects that are undertaken to achieve overall objectives. In each project exploration and organizational learning are facilitated, so even in a smaller company it is possible to benefit from such an approach.

If you wish to learn more about other methods of optimization of production planning processes check out this article.

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One Piece Flow method

One Piece Flow method

How does One Piece Flow work?

One piece flow is the basis of lean philosophy. In short, one piece flow is the opposite of batch production. In this system, the time when the product is not worked on/processed is minimized. Read on to find out more.

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One Piece Flow method

One Piece Flow method, sometimes called continuous flow, is a production method used instead of traditional mass production. In mass production, materials move through the manufacturing process in batches which can be highly inefficient. In one-piece flow, a product is completed before the next one is started. The name refers to a maximum number of products between operations, workstations, processes. That’s why it’s also called “single piece flow”, as everything is constantly progressing and only one item is in any given queue at a time. Multiple items can be in the process as a whole, but nothing has to queue up and take up space from the moment it starts until the moment it’s complete. Thanks to One Piece Flow you can save time and money, as work is performed faster and any space you use is highly optimized. The customer also receives ordered goods much faster than in a batch method. This reduces waste (you’re not spending money holding items for future delivery) but requires a huge amount of coordination and consistency to pull off.

One Piece Flow – the beginning 

The beginnings of the One Piece Flow are in 1934, when Kiichiro Toyoda used this method at a foundry and engine production. He used a concept of “confirming one, after the other”, which aimed at saving time and eliminating mistakes as they were spotted mid-batch before  affecting the entire order. Two main advantages of One Piece Flow were noticed: that work is completed faster and the money is saved both due to the time and space you free up. That said, these simple benefits have huge knock-on effects. The One Piece Flow method can be implemented almost anywhere providing the operations and processes are repetitive. Other necessary requirements include:

  1. The number of workstations has to be bigger than one. 
  2. Make sure that the flow of work is clearly visible, tracked and standardized by using a production planning system.
  3. The workstations should be balanced, which means that time spent at each of them should be similar.

What is a production cell?

The term “production cell” is very important for the One Piece Flow method. It refers to workstations and machines which are set up next to each other, which ensure the production flow is smooth and the product can follow easily all production stages. Modern work cell allows for the implementation of the entire production process as a one-piece flow, thus eliminating any waste and ensuring the highest quality of the end product.

One Piece Flow – the  benefits of implementation 

There are a few major benefits of One Piece Flow:

  • Improved quality

First up, using One Piece Flow can make your final results higher quality than if you tackled them in bulk. This is because errors are more likely to be spotted partway through the process than at the very end when it’s too late to correct them. With One Piece Flow, the problem is detected at its first occurrence, thus we will not produce next defective parts.

  • Less elements in the process  

It is easier to scale up your operations and do so reliably, since you can monitor the production of each product across every step of the process. When you control the production plan we no longer have to monitor and change the plan for numerous stations, but only for a select one. Additionally, by breaking up your process into set workstations and blocks of tasks you can more easily see where you can benefit from using business process automation. Any initial cost of setting up the automation would quickly be offset by both the money you save with one piece flow and with the savings your new automation will make 

  • Smaller production hall

We do not need so much space to store products between operations. Workstations can be situated closer to each other, and a smaller hall means not only smaller rent, but also less space that needs heating, cleaning, lighting, etc. Production cells are located next to each other to offer smooth transition between operations.

  •  Flexibility and productivity

In the one piece flow system you can immediately see which process is faster, so that we could respond more easily. For example, evenly distribute work between stations. This enables us to identify bottlenecks and  use resources optimally. We do not see this in batch production. 

  • Faster response to customer’s order

Refitting the line for other products or orders is much easier. We don’t have to take away containers, crates, pallets from various processes and supply new ones. The operator / machine simply adjusts itself to another product. That’s why the customer will get their order faster as they don’t have to wait until all ordered items are cut, milled, painted and assembled. This process often takes days, weeks or months. The faster the product is available to the client, the faster we can invoice. What’s more your processes will be more flexible to the customer. Since you’re able to fulfill orders and tasks much faster, you can leave them for longer before starting work on them. This then leaves more time for the customer to make any alterations before you’ve already started work.

  • Better ergonomy 

Workstations are optimized for the implementation of the One Piece Flow method.

  • Increase the morale of your workforce

Depending on how your process is set up, continuous flow can also help to increase the morale of your workforce. As long as there is still some variation in duties (eg, switching employee tasks every so often) the higher rate of progress can help to show your employees that the work they’re doing is making something worthwhile.

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5S method and how it is used to organize production in a small manufacturing company

5S method and how it is used to organize production in a small manufacturing company

5S method and how it is used to organize production in a small manufacturing company

What is 5S?

5S is a system for organizing spaces so work can be performed efficiently, effectively, and safely. This system focuses on putting everything where it belongs and keeping the workplace clean, which makes it easier for people to do their jobs without wasting time or risking injury. It lays at the basis of lean manufacturing, includes cleanliness and organization; it is also about maximizing efficiency and profit. 5S is a framework that emphasizes the use of a specific mindset and tools to create efficiency and value. It involves observing, analyzing, collaborating, and searching for waste and also involves the practice of removing waste.

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What are the elements of 5S?

5S, sometimes referred to as 5s or Five S, refers to five Japanese terms used to describe the steps of the 5S system of visual management. Each term starts with an “S”. In Japanese, the five S’s are Seiri, Seiton, Seiso, Seiketsu, and Shitsuke. In English, the five S’s are translated as Sort, Set in Order, Shine, Standardize, and Sustain. These steps involve going through everything in a space, deciding what’s necessary and what isn’t, putting things in order, cleaning, and setting up procedures for performing these tasks on a regular basis. The above list describes how to organize a work space for efficiency and effectiveness by identifying and storing the items used, maintaining the area and items, and sustaining the new order. The decision-making process usually comes from a dialogue about standardization, which builds understanding among employees of how they should do the work.

5S method – steps to follow

There are five phases of the 5S method:

5S 

  • 1S. Sort involves going through all the tools, furniture, materials, equipment, etc. in a work area to determine what needs to be present and what can be removed. We aim at separating necessary from unnecessary. It allows us to identify excess materials, tools, manuals, data, information, which aren’t important and determine the value of each item. A workspace might be better off without unnecessary items or items used infrequently. These things can get in the way or take up space. Very often  the red tag method is used. Red tags are usually cardboard tags or stickers that can be attached to the items in question. Employees fill out information about the item such as: item description, location, date, name of the user applying the tag, then place them in the designated red tag area. After a set amount of time it’s time to make a decision whether to remove it from the workspace.
  • 2S. Set in order – means putting all necessary items in the optimal place for fulfilling their function in the workplace. The goal of this step is to make the workflow smooth and pleasant. Once the extra clutter is gone, it’s easier to see what’s what. During this phase, everyone should determine what arrangements are most logical. That will require thinking through tasks, the frequency of those tasks, the paths people take through the space, etc.

5S

Implementation at work stations mean arranging everything in such a way that all tooling / equipment is in close proximity, in an easy to reach spot and in a logical order adapted to the work performed. All components should be according to their uses, with the frequently used components being nearest to the workplace. Likewise tools should be  easy to find and pick up.

5S method

The visual factor is very important at this stage. When there are fixed locations assigned for items by means of clear labels, marks or hints, colorful lines, shadow boards, maps, floor marking tapes, pegboards, etc. it is easier to return things to the correct location or spot missing a mistake.

5S

During 2S layout and organization of an area is important as well as clearly  marked motion and transportation areas to ensure smooth workflow. In this stage it is clearly visible that 5S is a systematic form of visual management utilizing everything from floor tape to operations manuals. 

  • 3S. Sweep/shine – focuses on cleaning up the work area, which means sweeping, mopping, dusting, wiping down surfaces, putting tools and materials away, etc. In addition to basic cleaning, 3S also involves performing regular maintenance on equipment and machinery. Planning for maintenance ahead of time means businesses can catch problems and prevent breakdowns. That means less wasted time and no loss of profits related to work stoppages. Sweeping means “visual cleanliness”, spotting failures, abnormalities, technical problems. In 5S, everyone takes responsibility for cleaning up their workspace, ideally on a daily basis. Doing so makes people take ownership of the space, which in the long run means people will be more invested in their work and in the company. Moreover, inspecting the workplace, tools and machinery on a regular basis improves the production process efficiency and safety, reduces waste, prevents errors and defects as well as keep the workplace safe and easy to work in.

5S methodology

  •  4S. Standardize – the number one goal is to establish procedures and schedules to ensure the repetition of the first three ‘S’ practices. Once the first three steps of 5S are completed, things should look pretty good. All the extra stuff is gone, everything is organized, spaces are cleaned, and equipment is in good working order. In 4S are introduced standardized visual cues such as signs, labels, posters, floor marking tape, and tool organizers that play an important role in 5S. They can provide directions and keep items in place, in many cases without words. There are also the various checklists of tasks to ensure everyone knows their responsibilities of performing the sorting, organizing and cleaning. Photos and visual controls are used to help keep everything as it should be.Regular audits and status reviews should be carried out at this stage.  
  • 5S. Sustainrefers to the process of keeping 5S running smoothly, but also of keeping everyone in the organization involved. Sometimes it translates as “do without being told” and requires great self-discipline of the workers.Ideally, 5S becomes a part of an organization’s culture, but everyone needs to participate: managers, employees out on the manufacturing floor, in the warehouse, or in the office. To help sustain 5S practices, all new employees should receive training about 5S procedures in their field of work. To ensure that the 5S approach is followed.it is a good idea to organize training sessions to regularly review  improvements or make necessary changes.

5S tips

5S involves assessing everything present in a space, removing what’s unnecessary, organizing things logically, performing housekeeping tasks, and keeping this cycle going. Organize, clean, repeat. A key part of 5S is that it makes spaces cleaner and therefore easier to navigate. That means people can more easily get their work done. Visual communication tools such as labels, floor markings, cabinet and shelf markings, and shadow boards can make navigating spaces even simpler. Plus, these tools can help keep the workspace organized. A workplace that uses visual management in this way is often referred to as a visual workplace.

5S is a long term and continuous method of organisation. In the long run it decreases the number of accidents at work,  improves the quality of products and services and the number of mistakes constantly decreases.It means less complaints and more customer satisfaction, as well as potential subcontractors, suppliers,  auditors, etc. The morale of staff improves: there is logic to the way they work, order and transparency. As a consequence the costs decrease, because all resources are used more efficiently. The company achieves stability which improves the image and helps to stay competitive on the market.

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How does JIT system work?

How does JIT system work?

How does JIT system work?

Just-in-time (JIT) method

There are many different methods of optimization, which are part of lean management. Read on to learn about one of them.

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What is the Just-in-Time Method?

The Just in Time (JIT) style of inventory management – also sometimes referred to as the Toyota Production System (TPS) – is a strategy of managing inventory and/or production that links the ordering of raw materials to production scheduling. 

Kiichirō Toyoda is considered to be the “father” of this concept, which was firstly implemented in Toyota from the 1950s to 1962. JIT method has roots in Japanese culture  – geographic location of the country is determined by about 4 000 islands constituting the archipelago, so naturally Japanese prefered management style based on creating goods directly related to the orders being placed, instead of making extra goods to meet the needs of any potential orders that may be placed. The JIT method ultimately helps companies cut down on waste from making too many products (or supplying too many goods). Therefore, they don’t use up raw materials that may or may not actually be necessary to fulfill the orders they have. In turn, it cuts down on the costs they have for inventory, freeing up cash flow.

System JIT revolutionized approach to sales and production. Most companies create and hold inventory in excess, meaning they create goods in anticipation of other orders. The Just in Time method involves creating, storing, and keeping track of only enough orders to supply the actual demand for the company‘s products.

JIT model is based on the idea that clients should get: 

  • Suitable product / service
  • Specified quantity
  • in Agreed time frame

JIT implementation tips 

It is highly recommended to run a series of different analyses before implementing the JIT model, which will help you to go through the whole process smoothly. To fully benefit from the JIT method the company should:

  • Invest in analytical technologies, which will enable successful demand and supply forecasting;
  • Make short production runs, which means that it has to quickly move from one product to another. Furthermore, the company should reduce costs by minimizing warehouse needs.
  • Improve the flow of information (it should be smooth and without any communication breakdowns; the cooperation between suppliers, producers and end clients is key to achieve success);
  • Eliminate potential disruptions in the supply chain. If a raw materials supplier has a breakdown and cannot deliver the goods in a timely manner, this could conceivably stall the entire production process. A sudden unexpected order for goods may delay the delivery of finished products to end clients. (The company should choose a right supplier and the pricing cannot by one of the most important criteria giving field to reliability and efficiency);
  • Eliminate unnecessary processes ex. in the machine changeover procedure and improve the speed of maintenance tasks.  

Not every supplier or manufacturer has the luxury of ordering only the materials they need to complete a specific order. A company must consider potential variables in the manufacturing process – such as inclement weather delaying receipt of inventory materials, labor strikes or supply shortages – before deciding if this inventory method is right for their organization. JIT cannot be implemented unless a company has high production, steady production, high quality output and stable suppliers. Otherwise there is always a danger of using up all supplies and complaints from the customers, because of delays, as timing was determined by prior orders and supply history.

The JIT method is advantageous to companies because of the reduction of waste it offers. The system highlights problem areas by measuring lead and cycle times across the production process, which helps identify upper limits for work-in-process inventory, in order to avoid overcapacity. The JIT production method cuts inventory costs because manufacturers do not have to pay storage costs. Manufacturers are also not left with unwanted inventory if an order is canceled or not fulfilled. 

One of the essential steps in the JIT implementation process is introduction of the pull system. In contrast with the push approach, which is a synonym of passing on different goods from one workstation to the next until the final product leaves the production hall, JIT inventory method is considered a “pull” approach in manufacturing. When sales activities warrant more production, inventory is “pulled” and more manufacturing supplies are ordered. Separate workstations are treated as independent in company “clients”. In the “pull” system they are responsible for signaling demand for products and instigating the whole production process. It results in a smooth flow of production and reduced inventory costs. This method relies on signals given at different points in the production process that tell the manufacturer when to make the next part.

What are the advantages of the JIT method?

One major advantage of the just-in-time inventory management system is that funds that were tied up in inventory costs can be used elsewhere. Likewise, areas devoted to storing inventory are now free to be used in production or for other needs within the company. Other advantages include:

  • Less waste and lower inventory costs, which result in increased profits for the organization;
  • Better information flow, supply tracking, goods distribution;
  • Employees skills are better utilized (multitasking, multi skilling);
  • Production planning is synchronized with demand –  when there is no demand for goods, they aren’t produced. It creates savings and better cash flow; inventory is reduced even by 30%;
  • Utilizing the raw materials in a timely way so as to fill orders on a timely basis (the risk of goods being damaged or out of date is minimized);
  • Suppliers get the raw materials to the company in a timely way, which results in an improved relationship. Potential conflicts are cleared straight away;
  • A company efficiently using raw materials, leaving little to no raw materials left over after production;
  • Possibility of committing to more orders;
  • Shorten time of order delivery and completion.

 

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