How can an ERP system help to improve product quality and drive profitability? I was asked this question because I made a claim in a previous blog that I didn’t substantiate – so here it is.
The starting point for product quality is getting the design right and building it to that blueprint every time. The final test of product quality is your customer being delighted with the product they receive, at the right time and the right price.
Research & Development departments have often been left out of traditional ERP implementations because they were seen as somehow ‘special’ or not part of mainstream business processes. Nowadays, however, we are working with customers to integrate their R&D with ERP software for discrete manufacturing or process manufacturing, and to measure the costs, priorities and ROI of R&D within the business.
After all, the output of R&D is new product design and a key aim for businesses is to get new product introduction working faster. To achieve this, integration with PLM and PDM (product lifecycle management and product data management) is required, with bill of materials and operation routings created directly for the manufacturing processes.
Any new raw materials and/or componentry must be sourced, so integration with Procurement in the ERP system is also required.
We then need to monitor the material being received and flowing through the manufacturing plant (or distribution warehouse) operations. Quality checks at receipt and during manufacturing operations can be carried out. Most ERP systems, certainly the ones I work with, have the ability to make this as flexible as required and to monitor and report on specific criteria and test results.
So, I think it’s clear that well-implemented ERP software solutions provide a level of control and integration across the lifecycle of a product that will support the effort to produce parts of consistently high quality.
More and more industry is now creating more personalised product, which may be made to order, or designed/engineered to order. Other products need to be subject to traceability through the value chain and may be subject to additional criteria such as shelf life, chemical composition etc.
With the latter category, considerably more information is required to be held against the product as it moves through the plant – again the ERP system becomes the repository, control and reporting tool.
The former category requires a finished product to be ‘configured’ to the customers’ requirement. In this instance, you start to build the product in the quotation stage and may begin to engineer/manufacture parts of the final product while other parts are still being refined in the quote.
Now the final quality of the finished product depends on the complete integration of all the business processes, from quotation through to shipping (and invoicing). So, I would contend that ERP really does contribute to increased product quality in all circumstances and makes an even greater contribution in the more complex environments.
Of course, product quality must be appropriate to value for it to be profitable. To use an example from the automotive industry – Aston Martin produces vehicles of extremely high quality but does not make a profit, while Renault increased its profit by 59% through Dacia, a brand that arguably uses materials of lesser quality and takes less time to build cars…