Manufacturing ERP Implementation with SOP’s

Objective of this Service:

The primary objective of this service is to enable a company with smooth implementation of ERP with the help of SOPs to make the entire ERP operation seamless right from the onset. The use of SOP for ERP will ensure that the company remains “system dependent” instead of being “person dependent.” This write-up is meant for the reader to understand implementation of ERP in the manufacturing process or manufacturing ERP implementation

Importance of SOPs in Manufacturing

• Standardization: By incorporating SOPs, a manufacturing company can establish a standard and consistent way of completing a task. Providing workers with SOPs ensures that the tasks get performed in the same manner across manufacturing facilities and production lines. Further, SOPs help in streamlining processes, improve consistency and equip the management to make informed decisions.
• Streamlines Communication: With standardization, managers can easily share performance metrics with team members. This helps reduce the risk of non-compliance, improve supply chain efficiencies and streamline project management.
• Efficiency: By incorporating SOPs, managers can improve production efficiency by a large margin. With the help of procedure templates, repeatable processes can be made more efficient. Also, processes can be improved by removing redundant steps or by adding additional steps as a corrective measure to make the process more efficient and effective.
• Regulatory Compliance: Manufacturing facilities are expected to adhere to prevailing industry standards set by statutory authorities. While writing and formulating SOPs, these standards can be made part of it. These will ensure processes within a manufacturing unit never go beyond the statutory requirements.
• Improves Accountability: By laying down SOPs, workers are expected to follow the stipulations within an SOP. If workers are found violating the SOP, then corrective action can be taken to ensure the event does not get repeated. This improves accountability on the manufacturing floor significantly.

Challenges with ERP Implementation & How SOPs can help Overcome these

• Production/ Project Tracking & Management: While an ERP is capable of establishing project timelines and milestones. The entire process of coordination between multiple aspects within the ERP becomes more streamlined with the creation and implementation of SOPs. Any room for overlap or mismatch between tasks can be eliminated right at the outset by the inclusion of an SOP in the project management process. Moreover, with SOPs there is a clear demarcation of responsibilities which leaves no scope for “blame game” when the project does not proceed in the manner it is meant to be.
• Inventory Management: Again, various aspects come under the ambit of inventory management, and it becomes essential that these are carried out in a stipulated fashion without lapses. These include physical observations and handling of the inventory, along with various other physical processes that support digital processes within the ERP. An SOP becomes the integral link in establishing coordination between the physical and digital processes. Most often, not addressing this crucial link can impede the seamless operation of ERP. Plus, there can be other processes like inventory analytics built-in to the ERP which require essential guidelines for usage. SOPs can provide the essential guidelines for such processes.
• HR Management: This includes all the processes handled by an HR department within the company. And it can include processes like recruitment, job interviews, performance management, and so on. All this primarily requires human intervention to get executed. Once the action has been carried out, it becomes essential that these get recorded in the ERP. This means physical processes getting supported by digital processes. For this to happen, SOPs must be framed and implemented across the HR function. So that the ERP is made use of to the utmost potential.
• Quality Check & Compliances: Almost all manufacturing companies have quality and compliance functions, which ensure the goods manufactured to meet certain quality and legal requirements. With an ERP software, it is possible to set up automated audits and checks of incoming raw materials and outgoing finished goods. Before implementing these audits, there needs to be SOPs that spell out the essential guidelines & benchmarks for carrying out the audits. The same procedure applies to compliance when the company has to follow multiple sets of regulatory compliances, it is again the SOPs that streamline the creation of audit trails and reports within the ERP system.
• Logistics Management: When it comes to logistics management, there are a lot of physical observations, tracking, and follow-ups that are part of the process. In order to ensure the entire function meets company expectations and guidelines, it is essential to implement SOPs that will pave the way for the effortless functioning of the entire logistics management within the ERP. Without SOPs there is scope for a lot of ambiguity with the staff compelled to rely on experience and guesswork to accomplish tasks even with the presence of ERP.
• Procurement Management: This function generally involves receiving raw materials, price negotiations, and setting a price range for procurement. All this information can be fed into the ERP, but smooth functioning of the process only occurs when there are clear guidelines and procedures spelled out by an SOP. Setting the ERP for procurement management must be done through SOPs, it can ensure streamlining of the procurement operation within the ERP.

Why DFX for Manufacturing ERP Evaluation & write SOPs?

DFX comes with a wealth of experience in the creation and implementation of SOPs for ERP in manufacturing operations. While implementation of ERP may be a complex operation, the degree of complexity can be reduced with the help of well-articulated SOPs that will spell out clearly how there has to be coordination between physical and digital processes. DFX comes across as an expert in doing so and has implemented SOPs for a variety of manufacturing units within the country and overseas.

Our in-house experts come with academic training and industry experience in manufacturing ERP selection consulting or manufacturing ERP consulting. We vouch for our claims on prior experience in manufacturing ERP implementation across large-scale manufacturing undertakings with a high degree of complexity. Regardless of the scale and complexity, DFX is equipped for implementing standard operating procedures in manufacturing (i.e. SOP for manufacturing units) in a seamless manner without any hurdles. Overall, DFX team has mastered the art of writing and implementing SOPs which are digital i.e. integrated with ERP at the manufacturing units.

Business Architecture

Identify areas/ functions where ERP and other business applications implementation is needed:

As part of the business architecture framework for the implementation of ERP and other applications, we have to identify areas/departments from where data can be collected and stored in one centralized place, i.e. Finance & Accounting, Human Resources, Customer Relationship Management, Production Management, Business Intelligence, Warehouse Management, Inventory Management, Supply Chain Management, Point-of-Sale (POS) and eCommerce. The steps for effective ERP implementation are:

• Choosing the right ERP selection team
• Identifying the problem and objective, analysing your KPIs
• Deciding your budget and implementation timeframe
• Choosing the best ERP system for your organisation
• Preparing a best-fit ERP
• Implementation plan
• Preparing to migrate and switch ERP systems
• Customizing the system for your business processes, adding new functionalities
• Providing ERP employee training on how to optimally use the new ERP software
• Testing the ERP system (ensuring no gaps, bugs, or errors, issue identification, and resolution)
• Going Live (with additional functionality testing once live to ensure that the system is fully operational).
• Additional ERP support for regular software updates and maintenance

ERP Requirements Finalization

Finalise the modules needed in the ERP and the features:

To finalise and select the ERP and its requirements, modules, and features that align with the organisation’s needs, here are the principal selection criteria used:

• The Functional Fit for Your Organization
• Industry Experience
• Price (by calculating the ERP’s ROI, the total cost of ownership, pricing mode/software licensing, and implementation cost)
• ERP Vendor Viability
• ERP Implementation Project Considerations (Business timing, executive support, project plan methodology)
• Technology (End-user reporting tools, Simplicity in UI and UX, Business intelligence, Data security, System performance and Response time, Integration with other systems, Customization capability)
• Risk (and how to avoid it)
• Scalability
• References (feedback from the ERP company’s clients)
• Post-Go-Live (on-going support and training plan)

While finalising the ERP, modules, and features, the below benchmarks have to be remembered:

• Efficient and automated processes
• Centralized ERP platform with integrated data from best-in-class applications
• Stable and automated integration platform
• Simple and efficient accounting structure
• All locations data consolidated in a single database
• Company-wide metrics and analysis reporting
• Automated and easy-to-use workflow functionality
• Allow for easy electronic document management and storage
• Rich application functionality out-of-the-box
• Standardized user access profile management

Manufacturing ERP Evaluation

Selection, Negotiation, Finalization:

Selecting a new ERP solution is a large project require the following key factors to be considered for the ERP Evaluation process:

• Determine system requirements
• Ensure senior management support
• Establish a project roadmap
• Factor in the total cost of ownership (TCO)
• Consider peer references
• Establish a relationship with the vendor
• Evaluate deployment flexibility

The ERP Evaluation Process: Demo alignment, review, shortlist, negotiation, and finalisation consist of the following key steps:

Pre-demo activities – Shortlist:

• Ideally, the demo prospects should be shortlisted into two or three ERP vendors, helping to eliminate vendor blur.
• This final shortlist should include vendors that have options offered in your price range, provide the required features, are designed according to the size and scope of your company and have scored high marks in the vendor evaluation process.
• As per request, the prospective vendors should be provided with a data sampling (example bill of materials – BOM, production notes, etc.) to enable them to perform personalized transactions during the interactive software demo.
• There should be communication with the vendor beforehand to discuss the specific addressable points and perceived functionality gaps, and all this can be incorporated into the personalized demonstration.
• A list of questions should be prepared before the scheduled demo, also simultaneously reserving the right to ask impromptu questions during the presentation or at specific times to ensure that all areas of discussion are covered. Detailed notes should be made during the software demonstration to effectively evaluate the differences among vendors without an overlap of each software’s functionalities and uniqueness.

Demo activities:

• As a critical part of the selection process, the full ERP demo should take the audience through a day in the life of the company, highlighting order entry, purchasing, bill of material management, manufacturing, quality control, accounting, and other key organisational features.
• With this level of detailing, your company should set aside approximately eight hours to get a complete picture of the ERP software’s capabilities. Ideally, the format should be similar for each vendor to facilitate easier comparisons.
• The detailed software demonstration provides your company with the information needed to compare and contrast solution options – focusing on your organization’s requirements and expectations from the new ERP system.
• In this demo, each ERP vendor will effectively demonstrate how their software can align with your business objectives and operational methodology, highlighting the strengths and uniqueness of their solution and their industry-ratified solution offerings.

Post-demo activities:

• After the ERP demo, the selection committee should convene to summarize the demonstration, determine its takeaway points and prepare a list of additional questions that may have come up following the presentation.
• If required, a specific portion of the demo may have to be repeated for a further explanation until all aspects are covered – requiring additional time to complete the evaluation.
• The selection team should review software performance and functionalities indicated by scorecard rankings, as well as the company’s overall perception of vendor capability.
• Finally, the selection team should have all the information needed to make an informed purchase decision and select the right ERP software in line with the company’s objectives, work culture, requirements, and processes. The selected ERP vendor should be open to questions, and negotiations concerning all the terms and conditions of the final contract, pricing, etc.

Negotiation & Finalisation – DO’s and DON’T’s:

The negotiation and finalisation process should consist of assembling a professional negotiation team, pre-establishing a negotiation strategy, reviewing the contract and terms of warranties, comparing bids, seeking legal counsel, reading the fine print, minutely examining the service level agreement, capturing and pinpointing all fees and hidden costs including the implementation costs, thoroughly understanding the ramifications of the terms and conditions, uncovering possible vendor motivations to gain leverage, using a scoring template to identify your best negotiation options, and if there is a negotiation breakdown on terms and conditions, to be always prepared to walk away from the contract.

Manufacturing ERP Rollout Plan

The global or localised rollout plan for an ERP software system is commonly adopted by organizations that aim to leverage and take advantage of standardized and streamlined business processes and operational visibility across all local entities, or business departments. Depending on specific business needs and their complexity, organizations can choose different rollout strategies.

Companies might choose to pre-define a standardised universal template at the start of the ERP implementation project and then rolling it out to the local business entities, or departments. On the other hand, they might also factor in flexibility and define the template during the project implementation, based on specific business needs. In practice, businesses tend to choose the first option since it leads to lower costs.

To ensure the success of the universal ERP rollout template, the following factors must be taken into consideration:

• Template readiness and adaptability
• Strong governance
• Proactive change management
• Skills roles and responsibilities
• User training
• Common master data definitions;
• Management of dependencies with other integrated systems

Manufacturing ERP Implementation

ERP Masters Updation:

ERP packages contain different modules, such as finance, sales and distribution, materials management, manufacturing and production control, human resources, plant maintenance, and quality management. Due to the integrated nature of the functioning of all the modules, master tables are referenced frequently all across the system and databases and shared by different applications, functional areas, and sites. Master data updated thereon needs to be accurate, complete, timely, consistent, and easily accessible. The quality of master data inputted is a major reason for the success of an ERP Implementation.

The following best practices should be adopted while updating master data in an ERP system:

• Collection and maintenance of master data
• Defining a clear-cut process and procedure for maintenance of master data.
• Ownership of data should be properly defined.
• In-built workflows and authorization for adding and modifying data.
• Documentation of the process should be done
• Audit trails of master tables should be activated and modifications logged in the system.
• Proper excel templates or data mapping should be done with a legacy system, for the initial collection of data.
• Master data should be properly classified

Examples of master data in ERP systems include delivery, shipment, invoicing, payment methods, parent company of customer, country location (for tax and statistical purposes), status (active, inactive, potential), credit rating, financial groups, contact names and addresses, default currency, prices and discount, sales channels, sales offices, transport, etc.

ERP User Rights Updation:

Access Control protection for ERP Data:

ERP software should be risk-free, and unauthorized users could misuse sensitive data, representing a significant security threat. Access control helps to mitigate risk and is known as identity and access management (IAM), defined by Gartner as ‘the security discipline that enables the right individuals to access the right resources at the right times for the right reasons.’ Thus, to reduce security breaches, risk and safeguard sensitive data, businesses must thoroughly vet users and restrict ERP user rights access on a strict need-to-know basis.

The following strategies can be adopted in this regard:

• ERP User rights and access levels: Distribute access levels with user-based permissions, specifying user role, permission level, document type, identification of vulnerabilities through periodic access control reviews
• Managers can look for warning signs, i.e. ERP access control warning signs
• User administration should be verified as continuous/ongoing and immediate, with strict guidelines and process standards implemented. This includes adding new users, modifying existing users, and disabling inactive users
• Enforce strong passwords and update logins regularly
• Employee assessment of workplace password security
• Automation of ERP access control processes (like user modification and access rights) through IAM applications
• Boosting efficiency, monitoring user activity, and enforcing regulatory compliance based on a customizable set of parameters
• Periodic review of existing access control processes
• Reinforce security best practices with ongoing ERP training

Paperless SOPs Development

SOPs developed across all functions:

Paperless SOPs are essentially Standard Operational Procedures integrated into IT systems, or documented in a digital format. For several years now and especially in the context of the new normal, paperless SOPs are being effectively integrated across all functions in IT (through various ticketing and BPM – Business Process Management tools) and non-IT organizations (like banks and financial institutions). Paperless SOPs within BPM can be used to create comprehensive user manuals defining organization workflows. They are cost-effective as they are easily accessible from any part of the globe via electronic communication such as emails, or shared network drives which can be accessed instantaneously and in real-time. These digital SOPs help to track task progress, process upgrades and revisions, and also facilitate complete data security and safety. They can also be integrated across all business functions and departments, i.e. purchase, human resources, production, sales and marketing, accounts and finance, etc. In non – IT organisations like banks and financial institutions as well, paperless SOPs drive the functioning of their various digital platforms and applications.

Ensure SOPs are integrated with Manufacturing ERP:

Paperless SOPs can be effectively implemented when it is integrated with an Manufacturing ERP system already in place. Through this process, Manufacturing ERP software maps paperless SOPs in the background and provides a window for all eligible users to digitally access and track their business functions and operations. Cutting-edge technology used in the Manufacturing ERP software seamlessly complements digital, paperless SOPs. All operational procedures get mapped in the management information system, ensuring automation of business processes. This automation is integrated with Manufacturing ERP’s information-sharing attributes in real-time ensuring operational stability, consistency, accuracy, and speed in all business processes. Thus, through an integrated digital SOP-Manufacturing ERP platform, the business can centrally incorporate any required change in its business software applications and also remotely introduce modifications for paperless SOPs.

When paperless SOPs are integrated with the organisational standards for performance and output, these parameters/benchmarks are already mapped against each operational activity in the Manufacturing ERP information system. The system doesn’t allow any user to move on to the next operational activity until they have completed the current pending activity or tasks as per the SOP’s requirements. The status of each operational activity or task is also clearly shown on the Manufacturing ERP dashboards of the concerned reporting authorities or management, to keep them up-to-date at all times.