The Three Different Types of ERP Manufacturing Systems
As a manufacturer, you face a challenging and opportunity-rich environment. You must navigate changing demand patterns, manage global complexity, and meet growing sustainability and compliance requirements. One of the most common and costly mistakes a manufacturer can make is choosing an ERP software system that does not fit with their process. A good example of this would be a chemical producer who selects and implements software designed for a company that develops furniture or automotive parts. This is an obvious mismatch. But sometimes, the specifics may not be so clear cut.
In order to highlight some of the differences, let’s take a closer look at the three main types of manufacturing:
This category includes companies that assemble products from distinct pieces such as nuts or bolts. Examples of discrete manufacturers are those that assemble automotive, aerospace, or electrical parts and use Bill of Materials (BOMs).
Process manufacturers are those who blend liquids, formulas or recipes. Once put together the component parts can be distinguished or disassembled. Typical examples include those who develop food, cosmetics, chemicals, paints and coatings.
Mixed Mode Manufacturing
This type describes companies who operate in both Process and Discrete environments. Mixed Mode Manufacturers require both a process and a discrete manufacturing system.
These differences are only the beginning of a long list of incompatibilities that process and discrete manufacturers have to deal with. Granted, some of the issues are the same: all need a general ledger; accounts payable; accounts receivable; bank reconciliation; sales order; purchase order; etc. However, the differences in the types of types of manufacturing have very distinct inventory and bill of material requirements. For example:
Process Manufacturers require formulas/recipes, containers and labels for their bill of materials. They need to measure pounds, gallons, ounces, liters, milliliters, grams, etc.
Then within Process Manufacturing are the various types of industries each facing their own challenges.
Food and Beverage companies must contend with the ever present reality of food recalls, which makes lot traceability and reporting features crucial parts of a software package they may implement. These capabilities allow them to report lot numbers from the raw materials that have gone into their shipped products. In addition, they also have many other requirements mandated by the FDA. For example:
- The FDA must be given advance notice on shipments of imported food as well as label and health claims.
- Companies that process meat from the cow or pig to the finished good must deal with catch weights. Catch weights refer to the actual weight of variable-weight items that use weight as the sales unit of measure, but can also be measured by item. For example a wheel of cheese is sold by the pound but produced by the wheel.
Chemical companies have to deal with lot traceability for product pigments and/or hazardous material tracking, viscosity issues, material safety data sheet (MSDS) reporting, to name a few. Cosmetic producers also deal with the FDA and have a combination of issues that Food and Chemical companies regularly contend with.
Discrete Manufacturers need to measure lengths of material, such as wire in a roll and/or by the foot. Most discrete software packages neither understand a conversion of pounds to gallons, and liters to ounces nor do they use this same conversion factor on a Bill of Material.
While discrete manufactures often deal with serial numbers which in most cases is only one number per part, process manufacturers may be numerous lot numbers in a finished good that must be tracked.
Before you begin the software research process, it is crucial that you first understand your manufacturing type. Are you a processor of liquids, or do you assemble individual items to create an assembled product? This information will go a long way in helping you properly choose software that fits your organizational requirements.
Process Manufacturers - Explore more resources and download our process manufacturing success kit.
Discrete Manufacturers - Take the next step in researching which ERP system is right for your organization by downloading our How to Choose an ERP System whitepaper.
Mixed Mode Manufacturers - There are several options for you to choose from, explore all of our resources now.