Manufacturing Software Guide

What is ERP software?

ERP stands for Enterprise Resource Planning. An ERP is a type of modular software designed to connect all of the systems a business needs in its daily operations, including inventory management, supply chain management, customer relationship management, payroll, human resources, purchasing, estimates and quotes, sales, product configuration, distribution and shipping.

This interconnection can seriously improve the communication of data and ideas from one department to another, and lets leaders see how one area of the business may be impacting another.

What is manufacturing ERP software?

Manufacturing ERP software is ERP software designed specifically for the needs of manufacturers. ERP works largely the same for manufacturers as for any other sector – by connecting multiple systems into a single platform. However manufacturing ERPs tend to have more highly developed functionality around areas such as:

• Cost estimation – for planning and refining products prior to full-scale manufacture
• Manufacturing inventory management and purchasing – for the efficient procurement of materials, waste minimisation, and production planning
• Machine maintenance management – for efficient preventative maintenance
• Environment, health, and safety management – to minimise risks, reduce accidents and aid compliance with good manufacturing practices

ERP is deployed either on-premise or through the cloud, typically via a SaaS model.

On-premise manufacturing ERP versus cloud manufacturing ERP

ERP is typically deployed in one of two ways: on-premise, or via the cloud (typically via a SaaS model, see below). Some providers also offer a less-common third option, known as hybrid deployment, where their software can be hosted virtually on your on-premise servers.

With on-premise ERP:

• The user purchases an ERP software licence (or multiple licences if paying per user) and software is installed on their in-house servers
• Costs are predominantly up-front
• Ongoing costs include support, maintenance, and software or hardware upgrade fees
• What you get with an in-house ERP system is control. The configuration, functionality, control of data, security, connectivity: it’s all up to you. You aren’t dependent on a vendor for day-to-day operations – though you may rely on them for maintenance, patching and support.

Some organisations feel on-premise is more secure than cloud-based software. While this may have been the case once, it’s a misconception nowadays. They are generally both as secure as each other.

With on-premise software, your IT team must stay on top of security. By contrast cloud software vendors are usually responsible for keeping their product security up to date.

With cloud ERP:

• The user purchases an ERP software subscription (which may scale up or down depending on the number of users and software functions purchased). The software is accessed via the internet.
• Some vendors have their own downloadable apps; others deliver software via a regular internet browser.
• Subscription costs are rolling operational expenditures. Server costs, security, maintenance and updates are all included.

What you get with cloud ERP is convenience. Software delivered via the cloud is typically faster to set up, and adding new users can take seconds. Many organisations find the rolling operational costs much lower, or easier to manage, than an up-front capital expenditure.

However the vendor owns and manages the servers/software and this means your business will be reliant on their server uptime and ongoing support for almost everything. More on SaaS below.

What is MRP software?

MRP is a more specialised than ERP, and is sometimes offered as part of a module within a broader ERP package.

MRP stands for ‘Material Requirements Planning’ and is not to be confused with enterprise resource planning (ERP). While it has a similar acronym, MRP deals more specifically with manufacturing data-based decision making. It combines data from different elements of the manufacturing process to help manufacturers make better decisions around when to purchase their materials, components and subassemblies.

How does MRP work?

MRP help users answer four key questions: “What do we have?”, “What do we need?”, “When do we need it?” and “What are we capable of?”

It tracks factors such as predicted customer demand, resource availability, lead times and deadlines, and can compare them to production capacity, inventory levels and bills of materials.

A properly installed MRP system will allow a manufacturer to predict when to purchase the correct quantity of materials to produce the right amount of goods at the right time to meet customer demand.

Learn more: MRP Explained: All You Need to Know About Material Requirements Planning

On-premise ERP software usually involves a larger upfront capital outlay. Whereas software delivered through the SaaS model is billed in smaller, regular increments.

Cloud manufacturing software is simply any manufacturing software that resides in, and is delivered via, the internet. In principle, the term ‘cloud-based’ refers only to the delivery model of the software. However in practice cloud software is a more recent technology, and tends to be quite different to its on-premise counterpart.

Cloud manufacturing software is often more specialised in scope, with a strong focus on ease of integration with software made by other firms. On-premise software, hailing from an older period, is typically wider in scope and less easily integrated with other products.

Cloud-based software versus SaaS

SaaS, or software as a service, is an increasingly popular method of billing for and delivering cloud-based technology. ‘Cloud’ and ‘SaaS’ are one and the same; the cloud is where SaaS software resides. SaaS as a term is used to clarify that a piece of software will be held in the cloud and billed in an as-a-service model, i.e. a rolling subscription.

The wider term of ‘cloud’ also includes infrastructure as a service (IaaS) and platform as a service (PaaS) – other IT services which can be held in and delivered from the cloud.

Why do manufacturers use SaaS software?

Cloud-based software (delivered through a SaaS model) tends to be convenient, and easy to manage.

One of its greatest advantages is its overall reduction in costs and setup when compared to legacy on-premise products. Since the software is hosted by a third party, there’s usually very little installation or IT setup required at the manufacturer’s end. In some cases, you can be up and running in a few minutes. Additionally, because it’s hosted online, you can access a SaaS product anywhere with an internet connection.

With SaaS you tend to only pay for the services you use. If you require more from the product, you can scale up by switching on more user accounts or software features. Likewise, you can scale back down if your needs change. This keeps operating costs to a minimum.

SaaS is very popular with smaller or medium-sized manufacturing firms, who may not have the time, money or IT expertise to establish a complete on-premise setup. Smaller firms are also much less likely to need the degree of functionality that often comes with on-premise products.

Who owns my data if manufacturing software is delivered as SaaS?

This depends on the vendor. In the case of the vast majority of SaaS vendors the service-level agreement (SLA) will stipulate that you own your data, even if it’s housed on their servers. Additionally, you will have a right to retrieve your own data at any point, and there may be an additional clause that stipulates how you will get your data back if the vendor goes out of business.

Before you sign on with a software vendor ensure you check over the SLA for clauses like these, and ensure your legal team, as well as IT and data security personnel are across the agreement.

You may also need to consider where your data will be held. While your data will officially be ‘in the cloud’, it still has to live somewhere physical. If that somewhere physical is offshore, depending on your country of origin you may come into conflict with any data protection regulations that stipulate a country’s data may not be moved overseas. This can be checked on the SLA and may be open to negotiation where needed.

Is SaaS secure?

There is a misconception that cloud-based software is not as secure as on-premise software. However, these days that is not true, and in fact the opposite is often the case.

SaaS vendors are usually required by law to provide a high level of cyber security, and many go far beyond what’s required with best-practice encryption and features such as Two-Factor Authentication (2FA). Check by asking about their certifications and security framework before signing on.

On-premise software, on the other hand, has the potential to be more vulnerable. While it’s less open to issues like Denial of Service (DoS) attacks or mass data breaches, in practice installed solutions tend to become more vulnerable than their SaaS counterparts over time.

Cloud software is very easy to keep updated as the vendor will routinely release new versions and patches, which are usually implemented automatically. By contrast on-premise IT teams must stay on top of their own security, and maintain software that – realistically – starts becoming out of date from the day it’s purchased.

‘Best of breed’ manufacturing software

The term ‘best of breed software’ is used to describe products that focus on a particular area of functionality. These products aim to deliver specialised features within their area of expertise and rely on integrations with other best-of-breed products for anything outside their scope.

By choosing the right combination of best-of-breed software products many small and medium sized businesses can build digital capabilities that rival the more expensive ERP alternatives.

For example a medium sized manufacturer might chose products such as:

Lokad - For Supply Chain Forecasting

Unleashed - For Manufacturing Inventory Management

Xero - For Accounting and Finance

StarShipIT - For Shipping Automation

All of these can be connected via existing ‘plug and play’ integrations, or a customised connection using open APIs, to create a single, cohesive software solution.

Manufacturing inventory software lets manufacturers see exactly what components and products they hold in their warehouses, as well as what it costs and where it is.

Most importantly, inventory software that’s designed for manufacturers uses online Bills of Materials (BOMs) to revolutionise production management and purchasing.

A Bill of Materials is a recipe that details all the parts and quantities needed to assemble a product. A simple BOM might have only one level of assembly required, while a multi-level BOM would be used for a more complex product that incorporated multiple different sub-assemblies.

Manufacturing inventory software and BOMs

Online BOMs are a core feature of manufacturing inventory management software. By matching a BOM against a sales order for a given product – as well as the stock and components currently held on site – manufacturing inventory software can:

• Assign existing components for assembly (which ensures they’re not used or sold elsewhere)
• Coordinate the dispatch of any completed products held on site and deduct these from the sales order
• Quickly and accurately create purchase orders for the different parts required to complete the order

The result of using digital BOMs as part of inventory management software for manufacturers is usually:

• Dramatically reduced production planning time
• Much less production waste / over-ordering
• Leaner stock levels and more efficient use of capital

Learn more: What is a Bill of Materials? Here’s What You Need to Know

Inventory management software products designed for manufacturers typically aim to bring the same level of efficiency to other parts of the product production lifecycle, with features like:

• Supplier management
• Invoicing and purchase orders
• Batch tracking and recall management
• Warehouse management
• Serial number tracking
• Sales order management
• Sales enablement – e.g. B2B eCommerce tools and / or eCommerce integrations
• Pick, pack & despatch + logistics

How manufacturing inventory management supports lean manufacturing & JIT

Just In Time (JIT) manufacturing is a model whereby production starts in response to a sales order – with a minimum quantity of parts and products kept on hand for immediate fulfilment, and the rest ordered in as required. It’s sometimes known as ‘pull production’ for the way that work is ‘pulled’ through a factory in response to a sale, rather than ‘pushed’ through by anticipated demand.

JIT manufacturing’s great advantage lies in its efficient use of capital. When stock is only bought in response to a sale, inventory levels are kept to an absolute minimum, which can dramatically free up capital for use elsewhere in the business. Stock is much less likely to be written off or unused, and product expiry is uncommon – which is why a JIT approach is common among food and beverage manufacturers.

Naturally successful JIT manufacturing depends on close control over supply chains and supplier lead times, as well as fast and efficient internal processes – which is where modern manufacturing software comes in to its own.

A good manufacturing inventory software product allows businesses to operate under a JIT model by aligning purchasing with sales orders (via each product’s BOM), and doing so quickly and accurately.

Manufacturing inventory software is also closely aligned with lean manufacturing, which is a manufacturing methodology related to JIT. Lean manufacturing emphasises waste reduction, efficiency and good communication – which are all facilitated by modern software tools.

Learn more: Lean Manufacturing: What is it, How is it Done & Why?

Beyond the generic manufacturing software tools are a range of more specialist tools used by manufacturers. These include:

CMMS

A CMMS is a Computerised Maintenance Management System. CMMS software can be valuable to equipment technicians, as it helps centralise maintenance information, provide technicians with access to the information they need to perform maintenance (including step-by-step procedures), and can automate administrative tasks.

CAM

Computer Aided Manufacturing software is used with computer-controlled machinery such as 3D printers, laser cutters and milling machines to automate the manufacturing process. Effectively CAM software translates designs into instructions for machinery and is only used with tools capable of being operated by software.

EHS software for manufacturing

Good manufacturing practices require compliance with environmental, health and safety protocols. Manufacturing EHS software specialising in aiding compliance and best practice in this space.

Other specialist software for manufacturing

We’ve provided only a small list here of what is quite a large software ecosystem. These days, if you have a particular function in your business then you can probably get software for it.

Learn more: 15 Types of Manufacturing Software (+ Who Benefits from Each)

The range of manufacturing software available isn’t constrained to functions within a business. It also includes specific industry sectors.

As you explore the manufacturing software landscape you’ll likely encounter products created to serve the needs of particular niches, from curtain and blind manufacturing software all the way to pharmaceuticals software.

4 points to be aware of when considering industry-specific software:

1. At the light manufacturing end of the scale, many industry-specific packages do much the same thing – but lack the scale and functionality of more generic ‘best of breed’ software
2. Over time, the more generic ‘best of breed’ software products tend to add to their functionality in order to broaden their appeal. This can further erode the business case for choosing an industry-specific software product
3. The smaller the niche served by a piece of software the more vulnerable the product is to market forces – before signing on you should consider if an industry-specific software is at risk of going out of business, or being swallowed up by a competitor
4. The more complex the needs of a given sector, the more likely it will be best served by industry specific software. For example aerospace & defence and pharmaceutical manufacturing tend to have needs best served by tailored software

In short: before committing to an industry specific manufacturing software tool, consider if your sector’s needs are addressed by a more generic product.

There is now significant overlap between the different software types. Some of the more sophisticated 'best in breed' packages have evolved into ERP-lite products, while also also serving niche industries well.

Examples of types of manufacturing software where industry needs are best met by a generic product include:

1. Food manufacturing software
2. Traceability software for food manufacturing
3. Brewery software
4. Coffee software
5. Supplement & nutraceutical software

Trying to figure out what manufacturing software to invest in, and whether it’s right for your business? Start by asking yourself – and your potential vendors – the following questions:

How is the software delivered?

• Where is the software stored? Where is its data stored?
• How will you be billed?
• What is the history of the company? Are they reliable?
• Is this a legacy product that has been updated, or was it developed especially for the platform it’s now on?

What does the software do?

• Does the software help with more than just the manufacturing process? I.e. can it perform functions such as HR, payroll, fleet management, etc.? If yes, are these functions that you need and are happy to pay for?
• Does it integrate easily with products from different vendors?
• Is it compatible with your current accounting and finance software – or the platform that you intend to use?

Who is the software for?

• Is it designed to cover the manufacturing process in general, or does it address a specific need? And does that match what you need?
• Is the software designed for your size of business? How big are the majority of its users?
• Is it a solution for a particular sector, i.e. brewing or pharmaceuticals? And do you need a niche product or a general one?

Review sites

You don’t have to trust that a piece of software will do what it says it will. Multiple comparison and review websites exist to help businesses assess their needs and compare products. Many include reviews from existing users as well as annual ‘Top 20’ style reports.

Popular review sites include:

• G2
• Capterra
• GetApp
• Trustpilot
• Software Advice

App stores

If you intend to connect new manufacturing software with other important technology in your business, then that company’s app store is a logical place to begin your search.

Most app stores will have a minimum level of compatibility required before they will include another software product, which helpfully narrows your search down to software that works with what you already have. Reviews on those sites will also be from users of both software products.

A common starting point for an App Store search is your accounting and finance software provider, as this technology is so central to many businesses.

See for example:

• The Xero App Store’s list of manufacturing software
• The QuickBooks Online App Store’s list of manufacturing software

Software ecosystems

Other software vendors operate by building large ecosystems of complimentary software products – these can be an excellent option for companies wanting to do business with a single provider.

See for example:

• The Access Group’s manufacturing software suite

Sources used in this manufacturing software guide:

ERP/MRP

• https://www.unleashedsoftware.com/blog/what-is-material-requirements-planning-and-do-you-need-it/
• https://www.investopedia.com/terms/e/erp.asp
• https://www.softwareadvice.com/resources/cloud-erp-vs-on-premise/
• https://global.hitachi-solutions.com/blog/cloud-vs-on-prem-erp/

SaaS

• https://www.softwareadvice.com/resources/saas-10-faqs-software-service/
• https://dig8ital.com/resources/library/are-you-reviewing-your-third-parties-for-security-risks

Best of breed

• https://www.gartner.com/en/information-technology/glossary/best-of-breed
• https://gobonfire.com/best-of-breed-software-advantages/
• https://www.techopedia.com/definition/23200/best-of-breed-system

Inventory management

• https://www.unleashedsoftware.com/product/inventory/
• https://www.unleashedsoftware.com/inventory-management-guide/

More sources

• https://www.unleashedsoftware.com/blog/17-wholesaling-software-features-for-smes-to-look-for/