Project based manufacturing is the most complex when compared to other types of manufacturing. Projects often begin as a concept, which later transform to become a reality by combining several assemblies/sub-assemblies with several bills of materials and steering instructions. Project-based manufacturing entails taking the existing standard manufacturing process and segregating the value chain by control, execution and planning. It is used when there is a need for a complex, unique product that requires a specific process to produce efficiently.
Project-based ERP systems need to be able to handle more than just the scheduling and engineering planning that most people associate with project management activities. A project-based ERP has to handle everything project-based. ERP in a project environment has to handle areas from tracking earned value in support of revenue recognition to detailed tracking of costs by project and task.
We have been providing our customers solutions to manage their Engineer-to-Order, Make-to-Order, Configure-to-Order and Assemble-to-Order businesses for many years. From our experience, some of the key concerns for project-based manufacturers:
When the end-of-project audit shows a project was less profitable than planned, it is a complete failure.
Late deliveries are an issue for any company, but missing milestones in a project scenario means that your invoicing doesn’t happen on time. That typically leads to immediate cash flow issues. Removing this unpredictability means removing the burden of carrying heavy cash reserves to cover for these situations.
Not much needs to be said here. Just a plain lack of timely visibility is a huge problem.
Change is a given. How you and your systems handle it will make or break a company. In project-based manufacturing, embracing and managing change can not only be the competitive differentiator you need, but lead to exceeding a projects financial goals. You need a flexible system.
The success of a project-based manufacturer is built around bidding accurately and quickly. Many companies spend significant capital on CRM systems and then turn around and have an extremely manual system for creating quotes that at best approximate. You need a single integrated system to allow for fast, accurate quotes.
And last but not least, getting the system in and running so you can start getting the value from it as soon as possible. The system has to be built for you industry and mode of manufacturing. It has to be engineering oriented and inventory centric. The system has to be preconfigured as much as possible for project-based operations. Most importantly, it should be a system that can be rapidly understood and easy to use.
You need instant overall project visibility – a Dashboard. A significant amount of a Project Manager’s time is spent reacting to requests for status on shipping and costs unless there’s a single system in place. The cash flow of the company depends on having an efficient and disciplined process for meeting milestones and tracking cost to earned value. Failure in either of these process can be costly and in smaller companies lead to financial ruin.
Being able to convert meeting milestones and costs will lead to higher profits and industry leading cash flow. Your ERP system needs to allow you to manage milestones, cost, and earned value and proper revenue recognition.