If you don't have these 3 things, your manufacturing business will collapse for sure
Strategic Transformation Leader | ERP, IT & Enterprise Solution Project Manager | Master Business Analyst | Management Consultant | Driving Innovation Through Process Optimization, Culture Development, and Automation Technology | 23 November, 2018 (Friday)View 2978
There are 3 key Best Practices in manufacturing business. If any one of them is missing, your business will fall. Think about a simple table with 3 legs. If any of the legs is missing, the table cannot stand.
The 1st thing: Stock Transaction Record; You are losing money if you don’t have it
Whenever there is a material movement, I am calling that there is a Stock Transaction. If you are not recording each and every stock transaction in your information system or ERP system, then you are losing money. Let me explain this in 2 minutes.
You may have hundreds or thousands of open Purchase Order given to many of your suppliers that are yet to receive material. Now, you cannot memorize all those, right? You may have an information system or some spreadsheets where you have the list of all Purchase Orders. When you receive some material against any Purchase Order, you must record the Stock Transaction. If you don’t record it immediately, you will never know if the Purchase Order is closed or still pending some material to receive from Supplier.
- If you don’t have record, and supplier sends you less, you will just lose your money.
- If you don’t have record, in the crowed of thousands of items, you will not be able to locate and find the material when needed, because you have forgot which location did you keep it. You will have to do extra Purchase and you will just lose your money.
- There are many unexpected things will happen for sure, if you are not recording each and every Stock Transaction; not just the transaction from Purchase Order, but the internal transactions too. Material cost is always huge, without recording, you will just lose your money.
The 2nd thing: Bill of Material; You are losing money if you don’t have it
Bill of Material (BOM), definitely you have heard about it. But do you have it? Or you are wasting your money in every order?
If your Stock level is increasing day by day, then I am sure, you don’t have Bill of Material followed in your company. Maybe you are doing BOM, but that is a fake BOM.
- If you don’t have the real Bill of Material practice, then you are definitely purchasing extra or less amount than actually required. In both cases, you are losing money.
- If you are buying extra, then you will have stock increased, the money will be stuck and you cannot make profit from it.
- If you are buying less, then you will have shortage when needed in production, maybe you will have to buy the short amount urgently, you may have to pay extra penalty or air cost. At the end you are just losing money.
The 3rd Thing: Material Requirement Planning (MRP); you cannot ship on-time because you don’t have it
The 1st thing and the 2nd thing are all about money. If you don’t have those, you are definitely losing huge amount of money.
The third thing, MRP is more focused on time, not money. Time is the 2nd most important thing to control in your business after money. If you can control your money and control your time, you can control the whole business.
- If you have the Bill of Material, using MRP approach, you can set the required delivery time for each item that you need as raw material. You may need tens, hundreds or thousands of items to purchase in order to get to the finished product. If you have Bill of Material and MRP, you will be able to inhouse them on-time.
- MRP provides the required date and time to inhouse each material. If you don’t have MRP practice in your company, you will never be 90%-100% on-time shipping your goods to customer.
- The main reason why you are not on-time is you don’t have the MRP established. Without this, any improvement projects on the Supply Chain is useless.
Therefore…
If you don’t have Stock Transaction recording system, if you don’t have Bill of Material, if you don’t have MRP… you will not be able to sustain in this 21st century.
These 3 are the basic Best Practices that any manufacturing company must have. If missing then any improvement projects will go in vain.
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