0
Select Articles

Way to Grow PUBLIC ACCESS

ERP Systems Help Small Engineering Firms Manage their Business

[+] Author Notes

Associate Editior

Mechanical Engineering 130(12), 40-42 (Dec 01, 2008) (3 pages) doi:10.1115/1.2008-DEC-3

This article discusses features of enterprise resource planning (ERP) systems that aim to help small engineering firms in managing their businesses. With the proliferation of ERP systems and vendors in the past decade, the big vendors as well as a series of small and niche players are now marketing their offerings for the small-to-midsize company and for specialized companies. Small companies often find that ERP systems give them better control of inventory and production scheduling. The engineer-to-order operation has unique needs that can be met by a specialized ERP system. Jobscope, a company in Greenville, South Carolina, makes ERP software especially for small-to-midsize engineer-to-order companies. In order to serve engineer-to-order type of engineering companies, the Jobscope system stores business information on a per project rather than a company-wide basis. It is because engineer-to-order companies batch and track jobs on a project basis. The experts agree that bringing in an ERP system might seem daunting to the smaller engineering operation. However, they also agree on another thing: it can help small companies manage the complexities of growing business.

Ten years ago, the Schumacher Elevator Co. had entered into a kind of stagnancy, according to JeffSchumacher, chief financial officer of the company.

The business wasn't growing, mainly because of the small rifts experienced when business systems aren't operating in synch or living up to their potential.

"We were extremely busy, with a lot of work, but couldn't get to the next level," Schumacher said. "We had issues with inventory control and production scheduling and those types of things, and we felt we needed an ERP solution to allow our company to grow to the next level."

ERP, or enterprise resource planning, systems link manufacturing with business processes like new orders, purchasing, credit, accounting, supply chain management, and planning. They stretch from headquarters across factories, warehouses, engineering centers, and sales offices. By linking these operations with profitability, ERP helps executives understand and forecast all the factors-from sales and purchases to asset utilization and hiring-that might affect profits.

A family-owned company in Denver, Iowa, Schumacher Elevator makes passenger and freight elevators and components. It specializes in nonstandard , large insta llations such as freight and hospital elevators. It's officially a small business, with 200 employees. Until fairly recently, it couldn't have found an ERP system to fit its needs, mostly because vendors didn't make products targeted to the small or medium-size business. Nor did vendors cater to specialized engineering organizations,- such as the engineer-to-order and custom engineering companies that are often, by their very nature, small companies with unique needs.

But with the proliferation of ERP systems and vendors in the past decade, the big vendors as well as a series of small and niche players are now marketing their offerings for the small-to-midsize company and for specialized companies, said Eric Kimberling, president of the Panorama Consulting Group in Denver. The group helps companies clarify ERP goals before they sign on for a system.

Small companies, like Schumacher Elevator Co., often find that their ERP systems give them better control of inventory, production schedules, and engineering projec ts than they'd previously had, Kimberling said.

"When ERP is done right, the number one benefit is streamlining your processes and making them more efficient than doing data entry and keeping track of stuff in spreadsheets and digging for data," he said. "ERP makes those things more flexible and accessible to employees."

According to an industry analyst, Dan Miklovic, these systems best aid the small engineering and manufacturing organization that juggles suppliers, products, and customers. Miklovic, research vice president for the manufacturing industry at Gartner Group in Stamford, Conn., said that, because the application offers a bird 'seye view into all business systems, it allows organizations to best ensure that they're making the right product at the right time and that they're doing it profitably.

"If you're a dedicated manufac turer and take a few raw material items and preassemble them, then you rea lly don't need an ERP system," Miklovic said. "But if you have multiple suppliers and customers, if you're really making a product with some degree of complexity, with multiple SKUs, and multiple va riants of a product, then you can benefit greatly from an ERP system."

Small companies often find that ERP systems give them better controL of inventory and production scheduling.

Schumacher Elevator brought in an ERP system eight years ago from SAP, a German company with U.S. headquarters in Newtown Square, Pa. Since then, Schumacher Elevator has started back on a steady growth plan. The system has helped the company get a better handle on its overall operation.

"It's helped in the sense that we're better able to manage projects. Our information is more current. We're able to control inventories better without cost going through the roof," Schumacher said. "We have better access to real-time information.

"We used to not be able to tell where a proj ect was at any stage, like the job of building an elevator for a customer. We couldn't track that in any system," Schumacher sa id. "Now we can."

Small businesses that don't choose an ERP system often have their own way of marrying business and engineering systems, said Jeff OS01'io, the chief fin ancial officer at Solaicx of Santa CIa ra, Cali f., which makes ingots and wafers for the solar power industry. But often those cobbled- together business software programs can't work in the streamlined manner of a dedicated system.

"They usually buy a whole bunch of packages and write custom interfaces, which I've never been a fan of," Osorio said . " I've seen large companies try to do that and not do a good job of it. Plus, it uses a ton of resources."

In his past work, Osorio was a consultant who helped companies implement ERP systems to improve their financial performance.

Oflate, Solaicx has been moving from wafer research and development to manufacturing. To that end, it recently opened a plant in Portland, Ore. In July, it implemented an ERP system from Syspro of Costa Mesa, Calif.

"We were running QuickBooks and some miscellaneous packages. In the research and development stage, that works fine," Osorio sa id. "But in commercial applications, with the volume of transactions that would be going through manufacturing, we needed more."

Solaicx now houses its fin ancial and manufa cturing data within the new application. That kind of integration makes for greater visibility into all aspects of the company, Osorio sa id.

"Everyone across the company can see the status of orders, customer shipments, inventory, and those types of things," he said. "That makes it a lot easier for us to work cross-functionally in the business."

The engineering change control module Solaicx will soon add to its ERP system should be particularly helpful. It will update the bill of materials when an engineer issues a change order.

"So if you want to substitute one part for another or change the part structure, you use that process within the ERP system," Osorio said. "Because that's tied to everything, it enables an appropriate level of transfer between product engineering, manufacturing and procurement, and the supply chain."

All relevant business operations are notified immediately and their systems automatically are updated to account for the different costs and manufacturing requirements of the change order.

Today, small and specialized companies can find ERP systems for their needs. The systems consolidate business information.

Grahic Jump LocationToday, small and specialized companies can find ERP systems for their needs. The systems consolidate business information.

The engineer-to-order operation has unique needs that can be met by a specialized ERP system.

Jobscope was founded in 1981 by necessity, said Hank Sanders, the firm's president. The company in Greenville, S.C., makes ERP software especially for small-to-midsize engineer-to-order companies. Executives at an engineerto- order company founded Jobcope after having trouble finding ERP software appropriate to their needs.

To serve these types of engineering organizations, the Jobscope system stores business information on a perproject, rather than on a companywide basis. That's because engineer-to-order companies batch and track jobs on a project basis, Sanders said.

"Each job is costed on its own, so you can be focused on each separate job," he said. "You can always be checking, how much did we expect this job to cost us against how much did it actually cost us, for each particular job."

Of course, executives can zoom out to view company operations as a whole.

One early-and continuing-Jobscope customer is PaR Systems Ine. The engineer-to-order company in suburban Minneapolis makes equipment for a r;ll1ge of industries, practically everything from industrial food-processors to nuclear labs. Part of its business is to supply aircraft and ammunition elevators for aircraft carriers and naval ships.

Each PaR Systems customer contract is unique-a separate job-with its own labor and materials changes, said Steve Sutton, the manager of information systems.

His company has written its own specialized applications for the Jobscope system through the years. For instance, PaR managers have learned that it's best to track and budget for parts at the assembly, rather than the part level.

Because the Jobscope software tracks to the part level, Sutton's department wrote an ERP application that tracks to the assembly level.

"We needed that mid-level granularity because we discovered that in our business it takes a lot of energy to check every single part," he said. "You don't have enough time to have every detail in front of you when you have a thousand-part project.

"If you discover a problem, then you can dig in at the part level," he said.

Another PaR-written tool pushes the bill of materials and master part descriptions from the company's SolidWorks CAD program into the Jobscope system so the information doesn't have to be entered twice.

"We write those kinds of things as the need comes up," Sutton said. "As we work on process improvement, we come upon more solutions."

Implementing an ERP system is usually not a simple affair, according to Miklovic. Osorio and Kimberling agree. Systems, including those meant for small businesses, are quite robust, can be costly, and often entail an extensive change in a company's business processes, they said.

The factors to consider when shopping for a system are significant in themselves. Does a customer want a hosted application, with the software maintained on the vendor's servers? Will a company tie the system to its manufacturing execution planning system in order to consolidate manufacturing and enterprise information?

So where should a small-to-midsize business start with this type of implementation?

Putting on his consultant's hat, Osorio said that executives first need to be clear on what they want to accomplish by bringing in ERP. What do they want the system to look like when it is fully implemented? Will it reach the (lctory floor? Will the hardware and software reside in-house?

They must look to ERP packages appropriate to the size of the company, both now and where they expect to be in the near-term future, as based on business plans and budget. This type of planning can be difficult for smaller businesses because they're poised to grow, he said. Executives may have a hard time knowing what the business itselfmuch less its software needs-will be in 10 years' time.

"You have to say to yourself, 'This type of business system will work for us if I'm a $10 million company, but will it when I'm at $200 million?' " Osorio said. "Or, 'Okay, it can handle a few transactions, but can it handle 100 transactions?' "

Osorio recommends that companies choose a system that's proved itself in a business field or industry. One reason Solaicx chose a Syspro package, for example, is that its manufacturing operations-the way wafers are produced, handled, and packaged on a line-are similar to food-processing operations. Syspro makes systems specialized to the food handling industry, Osorio said.

Even small businesses might consider bringing in a consultant to help choose an ERP vendor and to oversee implementation, he added.

The experts agree: Bringing in an ERP system might seem daunting to the smaller engineering operation. But they also agree on another thing: It can help small companies manage the complexities of growing business.

Copyright © 2008 by ASME
View article in PDF format.

References

Figures

Tables

Errata

Discussions

Some tools below are only available to our subscribers or users with an online account.

Related Content

Customize your page view by dragging and repositioning the boxes below.

Related Journal Articles
Related eBook Content
Topic Collections

Sorry! You do not have access to this content. For assistance or to subscribe, please contact us:

  • TELEPHONE: 1-800-843-2763 (Toll-free in the USA)
  • EMAIL: asmedigitalcollection@asme.org
Sign In