Age old questions
The chicken or the egg? Half-full or half-empty? Financial Management or Production Control? Never heard of the last one? Then perhaps you haven’t been involved in an ERP selection for a small to mid-sized manufacturing company yet. If your company operates on a make-to-order (MTO) basis, the challenge becomes even greater.

As is true in many businesses, in the MTO industries, on time delivery is critical. Late deliveries tell your customers that you can’t be relied on to provide product when you promised you would. Your late delivery now impacts their business. Either they have to scurry to catch up with their production schedule or they have to call their customers and explain why they can no longer deliver as promised.

The net result is that if your customers believe you won’t deliver on time, no level of quality or reduction in price is going to sway them to do business with you again.

So, if on-time delivery is the key to a successful business, then an ERP system which delivers the best tools to keep production running on schedule is the clear choice – right?

Perhaps, except that there is the one other tiny little variable that the small to mid-sized manufacturer has to worry about – profitability! Without profits, a negative cash flow will eventually kill a business. Without visibility to the profit on individual jobs, there is no way of seeing which jobs are making money and which ones are increasing the sales numbers and reducing the profit. This is the reason that we hear so much about the importance of job costing.

For most small to mid-size manufacturers, this brings the importance of financial management on par with the importance of production control. Therein lies the dilemma.

Which ERP System is right?
Rarely do the financial managers and production control managers agree on the ERP system that will allow them to succeed in the portion of the business that they are responsible for. Historically, most ERP packages for MTO share their roots in one of two areas. They were either developed as a broad-based accounting system out of which grew some basic functionality to deal with vertical industries such as MTO manufacturing, or they began as a manufacturing solution designed for small businesses that later added some basic accounting functionality.

It is really the natural evolution of supply and demand from the MTO businesses themselves. Take for example, the company that starts out as 5 people, grows into $10 million dollar business, and is on its way to becoming a $50 million dollar business. The original owner has an entrepreneurial style most likely depending on whether he started the business with a financial or production focus. The former was likely an investor that wished to purchase a small business that he could grow into a larger enterprise by better managing the business. The latter often times was someone with a better idea who started production in his garage, and grew his business by making a reputation for a great product delivered on time.

The “better management” person’s focus was initially on a small ERP system that allowed him to track the profitability and financial performance of the business so he could manage the growth decisions. On the other hand, the “better idea” person looked for a system that would allow the business to handle the scheduling issues that arise as sales increase, helping him manage capacity and deliver on-time.

And then the day arrives when the size and growth of the business requires that each of these two individuals bring in management to deal with the “other” side of the business - the “better management” person needs a strong production control manager and “better idea” person needs a good financial controller.

With the new management staff on board, it isn’t long before the original owners are hearing, “We have outgrown our ERP system. I need the tools to do the job you hired me for.” And so, the search begins…

Searching for the Solution
Realizing that the both sides of the business are now demanding strong solutions, many software publishers of accounting based and manufacturing based ERP systems are choosing to integrate their software with a complementary publisher to get the features that may have been lacking in their software. It often appears easier to partner with the experts than it is to develop functionality outside of their domain. Sometimes the strategy of two companies pooling the accounting knowledge of one resource with the manufacturing knowledge of another resource works well, and other times . . . perhaps not so well.

Unless the cultures are similar, many integration difficulties can arise:

• Different data structures don’t map well together
• Manufacturing systems that are not transaction based weren’t designed to drive journal level entries
• The two systems have a different look and feel and navigate differently
• There may be a lack of work flow integration causing conflict between manufacturing and finance / accounting
• Inventory levels (production) and valuation (financial side) are out of sync
• Production needs real time costing but accounting needs to follow GAAP procedures which mean that costing should not be update unless proper posting routines have been followed first
• Not to mention what happens when companies try to marry an off the shelf accounting system that sells for $200 with a complex manufacturing system designed for a $25 million dollar company.

There are a few exceptions. For those Accounting ERP publishers that have taken the approach of outsourcing their manufacturing solution to a certified developer of the accounting system, the result is a solution that is built from the ground up using the requirements of manufacturing production control, but designed specifically to take full advantage of the strengths of the accounting system.

Accounting Control and Job Control
A good example of a tightly integrated solution that works for make-to-order, assemble-to-order, or engineer-to-order manufacturers is Sage Software’s MAS 90 / MAS 200 accounting ERP system integrated with JobOps for production control. Because the JobOps modules were developed specifically for MAS 90 / MAS 200, the design did not have to take into account potential conflicts with data structures from other accounting systems. The look and feel and navigation are not only indistinguishable, but much of the manufacturing functionality runs within most of the MAS 90 / MAS 200 modules.

The result is a system which provides the tools for manufacturing management to focus on job profitability and on-time delivery without sacrificing accounting control. Below are some examples of how a single JobOps feature can address two concerns:

It is rare to find an ERP system that provides for the needs of manufacturing management and the needs of financial management. The fact that it is rare should not be much of a surprise when considering how different the needs of these two management groups are from a systems perspective. Of course, both sides understand the need for the company to be profitable, but the tools that they need to deliver the profitability require software development that truly understands both of their needs.

The age old question of “Financial Management or Production Control?” is becoming less difficult to answer today because ERP solutions like Sage MAS 90 / MAS 200 and JobOps are delivering a unique solution that gives both sides the tools they need to grow the business.

For more information on the JobOps Solution go to: www.compudata.com/JobOps.asp