Mike on Manufacturing

How I Got Started in the Manufacturing Software Business – Part 1 of 4

By Mike Hart

This year marks the 20th anniversary of my company, DBA Software, and so I find myself in a reflective mood.  20 years is a long time in the manufacturing software business and I’ve seen many competitors come and go.  But how did I get in this business in the first place?  

To answer that question, I need to take you back to 1986, which was the year our family business, Hart Manufacturing, was sold.  The company was started by my grandfather, Harold Hart, in 1927.  We made watering and feeding systems for the poultry industry and expanded greatly in the late 1970’s, only to crash and burn when new poultry house construction collapsed as Paul Volker broke the back of inflation with 20+% interest rates.  

Manufacturing vs. Accounting

By Mike Hart

The following is a typical scenario in the evolution of a small manufacturing business. 

Every company needs accounting software to invoice customers, pay the bills, collect money, and run financial statements.  When a company starts up and is small in size, it uses a low end software package such as QuickBooks or Peachtree because it performs these basic functions well and is low cost.  . 

The manufacturing side of the business gets by using the basic inventory, sales order, and purchasing modules offered by the accounting system and augments them with spreadsheets to handle manufacturing requirements.   

Manufacturing Software Packages for Small Business

By Mike Hart

Here is a link to the latest iteration of my manufacturing software directory, which provides links to websites for all the software packages I know of that are potential candidates for use by small businesses. 

Manufacturing Software Directory

All these software packages are advanced manufacturing systems, meaning that they include work centers and routings instead of just the bills of material offered by light manufacturing systems such as QuickBooks or Peachtree.  Light manufacturing systems emphasize inventory, but ignore job scheduling and shop floor control and therefore limit your efficiency potential. 

Does Your Software Address the Manufacturing Fundamentals?

By Mike Hart

Business software packages address all kinds of functions, including inventory, purchasing, sales, CRM, e-commerce, service, project management, financial applications, and human resources. 

These functions are important, but if you have a manufacturing company and your software does not address the fundamentals of manufacturing, you will never reach your efficiency potential, no matter how good your software might be in these other areas. 

How to Make Money with Lean Manufacturing

By Mike Hart

You hear about “lean manufacturing” all the time, but just what is it?

Simply put, lean manufacturing means completing jobs on time using the least amount of inventory and WIP possible.

Your overall efficiency is measure by how much inventory and work in process is required to support your sales.  The less you use, the more efficient you are.

Part Numbers Cannot Be Open to Interpretation

By Mike Hart

Many small manufacturing companies operate using general accounting software such as QuickBooks combined with spreadsheets to address manufacturing issues. I refer to this is an “informal” manufacturing system. 

In an informatl manufacturing system it is common for component specifications such as revisions and manufacturer part numbers to be entered on the fly during purchasing, as specified on drawings or spec sheets. This type of manual purchasing is a slow and cumbersome process where mistakes can easily be made.  

Cost for Efficiency

By Mike Hart

Traditional cost accounting can lead to bad decision making.  This is because it measures and rewards local efficiencies at the item, job, and work center level, which is actually counter-productive to overall efficiency. 

Cost precision is a myth

The most common mistake in manufacturing costing is to assume that each job has a precise cost.  Taking each job cost as a literal cost leads to poor decision making in regards to job scheduling, inventory, and product pricing.  These poor decisions can have a profoundly negative impact on your overall efficiency that gets translated into longer delivery times, increased inventory, and higher product costs. 

The Economics Favor Videos for Software Training

By Mike Hart 

A major source of revenue for ERP software companies and their resellers is providing live training, both on site and via off site seminars.  I believe that a significant portion of this revenue will erode in coming years because the economics favor video training over live instruction.   

Live instruction has a low cost-benefit ratio.  Not only are good trainers expensive, it’s the travel cost that eats you alive.  It is rare for trainers to live in your locality or for seminars to be hosted in your city.  To justify the travel cost, training sessions are stretched over several hours or days, which lessens their effectiveness because of information overload. 

The Manufacturing Pendulum Is Swinging Back from China to the USA

By Mike Hart 

I have long thought that American companies have gone overboard in moving so much manufacturing to China.  On paper, the cost savings were and remain significant, but there are many hidden costs – shipping, logistics, communications, product recalls, intellectual property theft, counterfeiting – that offset the cost savings advantage.  Blinded by the huge potential of the Chinese domestic market, American companies have flocked to China over the last decade, fearing that if they didn’t do so, some other competitor would and they would be out of the game.

Because of the fear of not being in the Chinese market, America companies over-corrected and rushed to China without weighing all the costs.  At first, manufacturing in China was a no brainer because labor costs were so low.  But labor costs have risen dramatically over the years and all the other hidden costs of doing business in China are coming to light. 

Beware of the Technology Freak!

By Mike Hart 

Anyone who runs a small manufacturing business is wise to learn how to recognize a technology freak and avoid any involvement with that person.
 
What is a technology freak?  It’s a person who falls in love with technology for its own sake.  It’s a person of mediocre ability who knows just enough about technology to impress non-technical people with his supposed expertise.