Don’t Limit Your Potential with a Light Manufacturing System

By Mike Hart

Many general accounting systems, including QuickBooks and Peachtree, offer the ability to allocate and deduct a set of kit components or a bill of material. I refer to this type of software solution as a “light manufacturing” system.

Is a light manufacturing system a good solution for an ultra-small manufacturing company, meaning one with well under 100 employees that only needs 5, 10, or 15 computer users? Is a QuickBooks or Peachtree type system a good solution for a startup company?

In my opinion, light manufacturing systems limit your efficiency potential and in many cases create a greater workload for your users than a true manufacturing system would.

What is the difference between a light manufacturing system and a true manufacturing system?

A light manufacturing system is basically limited to a bill of material and the ability to perform a product “build” or “work ticket.”

A true manufacturing system includes a bill of material, of course, but also offers routings, MRP, and manufacturing jobs (work orders).

Routings enable you to organize your factory into work centers and define the labor and subcontract processes that comprise each manufactured item. With routings you can schedule jobs and work centers and achieve accurate job and product costing.

MRP automates your job and PO creation and enables you to receive raw material and components on a “just in time” basis that keeps your inventory low without risk of shortages.

Manufacturing jobs (work orders) provide the framework that supports all your manufacturing activities, including the ability to schedule jobs, release them to the factory floor, issue material, track labor and subcontract services, and report finished production.

Does a small manufacturing company really need routings, MRP, and jobs? Is this overkill?

Except for companies with ultra-simple products with few processes, most companies do need these basic functions. Without them, companies expend great effort with spreadsheets and workarounds to compensate for the limitations of their light manufacturing system.

For example, some companies create non-stock components to represent labor processes and add them to their kits or bills of material. This simulates what a routing does.

Some companies create part numbers to represent subcontract services (for services such as painting, plating, and heat treating) and create POs and receive the service as a component. This simulates what can be done within a job routing sequence.

Some companies devise elaborate spreadsheets that compare bill of material requirements against available stock to determine purchasing requirements. This simulates what MRP does.

Some companies use kits within sales orders for allocating and deducting assembly components. This simulates what a job does.

Why bother with all these spreadsheets and workarounds? The irony is that these homemade solutions are more time consuming and less efficient than using a true manufacturing system that is designed to handle these functions.

If you want to become a truly efficient manufacturer, it’s almost impossible to do so with a light manufacturing system because there is no work in process tracking or accounting. The ability to monitor WIP is a fundamental element to efficient manufacturing. Without it, you are manufacturing with a blindfold on.

Why do so many companies start out with light manufacturing systems? I think it’s a combination of two common perceptions: that manufacturing software is expensive and is “too much system” for a small company’s needs.

Manufacturing software can be quite expensive, to be sure, but there are products such as my company’s software, DBA Manufacturing, and others that are designed and priced for smaller companies.

Regarding the “too much system” perception, it is just that, a perception. In reality, manufacturing is manufacturing, regardless of your company size. You may have a smaller facility and fewer employees, but the manufacturing process is the same. You don’t need an ERP system, which is for larger enterprises, but you do need to use manufacturing software because you are operating a manufacturing business.

If you are a startup company, I urge you to resist the temptation to use a light manufacturing system and start your business with a true manufacturing system. It will be more efficient from day one and eliminates the need for homemade spreadsheets and workaround solutions.

If you are operating with a light manufacturing system and you’ve “hit the wall” with spreadsheets and homemade solutions, I urge you to upgrade to a true manufacturing system so that you can continue to grow while boosting your efficiency level.

Where can you find manufacturing software for small companies? On my blog I’ve compiled a Manufacturing Software Directory of over 60 software packages. Many of these are ERP systems, but several products are targeted at smaller businesses and are worth your consideration.

Mike Hart is the co-founder and President of DBA Software Inc., a leading provider of manufacturing software for small businesses.