Why Your Small Business Needs Manufacturing Software

 

By Mike Hart

 

The majority of small manufacturing businesses operate with a general accounting software package, such as QuickBooks, augmented with spreadsheets for manufacturing requirements. 

 

By “small manufacturing business”, I mean companies with well under 100 employees that only need 5, 10, or 15 computer users. 

  

Can a small manufacturing business get by with QuickBooks and spreadsheets?  Certainly.  Can it reach a high level of efficiency?  Not likely. 

 

An efficient manufacturing company completes jobs quickly and on time with high quality, while keeping inventory and WIP to a minimum.  Efficiency translates into higher operating margins, greater return on investment, and increased profits. 

 

Can you think of any business more complex than running a manufacturing company?  Coordinating material, subassemblies, labor, and subcontract services to make products on schedule with good quality can be fantastically complicated, no matter what your company size might be. 

 

If manufacturing is so complicated, why do so many small manufacturing companies use QuickBooks and spreadsheets instead of a manufacturing software package? 

 

It’s not because QuickBooks and spreadsheets are the superior solution.  Obviously, software expressly designed to handle manufacturing issues such as material requirements, job and product costing, and work in process is more efficient than using a general accounting system. 

 

My company, DBA Software Inc., has been a developer of manufacturing software for small businesses since 1992.  Based on our experience, I believe there are three primary factors that account for the persistent use of general accounting software and spreadsheets. 

Ignorance. Many small companies have no awareness of the availability of manufacturing software and what it is capable of doing.

 

Inertia. Many small companies are fully aware of the limitations of general accounting software and spreadsheets, but are busy and never find the time to upgrade to a manufacturing software package.

 

Fear.  Many small companies are afraid of manufacturing software because they perceive that it is too costly, too difficult to implement, and too hard to use. 

Regardless which of these three camps your company belongs to, the fact remains that the only way to maximize your efficiency potential is by using software that is designed to run a manufacturing business. 

What benefits can you expect from a manufacturing software package? 

You will be able to define all your product and process details with multi-level bills of material and routings.

You will be able to schedule jobs directly from sales orders for make to order items or against net demand for make to stock items.

Purchase orders will be generated based on net demand that takes into account job requirements and stock on hand.

Jobs can be tracked in real time as they progress through the factory.

Costs can be rolled up for products and jobs with a complete breakdown by material, setup, labor, subcontract services, and overhead.

Inventory can be tracked in real time by location, as well as by lot and serial numbers.   

Without these features, you don’t have the tools to operate at peak efficiency.  And if you use spreadsheets to simulate these features, even the most cleverly designed spreadsheet cannot compare to the robust, multi-user database that is the core of most manufacturing software packages. 

 

Furthermore, if your business is growing and you’ve hit the wall with spreadsheets, your efficiency level can go the wrong direction and deteriorate to where your growth threatens your very survival. 

 

Manufacturing is a tough business.  You can’t survive long term unless you stay competitive, and you can only stay competitive if you operate your business as efficiently as possible.  And to operate your business as efficiently as possible, you are ultimately going to need a manufacturing software package. 

 

So how many software packages are suitable and available for small manufacturing companies?

 

On my blog I’ve compiled a Manufacturing Software Directory with links to over 60 manufacturing software packages.  The majority of these are ERP systems suited for mid-market enterprises, but several products, especially those that publish their prices, are designed for smaller companies.

 

 

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

Comments

[Christina]

Heck of a job there, it absoultley helps me out.