With a manufacturing operation based on Assemble-to-order (ATO), success hinges on being able to get products to customers quickly. There has to be tight control over inventory, and production planning and scheduling need to ensure product delivery. In addition, demand forecasting has to be accurate and costs have to be managed.
To handle all these different aspects of the business, an ERP system can deliver significant benefits in making sure operations and processes run efficiently. Since sales is a strong driver of success, there should integration between sales and production planning. This should also integrate with inventory management and procurement so that goods are ordered in time and there is visibility over stock items. It is also important for inventory management to have details of the items that make up assemblies.
How ERP helps Assemble To Order (ATO) manufacturers
Enables Available-To-Promise: An ERP system with Available-To-Promise functionality helps sales staff to see what inventory and planned production that is available to fill customer orders. When a sale occurs, the information will be transmitted to the warehouse to reserve components for the sale so that assembly and shipping is quicker.
Product configuration: common requirement for ATO is a product configurator. This uses a rules-based system of multiple configuration options, based on a Bill of Materials, to configure a product and create quotations or orders. The configurator can also generate jobs for the shop floor.
Cost management: Accurate costing is key to the profitability of ATO. Managers should be able to analyze the costs of customized orders to identify where improvements can be made in labor hours worked, and other areas where costs can be lowered, such as reducing waste.
Demand forecasting: Data on sales history should be available to produce forecasts. By using business analytics tools in the forecasting process, the quality of forecasts can be assessed and trends analyzed.
Manage kit issues: To streamline the process of issuing materials required for production, ATO manufacturers can make use of kitting. Using kitting, an ERP system can establish which jobs need to be raised, as well as what items ought to be purchased to complete the assembly.
Production management: A scheduling and planning system available in an ERP system will help plan production schedules. For example, production jobs for different sales orders can be combined to take advantage of commonly used parts and assemblies. Backward scheduling is a feature that allows due dates for the completion of orders to generate manufacturing orders to meet those dates.
Backflushing: Where production runs are short, an ERP system should allow a manufacturer to use backflushing to record the manufacture of items without having to create time-consuming work orders.
Tracking: Work-in-progress (WIP) tracking enables shop floor managers to monitor production jobs so that variances can be identified highlight. WIP tracking also ensures that all components required for a job are issued before the job goes to production.
Materials planning: ERP systems provide materials planning so that the procurement department can issue orders to vendors and make certain parts and materials are available in time for production.
Ensuring safety stock: Safety stock and min/max inventory levels should be provided by an ERP system to ensure stock levels do not fall below specified quantities, to assist with replenishment planning and avoid stock outs.
Traceability: Lot tracking of inventory items is an important function in an ERP system to allow a company to track inventory through the product lifecycle. It is also important for traceability, which is becoming a concern and requirement for many manufacturers. Product returns and recalls can be managed better when products and their components can be tracked through the receiving, manufacturing, assembly, inspection, stocking and final dispatch stages.
An ERP software allows manufacturers to have full visibility over forecasting, production planning, inventory management, sales and procurement. Using an ERP system in an Assemble to Order (ATO) production environment can improve delivery performance, customer service and inventory management, streamline the assembly operation, reduce costs and ultimate create a differentiated product in order to compete more successfully.