Unless a manufacturing company is fortunate enough to sign a long-term contract for building one or a few products, most find themselves having to respond quickly to market demand for new products in short time frames. This is especially true for mid-market manufacturing companies who live and die on their ability to meet small and custom orders from their customers.
Many mid-market manufacturing software systems rely on legacy, non-flexible code that forces their users into a box. Some don’t come with a financial system and have to rely on integrations to third party solutions, including entry level systems such as QuickBooks. Contrast that with Microsoft Dynamics 365 Business Central, an ERP system with more customers in the world than any other mid-market system.
Manufacturing software features are not as important as flexibility
When looking at new software systems, it can be tempting to just add up all the things the candidates can do and have a feature comparison. That is valuable as a starting point, certainly, but more important is how the system fits with how you do business.
Our company CEO used to work for a major consulting company that utilized software designed to compare systems. The consultant would review hundreds of questions with the prospective buyer, classify them as “needs” or “wants,” and then compare the answers to the database of available products. The end result was a fit percentage that was supposed to indicate the best match. This process was flawed in that there were often only five to 10 key features that were critical to the buyer. Focusing on the total number of features was a mistake then and now.
In addition to identifying the key capability needed, prospective software buyers need to consider how closely the processing flow and flexibility of a proposed system will match the requirements of the organization. The only constant in manufacturing is that nothing is constant. Customers will bring widely varied requirements to your firm and then will want them changed again, usually during the manufacturing process.
Often companies will create unique business processes to deal with these challenges. The difference between breaking even or losing money and making a profit is the software system’s ability to enable these processes. Significant advances in technology bring more challenges and opportunities to the table.
Does the manufacturing software vendor have what it takes for the long haul?
Many manufacturing software vendors started their product as a single user system and then gradually moved into a networked, shared environment. All of their annual maintenance revenue, plus a marginal amount from new sales, goes to keeping the lights on and keeping up as much as possible with new platform technology. There are often little to no funds available to transform the product or update it for significant technology changes, such as the move to the Cloud or for the latest in mobility initiatives.
Microsoft’s deep pockets have enabled it to support the four accounting systems acquired in the early 2000s and further transform two of them into industry-leading cloud solutions: Microsoft Dynamics 365 Business Central (formerly Dynamics NAV) for the mid-market, and Dynamics 365 Finance (formerly Dynamics AX). In the process of doing so, Business Central and Finance have only grown in capability and flexibility.
Microsoft Dynamics 365 Business Central Manufacturing module
It is important to realize this particular module is deliberately not designed to be a full enterprise ERP manufacturing system with every possible option and all the bells and whistles. It is purely intended to be easy to learn, easy to use, and incredibly flexible to handle all of the twists your customers throw at you. The manufacturing module has been optimized for “build to stock” and “build to order” operations, but many customers have extended it to also handle “engineer to order”, “job shop”, and other requirements.
The flexibility of the toolkit means it can be configured or extended to cover almost any requirement. Process manufacturing would be more of a stretch, however there are organizations utilizing it for food and other process manufacturing. For this blog’s purpose, we will focus on the first two: “build to stock” and “build to order.”
One of the great things about the manufacturing module is it can be implemented relatively simply and then expanded later to include more advanced features. It does include the “big five” core components expected from a manufacturing system including production BOM’s (Bills of Material), production orders, MRP (Material Requirements Planning), shop floor routings, and capacity planning. As an example, smaller companies that have not formally defined their shop floor routings may choose to implement that piece later. Others may avoid MRP until the full inventory system has been thoroughly tested.
Flexible functions to suit your Manufacturing operation
The consumption of parts, labor, and third-party costs are important components, as in the output of scrap and finished product.
The system allows for versioning of production orders, comparison of components across versions, and substitution of replaced parts. Default production BOM’s can be attached to inventory items, which is useful when generating linked production orders from sales orders. The system can handle an almost unlimited number of BOM levels including phantom BOM’s. The production BOM allows for tracking input quantities by either quantity or dimension.
Routings also offer versioning and allow for either sequential or parallel processes. Routings can be edited once attached to a production order to create a unique process for cover planned or last-minute changes, such as deciding to use a third-party vendor to do something you might normally carry out in-house. There are also a variety of time elements available such as setup, waiting, processing, etc. Scrap can be tracked in a number of ways. Routings will be used when MRP makes build recommendations.
Several types of production orders are available including planned, firm planned, and released. Once a BOM has been selected for a production order, the user can edit the components to suit a specific requirement if they don’t feel the new configuration is worth setting up as a new BOM or version. Firm planned orders can be included in the capacity planning.
Work centers can manage shift capacity. If necessary, one or more machine centers can be attached to a work center. Changes in capacity for events, such as employees calling in sick or quitting, can easily be processed and the production schedule updated.
Supply Planning and demand forecasting
MRP takes into account customer demand, as well as replenishment parameters and the master production schedule to produce a material requirements plan. This plan can be reviewed, edited, and processed by a user. Production orders can be combined with other parameters for both planned and committed actions.
The system will schedule all production orders but operates best under a “finite loading” model, where only the elements in a work routing creating a constraint will be scheduled. Graphical add-on products offering “drag and drop” capability are also available from add-on partners, if a more visual presentation is desired. The feature supports the “capable to promise” ability.
The sub-contracting worksheet can be utilized to manage the sending of materials and work in progress to a third party for additional processing.
The Order Planning window provides users a view of requirements and gives them the tools needed to manually plan for demand from sales lines and create different types of supply orders directly. This integration allows production orders to be created directly from a sales order and allows the user to consider “available to promise” and “capable to promise” quantities. The linked production order will be tracked directly back to the originating sales order line.
There are many options in manufacturing for flushing parts to the production order including forward or backward flushing and by shop floor workstations. Labor can be consumed through a consumption journal. Output can be recorded through the output journal, either manually or automatically.
Some parts can be assembled in a “light manufacturing” environment to build out parts for your manufacturing process. The automatic or manual assembly orders can be edited to match your specific requirements. The system will re-cost and re-price the assembled component based on any changes.
If necessary, the manufacturing module can be customized to add almost any capability if there are unique processes providing competitive advantage or improving your profitability.
In summary, choose Business Central with the Manufacturing module if you:
- Are a mid-market manufacturing organization with one or more shops but not requiring capacity scheduling across more than one location at a time
- Want a fully integrated financial, distribution, purchasing, sales, warehousing, and manufacturing system from one vendor with real-time updates
- Require, either now or later, shop floor routings with resource capacities, either machine or labor, for managing your manufacturing processes, tracking costs by stage, determining production order delivery date, and current processing status
- Currently don’t require a complex, rules-based configurator or are willing to implement from a choice of third-party options, which means you need to have your rules carefully defined
- Need complex MRP requirements able to manage time elements in inventory purchases or the manufacture of sub-components
- Want to manage scrap at various levels in the manufacturing process
- Have a use for a capable kitting or assembly module to manage sub-components
- Have unique processes that won’t be found in any manufacturing system but are important to your profitability or competitive advantage
Areas that can be enhanced through the use of available third-party add-on products include:
- Highly configured items including the need for a complex rules-based matrix of options
- Shop floor time collection using scanners or some other technology
- Quality assurance processes
Learn more about Dynamics 365 Business Central with Manufacturing here and contact us here to discuss how this software can improve your manufacturing business processes. Having an integrated financial and manufacturing system never gets old.
*After three years of Dynamics 365 Business Central, one of our seasoned NAV developers reflects on Microsoft’s investment and superior design that has benefitted both customers and software developers. Read our previous blog here for the full comparison between technology platforms.