There are different types of production companies that pursue different workflows. That workflows broadly define every business aspect, including customer acquisition, production planning, technological production process, and, for sure, its automation. As so, the specific workflow will affect the tools the company will need to implement to achieve the productivity boost, increase sales, and eliminate inefficiencies. In this article, we will talk about significant production workflow types and how to use this information to choose the right business automation software.
Intro: make to stock vs make to order
The most popular workflows could be described by make to stock and make to order. Each approach has its unique characteristics and is used by companies of different sizes and business models. Below, we will describe how they are different and what automation tools best suit each case.
Enterprise production: make to stock
This production workflow is usually used by enterprise companies that manufacture products for inventory. Such companies use historical sales data for building sales forecasts and model customer demand to fill it.
The critical element here is to match the business production and inventory in stock with the demand. If the demand is too low, this may lead to overstocking and losses if the demand is higher than expected, then the company may fail to match it. This will also lead to problems and losses. The recent example of such a situation is Intel that can't fill the demand and produce enough chips. This leads to the company's stock losing value.
Mistakes in calculations for demand, inventory, and production capacity can lead to similar business problems in any industry. This is why such enterprise companies mainly rely on specialized ERP systems that help them to build more precise forecasts.
Job shops: make to order model
Job shops are typically medium or small manufacturers that make specific products for one customer at a time. This workflow assumes that the production process starts once the order is received. Such companies do not forecast demand and fill the warehouse with products for future shipping.
Moreover, the production here is highly customizable as orders may differ slightly or substantially. This is also called bespoke products – customers provide their specifications, and the production process is altered according to this input. I.e., the specific goods are manufactured to fill the particular customer's needs.
This is evident that such a model requires a unique approach to automation, as planning, production process management, and sales work differ from the make to stock workflow.
Business automation: choosing an ERP for the specific workflow
For both workflows, a proper automation solution is a must. For make to stock companies here are the problems the right software can help to solve:
Manage the risks associated with consumer trends predictability. ERP that allows building a highly accurate forecast based on past sales and seasonal spikes saves real resources.
Another crucial task is inventory management and procurement. The company always has what it needs to fill the demand and clear the stocks at the right moment.
These tasks lead us to a comprehensive list of features the ERP for make to stock should provide:
Modules for product cost calculation.
Efficient planning that allows keeping the production in the positive ROI segment.
Warehouse control features are needed to get real-time data on inventory levels to match them with the forecasted demand.
In turn, make to order companies need to:
plan production cost – it is crucial for job shops to predict the cost of the production of the specific item before the process even started and verify the calculation after the product is ready.
assess how exactly the production times and time to start the production will be affected by the delivery of needed components.
dispatch the production based on the data from the MES system or mobile app for sending tasks to employees.
All these tasks require a different feature set for an ERP and business automation software:
Real-time order tracking: the company should be able to close orders fast and efficiently to free the production line for the next one.
Cost of goods sold calculation. Again, to keep ROI positive, the company should be able to perform cost calculations on the go to identify orders that do not lead to profit.
Production process customization. The opportunity to save the library of its technological processes for specific products can speed up the overall shipment and grow revenue.
Most ERP vendors create their solutions to make to stock companies. Thus, such software mostly focuses on forecasting, historical analysis, and inventory management. Smaller, make to order job shops need different tools that allow efficient cost calculations and flexible production processes management.
That said, it is also essential to understand that in the modern world, companies that grow may change their workflow as time goes. For example, small manufacturers can switch from making to order to make to stock once they reach the specific volume. In such cases, it is crucial that the ERP system allows such shifts and can scale without interrupting the production or running costly implementation projects.
At 1Ci are building solutions for the make-to-order segment that can be scaled once the company has grown and is ready to enter the new market or vertical. This is why 1C:Drive is a perfect solution for growing make to order companies.