Digital is the future we can't ignore

Notoriously, most small business failures occur, not during a recession when the hatches are battened down, but when they are overstretched during the recovery. That is true even if activity is reverting to the status quo ante, but nobody believes that the new normal will be business as before.

Customers will be offering shorter contracts, and probably longer payment terms. They will assert the right to alter the volumes they commit to and reschedule deliveries at short or no notice, while demanding deep and detailed visibility of their suppliers’ operations and supply chains. Customers are looking to capitalise on fleeting opportunities in an uncertain world and for their own suppliers to be similarly agile.

An advantage of being a smaller manufacturer is the ability to offer the flexibility and agility that customers require. But in the new environment that cannot be achieved economically from the back of an envelope. Systems based on manual operations and simple spreadsheets cannot cope with the increased numbers of orders and transactions, wider supply base, more frequent revisions to order quantities and delivery schedules, let alone spot the opportunities for increased efficiencies.

The spine of business process automation, for most manufacturers, will be an MRP system. 

Small firms have historically seen MRP as expensive, inflexible, hard to use and, especially in make to order manufacturing, largely unnecessary, and there was some truth is this. That is no longer the case.

A competent MRP system offers much more than the planning of materials requirements to inform purchasing. Moving forward, accurate production planning, scheduling and, especially in these volatile times, dynamic rescheduling, works together with Customer Relations Management to create quotes for price and delivery based on real product costs and performance possibilities.

Inventory is managed and allocated, stock levels optimised.

MRP has to be readily useable – small firms have neither time nor budget for extensive training. Operation needs to be intuitive, and tailored to reflect real life, not a theoretical model of manufacturing. As far as possible that tailoring should be achievable by users on site, not by remote and expensive consultants. 

Cloud-based MRP is the way to go. The firm is not continually paying to increase its server capacity, and making the system, or parts of it, visible to customers, suppliers (and home workers?) is simplified. Maintenance and upgrades are the vendor’s responsibility. 

A digitised MRP system should also provide a base to which other productivity and agility enhancing forms of digitalisation (transport management, warehouse management, shop floor data capture, as examples) can be attached and integrated to full advantage. No more ‘islands of automation’.

Small firms need readily scaleable systems but costs too have to be scaleable. A good offer for a small firm would be a charge per user per month by functionality, to be varied up or down at minimal or no notice. The systems cost of the business is to a large extent converted from a fixed to a variable cost.

For a smaller manufacturer looking to survive and prosper in this changing world, the question should be not ‘Can we afford this?’, but ‘Can we afford not to embrace the digitisation of our core business processes?’

Karl Heinrich Lauri is managing team member, MRPeasy