Project-based manufacturing entails taking the existing standard manufacturing process and segregating the value chain by control, execution and planning. It is used when there is a need for a complex, unique product that requires a specific process to produce efficiently.
Program managers must obsessively monitor their budgets as they are faced with the additional costs of special-ordered products. It is key that they measure the differences between the estimated cost and the actual cost and record any variances. If this is done correctly, it benefits highly complex engineer-to-order business and capital projects.
The core benefits include:
- Providing a 360-degree view of the business process by project
- Integrating deeply with cost and general ledger
- Building a base that allows the use of Microsoft Dynamics® AX or other systems
According to Ken Korn, Principal Consultant for Cincom, the tradeoff between segregation of inventories and work-in-process by project is a drill-down on soft allocation. “It allows you to report cost and performance by project and offers different ways of running the supply chain,” says Ken. “When buying something for the project, you must track and store those items. The more you buy the cheaper it is. You may choose to buy a piece that can be used both in unique and standard projects. Consolidate but segregate.”
How can ERP systems assist with project-based manufacturing?
Cincom is leading the way in creating ERP solutions for project-based manufacturing companies with its recent global strategic partnership with the Microsoft Corporation. With the partnership, Cincom is adding project-based manufacturing functions to Microsoft Dynamics AX to help companies such as aerospace and defense manufacturers more quickly adapt to changing market conditions.
“Project-based ERP systems need to be able to project the business process, inventory control, proposals and contracts,” says Ken Korn, Principle Consultant for Cincom Systems. “They need to have complete visibility across all disciplines.”
Features such as contract integration drive demand and track due dates, proposals, forecasts and contracts by project. Project supply chain segregation provides project ownership of the process in the supply chain. It also tracks costs, and is most effective when fully integrated.
“ERP systems for project-based manufacturing should be more sophisticated to reflect the more sophisticated business processes that are inherent in that type of manufacturing,” says Steve Henderson, Cincom’s Aerospace and Defense (A&D) Principle Consultant.