ERP for Electronics & Electrical Manufacturing

ERP for the Electronics and Electrical Industry

1. Industry overview

Electronics span communications, healthcare, computers and peripherals, audiovisual products, toys and military applications. The supply chain includes electronic components, integrated circuits (ICs), accessories, intermediate products such as automotive electronics, and finished products.

2. Industry characteristics

• Customer demand is difficult to predict; lead times are short, rush orders frequent, and customers need multiple configurations.
• Product structures are clearly defined and relatively fixed.
• Rapid upgrades, short lifecycles and frequent changes complicate version control.
• Short production cycles require close coordination of production and materials planning.
• Many component types and models complicate procurement and assembly; in-house and inter-company production coexist.
• Slow-moving or obsolete materials can accumulate.
• Quality management is widely emphasized and control requirements are demanding.
• Numerous suppliers require performance assessment.
• Many customers require timely credit monitoring and improved receivables turnover.
• High variety, small batches and frequent rework make costing laborious and true costs difficult to establish.
• Some key parts have long lead times and must be purchased against forecasts or held in stock.
• Substitute materials are common and must be considered in planning.
• Finished products need after-sales repair management, serial-number and repair records, and traceability back to original production.

3. Management priorities and common difficulties

1. Material numbering. Complex structures and numerous parts make manual numbering vulnerable to missing, duplicated or incorrect codes.
2. Engineering changes. Frequent product and order changes make design-change management difficult.
3. Design workload and varied demand. Small batches and many variants leave many product details for customers to finalize. Special requests increase design workload and complicate bill-of-materials (BOM) preparation and maintenance.
4. Sales forecasting. Markets change rapidly. Some sales are seasonal, some grow month by month and others grow linearly. Forecasts must also be broken down for material preparation, requiring alternative forecasting models.
5. Forecast-based preparation and order-based production. Short order lead times require materials to be prepared against forecasts, then products manufactured against actual orders.
6. Order tracking. Numerous customers and large, changing order volumes obscure related procurement and production progress and can delay delivery.
7. Credit and receivables. Payment arrangements include post-dated cheques, settlement of specified transactions or quantities used, different currencies for payments and debts, and subsidiary transactions settled centrally with a parent. Customer-specific credit limits are needed to control risk.
8. Procurement planning. Products use dozens to thousands of materials and many subassemblies. Small, varied orders, short delivery times, customer-specified key parts and long overseas component lead times make suitable procurement plans difficult to prepare.

4. ERP solution

1. Flexible automatic coding. Predefined product and material numbering rules generate new item codes and help avoid missing, duplicate or incorrect codes.
2. Product-structure management. Standard BOMs support routine entry and maintenance. Customer-specific BOMs handle varied order requirements. Configurable BOMs avoid creating numerous item codes and BOMs for different options of similar products. Phantom assemblies simplify design and change management for common component groups.
3. Make to order and prepare against forecasts. Material requirements planning (MRP) considers sales forecasts, stock and existing documents to generate production and procurement plans in advance. The make-to-order (MTO) subsystem explodes orders into subassembly production and short-lead-time material purchases, tracked throughout by order number.
4. Order, procurement and production tracking. MTO generates and tracks procurement and production plans against orders and communicates specific customer requirements to production to help prevent errors.
5. Material procurement planning. Plans consider BOMs, loss rates, substitute materials, effective/expiry dates, purchasing lead times, inspection time, minimum purchase quantities, packaging quantities, existing documents and forecasts. Multiple plans can be compared. If customers cancel or change orders, MRP can recommend cancellations or changes to already-released documents to reduce risk.
6. Material issues. Issues can be organized by batch, process, warehouse or material characteristics. Backflushing and shop-floor stock management are supported. Combined picking reports reduce warehouse workload.
7. Supplier assessment. Receiving records identify late deliveries and quality problems. Exception reports analyse early, late, excess and short deliveries, defects, price premiums and below-reference prices. Quality records capture supplier-specific defect causes and support delivery-quality ratings.
8. Credit and accounts receivable. Credit control covers order acceptance, shipment, settlement, cheques and cheque clearance. Receivables/shipment details, collection summaries by customer or salesperson, and ageing analyses support reconciliation and management.
9. Lot and serial numbers. All incoming and outgoing materials can be lot-controlled. Repair records use serial numbers to document problems and trace original production and materials, other products from the same batch, and their sales or stock positions.
10. Costing. Actual or standard costing can be used. Material, labour and manufacturing-overhead data are entered through the relevant subsystems. Month-end calculations produce monthly costs and reduce manual complexity.