Discrete ERP refers to ERP software specifically designed for manufacturing companies that deliver distinct (i.e., discrete) products in large quantities. This means that each finished product can be manufactured and sold separately from any other product. A few examples of such products are computers and electronics, fashion and apparel items, or furniture and appliances. Very complex products such as heavy machinery and airplanes can also be considered discrete, but they are not mass manufactured and require a lot of engineering and customization.
Key Benefits of Discrete ERP Software
- Provides a single source of truth for manufacturing information
- Improves business processes and aligns internal and external stakeholders to deliver products on time and at the highest quality
- Helps define and manage product costing and profit margins, as well as monitor the profitability and financial success of the company
Why Use Discrete ERP Software?
Manufacturers can use discrete ERP to define, plan, and monitor operations across all departments in the company. The most critical challenges that can be addressed using this type of software are as follows:
Cost reduction and improved profitability — These are vital to any company but particularly crucial for manufacturers who invest heavily in production equipment, raw materials, personnel, and utilities (such as electricity and water). Discrete ERP helps manufacturing companies track all these costs and allocate them to the various products delivered by the company to calculate their total cost. Since the profit made by the company is the difference between the price and the total cost of their products, manufacturers need to lower costs without compromising on quality.
Improved productivity — Productivity can be improved through increased collaboration and better visibility into manufacturing operations. Since discrete ERP provides a single database and one system to manage most processes and operations, employees from multiple departments can use their time more efficiently and perform better. Improved collaboration with external parties such as suppliers and contractors can also help employees be more productive.
Quality control — Quality can have a significant impact on the customer experience and the profitability of the company. Also, a lack of compliance with safety and health laws and regulations can disrupt the activity of the manufacturer and cause accidents that may damage equipment and put the lives of the employees at risk.
Who Uses Discrete ERP Software?
Most departments of a manufacturing company can benefit from using discrete ERP, however, the ones that benefit most from using this type of software are:
Production — Planning, scheduling, and monitoring manufacturing operations are critical for manufacturers. Companies need to understand what products need to be manufactured, in what quantities, and when they should be ready to be shipped to customers.
Accounting — Different types of costs are allocated to various activities, and discrete ERP software keeps a record of all financial transactions between the company and its customers, suppliers, and employees. Accountants also use discrete ERP to track payments from customers and to suppliers, for cash and treasury management, month and year close, and financial statements.
Logistics — Logistics departments use discrete ERP to plan deliveries to customers and manage the inventory of raw materials and finished products. Logistics managers need to ensure that there is enough inventory to fulfill demand at any time and to reduce waste that can be caused by inventory control errors.
Kinds of Discrete ERP Software
All in one — Discrete ERP can deliver all the features mentioned above in one single solution or package. While these packages can be customized by adding additional modules, they can be rigid and difficult to implement and maintain.
Best of breed — Some discrete ERP software focuses on manufacturing features and essential back-office functionality for manufacturers such as accounting and procurement. Additional features for sales and marketing or HR and workforce management are delivered through integration with other software solutions.
Industry-specific — Other discrete ERP software focuses on one or a few manufacturing sectors. A few examples are ERP for fashion and apparel and ERP for lumber and construction materials. Such specialized solutions are used mostly by manufacturers serving those industries and aren’t the optimal choice for others.
Discrete ERP Software Features
Accounting — Accounting is the backbone of any discrete ERP system because any financial transaction made by the company needs to be tracked and documented for compliance purposes and to monitor profitability. Accounting features vary from one system to another but usually include a general ledger and chart of accounts, accounts receivable, accounts payable, journal entries, financial period close, and financial reporting. Some discrete ERP products also include budgeting and forecasting or features to manage fixed asset depreciation.
Production management — Production management functions are at the core of every discrete ERP system. These features can be more or less robust but should always be included in any discrete ERP solution. To plan, manage, and monitor production, discrete ERP systems provide features such as material requirements planning (MRP), rough-cut capacity planning (RCCP), master production scheduling (MPS), or shop floor control.
Inventory and warehouse management — Manufacturers need to manage the storage of raw materials, components, and finished products. For companies with multiple locations, this type of software helps track inventory movements between warehouses. Most discrete ERP systems include features for picking and shipping, while transportation management is usually delivered through integration with other software products.
Procurement — Procurement is essential for manufacturers because it helps them buy the raw materials and components needed for production at the lowest costs and highest quality. It is also necessary to synchronize procurement with production schedules to avoid delaying production because parts are not available. To create and maintain good relationships with reliable suppliers, procurement professionals can use discrete ERP to track supplier performance and choose the best provider for various types of items.
Quality management — This defines what needs to be tracked and monitored to comply with quality standards and regulations. Quality plans include tasks and instructions on how to test products during production, what to do in case of nonconformity, and how to choose either to repair defective products or scrap them.
Additional Discrete ERP Features
CRM and sales — These features are included in most discrete ERP products, but their robustness can vary a lot from one system to another. To provide better features for sales and marketing, ERP vendors tend to integrate with CRM software that is delivered separately by the same vendor or by partners.
HR and workforce management — Both HR and workforce management are critical for manufacturers to track the utilization of their workforce, which impacts their labor costs and the total costs of their products. Most discrete ERP systems offer basic features to allocate personnel to various activities, time tracking, and payroll. These features are not sufficient for manufacturers with thousands of employees spread across multiple locations, which is why all discrete ERP products offer integration with HR suites.
Supply chain management — This provides advanced features for logistics that are not usually included in discrete ERP systems. One example is transportation and fleet management, which allows manufacturers to manage their own fleet of trucks and their utilization.
Trends Related to Discrete ERP Software
Two-tier implementation — This refers to the strategy to use two ERP systems to access the complementary benefits provided by each system. For instance, a manufacturer may want to use one ERP system to manage manufacturing, procurement, and inventory, and another ERP software for accounting. This usually happens when the ERP system does not include advanced accounting functions, and the accounting solution only provides basic features for manufacturing.
Potential Issues with Discrete ERP Software
Rigidity — ERP system rigidity has been a challenge for a long time. Modern technology like the cloud helped vendors simplify implementation and maintenance, but ERP systems are still complex due to the nature of the operations they manage.
Lack of advanced features — This may be an issue for mid-market companies and enterprise ERP users. While most discrete ERP systems offer similar functionality, the depth of the features provided can make a big difference for medium to large companies.
Need for industry-specific features — Discrete ERP products have been adapted (and sometimes built from scratch) for light manufacturing sectors such as fashion and apparel. For more complex industries like chemicals and food and beverage, it is preferable that manufacturers use process ERP solutions.
Cost — Discrete ERP solutions can be expensive, and this has been one of the most critical challenges faced by ERP buyers. While this has been addressed partially by the use of the cloud delivery model, discrete ERP can still be expensive.
Software and Services Related to Discrete ERP Software
CAD & PLM software — CAD and PLM software are used by manufacturers to design products and components. Most discrete ERP systems include limited features for product design, which is why CAD and PLM are essential. Manufacturers that focus on less complex products often use only CAD solutions for design, while PLM is required mostly for complicated products.
Supply chain & logistics software — Supply chain and logistics software extends the logistics and inventory features included in discrete ERP solutions. For instance, discrete ERP systems include robust features for inventory management but not always functionality for warehouse management. While smaller manufacturers may not require warehouse management modules, these types of features are critical for larger companies that store raw materials and finished goods in multiple locations.
Business intelligence software — Business intelligence software complements the reporting and analytics functionality delivered out of the box by discrete ERP solutions. While some vendors offer their own business intelligence software, others (especially smaller vendors) partner with business intelligence providers. Business intelligence software is usually sold separately from the discrete ERP system but can also be bundled together with ERP.
CRM and related software — CRM and related software provides advanced features to manage relationships with customers, which aren’t always included in discrete ERP solutions. These types of software are used by manufacturers to manage the entire customer lifecycle, from lead capture and management to sales and customer service.