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Manufacturing Software for the Electronics Industry

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There are many manufacturers who produce for the Electronics Industry and require strong ERP support to help them run at top efficiency. This industry includes a very diverse group of companies which range from fabrication to repetitive assembly operations, for example, companies who make or stuff boards. They also include companies who make electronic components for their own use or for resale, and those who outsource subassemblies and do final assembly. Common to most companies in this sector are repetitive assembly operations, especially for consumer electronics, which is characteristic of high production volumes and a limited number of end products. Semi-conductor and PCB companies are typically unique in their manufacturing processes and form their own industry sector.

Similar to all manufacturing segments, the Electronics Industry has the need for a complete suite of financial software modules which include General Ledger, Accounts Receivable, Accounts Payable, and Fixed Assets. Depending on whether the company produces as a make-to- order or make-to-stock manufacturer, there are different demands on the cost system and, in turn, the general ledger. Inventory takes on added importance owing to the high volume of finished products that is usually produced in a repetitive assembly operation. Whether the company is purchasing it, storing it as components, accounting for it as Work in Process (WIP), or maintaining it as finished goods, inventory is a big part of the investment that companies make in this segment. As with all manufacturers, production or material defects wind up in scrap, excess or obsolete inventory. The more successful companies keep a low inventory position with a high level of “inventory turns.” This is the ratio of the average amount of inventory value maintained compared to the cost of goods sold in a year.

Accurate forecasting of demand for finished goods is the first and most essential step in keeping inventory positions low. Many ERP and “best of breed” systems use historical trends to time-phase demand for finished inventory. Additionally, ERP software using curve fitting techniques enables accurate demand estimations but also time-phase that demand based on the curve model selected. Models included in this software should accommodate all phases in the product life cycle from newly introduced to mature products. Forecasting cannot be done in a vacuum and, to that end, the marketing and sales personnel must be involved in adjusting the forecast. It is to this adjusted forecast that Master Production Scheduling modules in the MRP systems will time-phase the purchasing of inventory. Many companies enter into purchase orders which guarantee a purchase price beyond the planning/purchasing cycle and release smaller quantities as required. These are called blanket or contract purchase orders depending on whether or not the purchasing company commits to purchase the amount specified in the purchase order.

ERP Systems for the electronics industry stress the management of three inventory classes which are raw or piece parts, work in process, and finished goods. As mentioned above, a good understanding of the forecast for finished goods is the key tool in protecting the company from excessive inventory positions. Once the inventory is in-house there are several techniques which need to be supported by the software to enable its efficient use. “Kanban,” a form of Just-in-Time where inventory is issued based on demand, is used to flow material to the shop floor from the warehouse. Many ERP systems, while keeping this kind of “pull” system, have replaced the traditional signaling card with an electronic message, but the principle of pulling inventory remains the same.

As in the consumer goods industry, floor issue for high volume, low cost material is used whenever feasible. This reduces the effort of issuing material to work orders with material usage calculated based on production amounts. Where scrap is not a significant factor, many companies “backflush” inventory and labor for cost reporting to simplify data collection.

Typical of many manufacturers in the electronics industry, work centers are production lines with operations performed along with the material flow. Since the amount of product produced is large, it is often not possible to issue all the material to the floor at the opening of the work order. Therefore, ERP systems need to support a material flow system where non-floor issue parts are flowed to the floor in sync with the production process. Sometimes product may be taken off the assembly line prior to being completely finished due to quality issues. In those environments, rework logic should be embedded into the ERP shop floor control module to allow for recycling the problems to repair work centers and later reintroduced to the assembly line.

Electronics is an industry which does a lot of outsourcing so that many manufacturers only perform final assembly in-house. Wire harnesses, PCB board insertions, and component builds are examples of items being outsourced. Outsourcing should be governed by the same inventory management principles outlined above. Further, based on the labor content of the finished product, the manufacturing site will usually be located where there is a low cost and skilled work force.

If the finished product is destined for the retail market, an ERP system will require a more extensive order management function. Functions in the order entry area can include: credit checking, credit card processing, internet presence and processing, and call center service. In the warehouse and shipping areas, functions such as bar coding of finished goods and modules for picking, packing and shipping also have to be included.

Effective inventory control is a primary issue in running a company that manufactures products for the electronics industry.

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Review by | Manufacturing Software