ERP manufacturing software vs. project management

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In Engineer-to-Order (ETO) and Make-to-Order (MTO) manufacturing environments, it can often be confusing whether enterprise resource planning (ERP) software or project management should dictate priority.

Take for example mid-size mold shops, tool and die makers and original equipment manufacturers. In these industries, every product is engineered and/or manufactured specifically to order. Seasoned managers will agree that each engineered and manufactured product can have a significant impact on both engineering and manufacturing resources. But, if multiple products are in queue at once (i.e. work in process – WIP), and if each impacts engineering and manufacturing resources, what’s to say that the project will be completed at the originally promised delivery date for the customer?

The Project Management Office (PMO)

In most midsize and large ETO and MTO manufacturing companies, project management is a hot topic. The project management office is ultimately responsible to ensure that everything is kept on track. For example, with critical path and task networks of more than 40 tasks per product, and with more than 40 products in queue simultaneously, it could be fair to say that with 1,600 tasks, each relying on human, machine and/or product dependencies, there is a lot of room for something to go precisely wrong, rather than roughly right!

Alarming Statistics

  • 50% of project management offices close within three years (Association for Project Management)
  • PMO implementation failure rate is over 50% (Gartner Project Management 2014)
  • Only 33% of all projects are successfully completed on-time and/or within budget (Standish Group's Chaos Report)
  • 68% of stakeholders perceive their PMOs to be bureaucratic (2013 Gartner PPM Summit)
  • 60% of projects fail to meet their schedule, budget and quality goals (IBM Change Management Survey of 1,500 executives)

Unfortunately, these statistics are often ignored and energy is geared instead towards continuous improvement efforts of the PMO. Management, more times than not, focuses attention and investments on continuous improvement efforts to create better balanced scores, data and statistics, in order to confirm that they now know precisely how late each project was and that every project had a “unique exception” - which leads them to renegotiate new due dates with their customers.

Project management professionals may in fact be forced to agree with Dr. Goldratt, the management processes guru, when he famously stated:

“Our customers kept changing their minds and our suppliers were unreliable.”

- The manager of a closed plant.

ERP (Enterprise Resource “Problems?”)

Most of today's machine shops, tool and die, and original equipment manufacturers already have access to a material resource planning (MRP) or enterprise resource planning (ERP) software system. Similar to project management software, each manufactured item has human, machine, and/or raw material dependencies. Each of these can impact the completion date of each product, sub-kit and component.

It could be a manager's dream that, someday, the planning department will have enough managers and staff to manage each item precisely, to ensure it is completed on time and, as a result, creates a predictable outcome of the finished product. However, many managers intuitively know, and/or have learned the hard way, that the predictability is not linked to the preciseness of infinite or finite scheduling, but rather to the protective capacity of the plant. The plant manager also knows that if each section of the plant focused on 100% productivity, it would still be unreliable, if there was not enough protective (i.e. idle) capacity.

Many ERP solutions, surprisingly, even today, still suggest that more precise planning will lead to more precise dependability. This sounds logical, but assumes that Murphy’s Law is no more. In most MRP / ERP scheduling software, even if one item is late, the entire schedule of all following items moves to the right (i.e. later than the originally promised and expected delivery date). In this planning strategy, there is an assumed and naive trust that all materials will be received on time, each resource will be available at the right time, machines cannot break down and people do not make mistakes. Similar to the PMO concept, there is a lot of room for something to go precisely wrong, rather than roughly right!

So now what?!

At this point, I'm imagining that if you're a CEO, you're smiling. If you're a project manager, you're fuming. If you're a scheduler, you're confused. If you're a plant manager, you’re laughing. And if you’re the controller, you’re crying. 

I can hear the question echoing in your head: "So now what?!"

The real question is how can these systems complement each other, work together harmoniously and synch in a way that simplifies manufacturing? I'm not sure whether a general answer to this can be put forward. Each situation will differ, so each will take some critical thinking — critical thinking that is necessary if we are to explore a better way that ERP and PMO software can cooperate to create happier customers, more motivated suppliers and increased profit.

Do you use project (or program) management and/or enterprise resource planning software in your manufacturing environment? What have you found to be the pros and cons of each? Share your thoughts in the comments.

Peter Mol

Peter has extensive experience working with mid- and c-level management teams, helping them to increase their throughput and level of performance. He has consulted with plants in a variety of manufacturing industries, including automotive, fabrication, food, plastics, stamping, aluminum and steel.

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