· James Kirkton · blog · 13 min read

What Software for a Small Manufacturing Business

Once you choose it's difficult to change. Choose wisely. Here are some tips.

Once you choose it's difficult to change. Choose wisely. Here are some tips.

If you’re reading this, you probably work at a small manufacturing business and are interested in software to make things easier.

I also guess that you’ve tried researching ‘small manufacturing business software’, or ‘MRP for small business’, and found it to be ultra complicated (MRP, manufacturing ERP, CRM, BOM, JIT, L6S, anyone??). In order to not waste any more of your time, let me tell you what my issues were when starting and running my small manufacturing business. If you can relate I can offer you a solution. If you can’t relate, then maybe I can point you in the right direction.

I started a small manufacturing business about ten years ago. We made furniture. Here are some of issues we experienced:

Inventory Problems

We would start producing a batch of tables and find out that an otherwise insignificant component (a subcomponent of a subcomponent, like a screw for the self-assembly fittings) was low on stock, and would take weeks to arrive resulting in the final product being delayed.

Sometimes, we’d order far too much of a component. We’d have a big pile of inventory taking up room in our warehouse for years, gathering dust to the point it had to be scrapped. It tied up our money and space and ended up just being wasted. Or else, we’d order a lot of a component then we’d change our design and it was no longer needed – again a waste.

We’d have some of our dining tables in stock. We’d also have some subcomponents (say a tabletop, or even an unvarnished tabletop) in stock. When an order came through we had no easy way of working out what parts we had to make and what was already in stock. We lost some sales this way – a product that only needs to be assembled is much quicker to dispatch than one where all the parts are out of stock.

At the end of every month we’d do a stock take so we could get an accurate idea of how much profit we made that month (i.e. how much our stock value increased or decreased by). Well, we had lots of components, and a lot of these were custom sizes. Working out the cost of all these small components is a nightmare, and we ended up only counting the easy stuff so our stock takes were always inaccurate.

We initially offered different wood types, frame colours, and lengths for each product – there were literally thousands of product variations that we sold. Keeping track of stock levels, and who ordered what, and what top was to be assembled onto what frame was impossible. We had to stop doing this and sell one colour of everything, reducing our sales greatly.

Back in the old days, before we used manufacturing software (or even fork lifts, for that matter)…

Product Problems

We would introduce a new product, spend hours working out how much it cost to make so we would know the profit margin. A while later, our suppliers increased their prices several times or we changed suppliers, and we never bothered to recalculate costs so our profit margin gradually eroded. Taking into account shipping costs to get these components to us was usually too complicated, so our calculations weren’t even accurate to start of with.

Or, our estimates of the time it took to make an item were overly optimistic so by the time we completed our products we spent all this time making things and it worked out we were making about $1 per hour. (At the very start, we actually lost about $15,000 on $50,000 of orders – we made lots of sales, but by the time we shipped things out we were making a loss – quite embarassing…).

Our customers would ask us for a quote for a custom / bespoke item. We’d spend hours working out how much it cost to make, and often they’d not place the order – too much time spent for absolutely no reward. Or, they’d ask for a quote and ask how long it would take to arrive. Some components out of stock, some not, etc. We had no idea – we’d just make things up, or give them an extra long lead time which would usually scare them away. If they did go ahead with the order and were happy with it, a year down the line they might order the same thing again. We usually had the drawings from their previous order, but we still had to recalculate the costs – again taking a while. In addition, it could be more difficult the second time since the customer wanted a matching item and we didn’t have a record of the exact components we used.

Production Problems

Say we’d have 50 current orders, lots of different sizes and different designs. We’d get a new order and add the drawing for a component to the bottom of a pile. When a maker completed an item, they were to take the top drawing off the list and do that next (the top one being the highest priority). In theory this is fine. But the maker would see that the top one was more difficult to do, so he’d look through the pile to find something easier to make. So some items were completed earlier than they should have been, some later – happy customers, angry customers. What’s more, not all of our orders had the same priority – some were due 8 weeks after ordering, some in 1 week. When an order comes through that’s due in 3 weeks, where in the pile do you put that? What about when different customers ordered the same thing – why not make them all at once in a batch, saving time? How do you realistically organise that with sheets of paper? With all these orders, how would we check on the status of an order? A lot of time was spent looking through piles of paper, or asking the guys to make sure they marked an order as complete on a whiteboard.

There were times that all of the sales team were out of the office (i.e. I was on vacation). A customer would ask when they could expect their order, and I didn’t have a clue. Or, we received a new order and I wasn’t in the workshop to add it to the list so it wouldn’t get done in time.

Some of our components were made using expensive tooling for our machinery. We’d run the machines not knowing how much life was left in the tool. Occassionaly we’d end up with problems of poor quality which led to the component being scrapped, or a delay while we awaited more of the tooling to arrive.

We would buy in some quantity of an item. We’d expect them to last a certain amount of time but they would vanish. It turned out that a couple of team members were stealing inventory. As we didn’t have a handle on what we consumed (down to a drill bit, for example) it took us a while to work this out, during which time a lot of our goods went missing. On a happier note – the workshop would be instructed to use a certain length of bubble wrap, say, per product. We used an awful lot of unneccessary bubble wrap before realising that they were using double what they were asked to use.

Analysis Problems

We’d sell our products through different channels – our online store, eBay, a sales agent, a distributor. We had no easy way of tracking the performance of each of these channels – how would we know whether they were worth pursuing? Similarly, how would we know which products were the most or least profitable, or best sellers? Yes, we could check our website data, but this wouldn’t include our other sales channels.

Purchasing Problems

We purchased a lot of things – product components, or even just general things needed around the workshop like printer paper. We’d place an order and forget what we ordered. We had no easy way of telling if something had arrived, or if everything that was ordered had arrived, or even a record of how much we paid for it compared with last time. (When we finally implemented a system to check on this about 5 years later, we found that it was common to receive less than we ordered… I don’t want to think about how much money we needlessly wasted by not checking..).

Expansion Problems (the big one)

We had a few products in our range – tables, cabinets, etc. We wanted to increase sales. We had the machinery and know-how to make and sell whatever design we could think of. So why didn’t we just add new designs to our range and sell those too? Because there’s no way we could have kept track of everything. Yes, we could have employed a store keeper to check stock and a supervisor to make sure everything is been done as it should. But these people won’t be producing anything – another overhead, how much does that cost per year? And who will train them? Who will supervise them? At what desk will they sit? What if they go off sick? And their wages must come from somewhere so we really need to sell a lot more product to pay for these guys – do we have the money for holding additional stock? Additional marketing? And when we’ve designed a few new products and these guys are kept 100% busy all the time will we even be profitable? Will the extra profit be worth the extra headache of more staff? These guys will still be using the same inefficient systems that we were using without them.

We just couldn’t expand the business – we would reach a plateau, and the only way of overcoming it would be to spend significantly more money at significantly greater hassle without any guarantee of profit.

Fortunately we found a solution, and if your problems are similar, we have one for you too:

Our Solution

We spent years dealing with the above. We found lots and lots of companies offering manufacturing software, and we tried out a great deal of it. For use in a small business it was, without exception, crap. Overcomplicated, poorly designed, and instead of making our lives easier it became something else we had to deal with. We had to fit our business around the software, rather than the other way round. It seemed that these software providers have never worked in a small manufacturing business, instead they’ve just sat at their computers and imagined what it would be like.

As far as I can tell, they had taken software used by big manufacturers (like Ford, Volkswagen, etc.) and just said it was ‘for small businesses’. This is stupid. These big companies have the resources to employ lots of people just to be experts in using that specific software. That doesn’t work for a small business. So forget the complicated stuff.

Over the years, we developed our own internal software system. At first, it was basic – when we added an order to the system it displayed on a screen at a station in the workshop. When the worker clicked ‘done’ it went to the screen on the next workstation. It was basic but it worked well – as our business grew and we needed a new function we added it. This allowed our business to grow some more so we made the software better, and so on. It got to the point where other small businesses were asking if they could use our system in their workshops. Our software was so effective that I had lots of time on my hands – aside from a few hours a week my furniture making business effectively ran itself. I spent the rest of my time, and the money the furniture business made, developing the software so it was even better and so that others could use it. As the software improved my business improved, so we had more time and money to develop it. That’s how Factory Superstar came to be available.

When we first introduced screens into our workshop, I remember the look on a couple of the guys’ faces – at the mention of using a computer their eyes went wide. They had never used a computer – the prospect was terrifying, they were afraid they wouldn’t be able to do their jobs. Even now, several years later, it seems that our competitors still haven’t even realised that this might be an issue. That just about sums it up.

MRP software in action:

You don’t need to have a high-tech factory to use our manufacturing software. We have screens on the wall that tell the operator what to cut. All you do is add an order to the system. The system prioritises the order, calculates what needs to be cut then checks if any of the parts are in stock. If any are not in stock it’ll tell the relevant workstation what to cut. When they’re cut, the user clicks ‘ok’ and the system tells the next workstation (welding, in this case) what to do afterwards. It even calculates what needs to be done for bespoke items. (It also calculates how much it’s cost in labour and materials, and when it will be ready). Not the Right Solution? If you have different problems, if Factory Superstar is not what you’re looking for but is in the ball park, then try searching for MRP software (‘manufacturing resource planning’). This is what software like Factory Superstar is supposed to be called. I did the same search years ago, and it led us to develop Factory Superstar. Good luck!

If you or your team are sending emails to potential customers, talking to them at trade shows, sending phone calls, and you’re getting to the point where you don’t know who is who nevermind what they want to buy from you, then you need a CRM software (‘customer relationship management’). Have a search – there are lots of those available. Factory Superstar tracks all the orders a customer makes, even across different sales channels, and you can add notes to a customer but it’s not a CRM as such.

Do you want to sell your products online, direct to customer? You need an online store. Don’t bother with anything complicated like Woocommerce (if you don’t know what that is don’t bother looking it up). Just use something like Shopify – it’s quick and easy. Yes, you do have to pay for it, but it’s relatively cheap and the result will be professional and you can use the days/weeks/months you save setting up a website to focus on your products.

There is other software that will make your life easier as a small business (for example a call answering service, or phone number redirecting) but they’re not exclusive to manufacturing businesses – we’ll cover them in another article.

Hope this helps.

Back to Blog

Related Posts

View All Posts »