How ERP system supports sustainable production

Nobody can ignore the impact of climate change anymore and manufacturers of all sizes can contribute to the fight against climate change. More importantly, action taken to create sustainable production contributes to cost savings. In Make UK’s report in conjunction with Sage – digitalise to decarbonise – 62% of respondents who adopted digital technologies reported making energy cost savings.

In the manufacturing industry, sustainability initiatives are creating win-win scenarios by lowering energy consumption, and carbon emissions, whilst assisting in containing rising costs for materials, energy and services. Many manufacturing companies are also successfully reducing their carbon emissions and non-recyclable waste through circular economy programmes.

Technology at the heart of measuring carbon performance

Reducing carbon emissions is only half the story. Measuring carbon performance is just as crucial, for example:

  • Carbon offsetting:
    • Few businesses will achieve net zero through operational efficiency—most will have to engage in carbon offsetting too. Carbon offsetting is a global system. A manufacturer will only be able to account for offsetting activity if it can fully and credibly record its own environmental footprint.
  • Reporting in:
    • Today’s stakeholders—investors, partners and customers —will now want to know the trajectory of a business’ environmental performance and achievements against defined sustainability goals for the business.
  • Making progress:
    • With Environmental, Social and Governance (ESG) at the top of the corporate agenda, understanding the sustainability KPIs which move a business forward will be crucial.

Technology is at the heart of extracting this performance data and making it meaningfully available to the business without adding a new and painful burden of manual labour.

Enterprise Resource Planning (ERP) systems, like Sage X3 ERP, are the key tool for sustainability metrics, driving:

  1. Real-time data – Connecting to multiple data sources, including developing IoT systems for increasingly granular green insight.
  2. Reporting – Reliable and comprehensible carbon accounting based on fact.
  3. Responsible sourcing – Using Application Programming Interfaces (APIs) to pull data from businesses up the supply chain.
  4. Lean manufacturing processes and waste reduction – Providing the data to power new efficiencies.
  5. Regulatory compliance – The data to prove that operations meet environmental standards.
  6. Demand from customers – Today’s tenders invariably include an environmental commitment. If a business doesn’t measure environmental performance, it is likely closing off whole markets of opportunity.

ERP for sustainable production

Apart from being able to measure sustainability metrics, ERP enables sustainable production, whilst being agile enough to react when market demands and opportunities change by supplying real-time visibility and control.

Supplier collaboration

An ERP system maintains records of vendor and material sustainability information. Supplier selection criteria include pricing, product quality, lead times, and vendor compliance certifications. Manufacturers can utilise this data to evaluate suppliers and materials during the purchasing process ensuring supply chain sustainability.

Traceability

Using an ERP system with real-time data and track-and-traceability enables manufacturers to monitor expiration dates, deviations in storage temperatures, spoilage rates across inventories, supply chain bottlenecks, and other factors, across materials and components, regardless of location.  This enables manufacturers to find ways to reduce waste, increase resource efficiency and create more sustainable products.

Supply chain management

Real-time visibility across the supply chain enables manufacturers to detect and fix issues. By synchronising production and distribution to meet demand, whilst minimising inventory miles, waste can be reduced and efficiency enhanced.

Cost management

Sustainable cost management strikes a balance within an organisation’s operations between its economic viability, social responsibility and environmental stewardship. An ERP system will support this by providing cost accounting, including simulated standard cost calculations and cost attributions to multiple categories.

Demand planning

With an ERP system manufacturing companies can precisely predict where, when, and how future demand will impact their operations by using demand planning. Enhanced material use, lower freight expediting costs and increased forecasting accuracy all contribute to the reduction of unnecessary greenhouse gas emissions as well as costs to the business.

Bill of Materials (BOM)

To reduce waste and/or incorporate recycled materials into the sustainable production process, manufacturers need to have visibility into their BOM. An ERP system provides for control of quantity, quality, and cost of materials and can even help organisations to trace and report on the percentage of raw materials that make up the final product, thereby reducing unnecessary loads on the system.

Inventory management

An ERP system will help to optimise inventory levels and locations, to prevent overstocking, understocking or obsolescence. Inventory pooling, cross-docking and drop-shipping can be deployed to cut down on the number of warehouses, transportation routes and intermediaries in an organisation’s distribution network. A manufacturer can cut down on storage expenses, transportation-related emissions and inventory waste by optimising inventory levels and locations.

The future of sustainable production

ERP systems, like Sage X3, are a vital part of achieving sustainability ambitions. They can be extended with other technologies that will become more prevalent in future, such as:

  • IoT – Sensors embedded in production lines to improve the data on which decisions relevant to sustainability are made in real-time and with ever more granularity.
  • The digital supply chain – Visibility of sustainability criteria from farm to fork, mine to market.
  • Predictive analytics and AI – These are universally transformative technologies which can allow businesses to change course with more agility and insight. But these tools need plenty of raw data in the first place, which is where ERP systems come in.

Check our guide ‘How the circular economy can transform manufacturing’ to discover how manufacturers, distributors and wholesalers can unlock the opportunities available from the circular economy.

 

 

2024-01-31T14:18:12+00:00September 13, 2023|Blog|
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