Enterprise Resource Planning(ERP) is a business management system adapted by many businesses for advanced management with an integrated system. Many back office functions can easily be automated in the process.
An ERP application is capable of integrating all aspects within a business operation from production, sales, Human resource, dispatch, and finance. This stepped-up integration of multiple departments and locations increases a company’s productivity. To understand more, let us take a look at the reasons for investing in an ERP and the business issues it solves.
1. Improved interaction and communication
For the smooth running of a company, it is wise for all the departments to communicate effectively. A single system that integrates all functions ensures both internal and external customers are in constant touch with the company. This increases response time between the customers and the company. When an ERP system integrates sales and production departments, it is easy for direct communication for product availability in the market thus improve planning. Making a company’s real-time information available to all the functions that require it is a plus in the workflow and productivity.
2. Standardized processes
Multiple systems within a company create a disconnect and are bound to errors. In the long run, time will be wasted as employees try to sort out the issues instead of attending their assignments. In an ERP, all the processes are manned by a single system and one functionality picks up from where the previous had left. It is easy for a single employee to man the whole process and give appropriate solutions. The system does most of the work reducing the expense for a larger staff number.
3. Improved performance
With an ERP, monitoring, and control of business performance is greatly enhanced. A company can continuously improve the processes involved. With the daily changes in the manufacturing industry due to enhanced technology, it is easy to adapt an appropriate system process to ensure performance is maximized. An optimally performing system increases the output without considering downtimes from human employees.
4. Improved production and Inventory management
For companies that produce goods and utilize them in their business processes, an ERP offers a point of convergence from the point the goods are produced, stored to when they are dispatched to the customers. This system can easily reduce the overhead costs associated with excess production while ensuring proper warehouse management.
In large companies, an ERP will manage large volumes of stock in various aspects from batching, FIFO, and help in the monitoring of near expiry products to reduce instances of stock overstaying in the warehouse. For any business, an ERP system can be tailored to specifically meet the requirements and processes involved. Moreover, there are provisions for process improvement for most ERP systems.
When it comes to production, an ERP system is programmed to monitor any defects and irregularities on every product that passes through the production line. It is able to give the exact description of the issue and prescribe the solution needed. Once the issue has been identified and sorted, the system can be programmed to prevent similar issues in future.
5. Enhanced delivery
Proper inventory management, accurate customer oriented production, and proper demand planning coupled with other benefits of the ERP system create a conducive environment for faster delivery. Demand planning and production teams are aware of their customers’ needs, the frequency of purchase, and items to be ordered. With this knowledge, they are able to plan in advance and determine orders for a particular customer for a particular period, a week or even month. The system is able to monitor available stock and days of stock for individual customers and establishes a pre-order level ensuring faster and continues stock delivery.
6. Cost reduction
An increase in the productivity of workers brings about improved efficiency during the stipulated working hours. Overtime expenses are reduced together with other labor costs. Precise production reduces chances of reworking on defective items and ensures fewer products are wasted and sent for decanting or scrapping. ERP warehouse monitoring reduces costs associated with excess production. There is generally an improved visibility of what is produced all the way to what the customers will effectively utilize.
7. Satisfied customers
An ERP system ensures a customer gets what they wanted at the time they wanted or even better. With On Time In Full Delivery(OTIFNE), a customer’s confidence in a company grows. They can comfortably sit back and make their orders knowing they will be delivered without fail. We all acknowledge the importance of making our customers happy. The benefits arising afterward are numerous from customer loyalty to referrals which eventually translates to a bigger brand and sales.