What do ERP Systems do to Save Manufacturers Money?
Are you ever left with excess stock at the end of a season? Are your suppliers constantly letting you down? Are you able to see exactly how many products are in your inventory at once?
An ERP system can cover everything within a distribution business, from customer records to stock management and inventory. An ERP system gives you a clear overview of all aspects of the business, allowing you to see real-time information about your business’s success and potential opportunities.
You are wasting money if you don’t have an integrated enterprise resource management system installed in your warehouses, in your office headquarters, or for your drivers.
Continue reading to learn how ERP software can save your company money.
What is an Enterprise Resource Planning System?
Enterprise planning resource (ERP), is a system that smoothens and speeds up the operations of small and medium-sized businesses.
Many modular applications can be used with the software, each offering unique benefits to different business areas. These applications can talk to one another, so data can be easily shared across the company whenever needed.
How an ERP system can save you money
Installing ERP software doesn’t come cheap. Even an off-the-peg solution can take some time to transfer data and train staff. Business owners often hesitate to invest because of the initial cost.
The long-term benefits of ERP are far more important than the costs involved in installing it. These are just a few ways ERP can save your company money over time.
Clear processes and real-time working
Every department is different and each new employee inherits legacy systems that will be modified over time.
Standardizing your processes and documents by including everything in an ERP system streamlines them. There is no need to waste time looking for details about suppliers or contracts. Everything is focused on the task at hand and can be done quickly.
Cloud working allows your delivery drivers to work from their mobile devices and provide real-time updates. Satellite warehouses can instantly see if another warehouse has the stock item it needs. The software can be learned by a new member of staff while they are on the move in the field.
ERP Cloud allows you to make your processes simple and easy to use. The system is available to your staff from anywhere in the world at any time. You don’t need to wait for human progress updates to order it: everything is available online for your staff.
Rapid Updates with Minimal Downtime
The software doesn’t need to be installed separately on each device when you work in the Cloud. Instead, access is provided via an installed program and then the software is accessed from a remote server.
Software updates are therefore very easy to install. To install large updates, you won’t have to remember every device or shut down each computer individually. An ERP provider will update your device once and it will be available whenever you log in again.
Simple Reporting for Better Financial Management
ERP systems can generate visual reports that are easy to understand and targeted at a specific audience. For example, you can provide a general overview of performance with a series of graphs for your monthly management meetings.
Your financial reports can be assembled quickly and easily for your company board. You can easily control who has access to which data sets in ERP reporting so that you only present the most important information. This reduces both the time it takes to create reports and the time it takes for people to read the information.
ERP software can provide you with a better understanding of your financial forecasts and at-a-glance real-time reporting. This software will allow you to identify where money is being wasted and budgets that are being underused. You can also monitor stock demand so that you can make wise investments on a seasonal basis.
Lower Admin costs
Each year, your business will be subject to multiple audits. Every audit is time-consuming and can produce a paper trail.
Audit preparation can be expensive. Every time a record gets altered, an ERP system creates logs. An ERP system can create and export a clear audit trail in no time.
The integrated ERP system also gives you limited access to data relevant to your job role. This allows for faster and more secure data access.
ERP software reduces human error by allowing for inventory and record keeping. The ERP software, unlike a spreadsheet that can be modified and saved over, will flag an invalid entry before it can be saved to the system.
Stock Control Improvement
Knowing what your seasonal stock requirements are will allow you to minimize storage space, reduce stock wastage, and improve materials forecasting.
ERP makes warehouse inventory management much simpler. Real-time stock updates allow anyone to see the exact status of any warehouse anywhere in the world.
Warehouse management is easier with a clear, real-time inventory overview for all warehouses around the globe. Clear reporting allows for better stock forecasting, which reduces warehouse space costs and allows you to anticipate seasonal demand.
Better Supply Chain Management
Are you aware of when your supplier contracts expire? Do you know how many times your supplier has failed to deliver on time?
Problems with suppliers can cost your company time, money, as well as customers. An ERP program can help you keep track of service level agreements, identify frequent problems, and improve supplier relations.
These are the most common problems. You will be able to spot the common problems. For example, are you giving your suppliers enough time to deliver, or do they sometimes fall behind due to your tight timeframes? This data analysis will allow you to accelerate deliveries and reduce delays due to common supply chain issues.
Management of customer relationships
It has been proven that a 5% increase in customer retention can improve profitability by as much as 75%
You can easily see all of your customer records, including any phone calls, emails, or orders, by keeping them in one place. It will instantly improve customer service as everyone can see the complete history of the customer and be able to provide a customized response to any queries.
Targeted marketing can help improve customer service in enterprise planning software. Segmented data from ERP software will allow you to create concise marketing messages that are relevant to specific customer groups. This will not only reduce marketing costs but also improve your ROI.
With one goal in mind, you hire people and buy equipment to expand your operations. The same goal motivated you to implement an ERP system: to increase your profits. An ERP system can help you reduce costs and achieve more with the current setup of your shop, rather than expanding your operations to grow.
ERPs can save manufacturers money in a nutshell. What are the benefits? These are five places where you can save money:
Inventory costs
Many manufacturers find that inventory carrying costs can be a significant problem. This means that you have too much capital in inventory and not enough to fund your operations. For your particular type of manufacturing, the solution is to reduce inventory. Companies can free up capital by reducing their inventory. This will reduce the chance of components and parts getting damaged in your shop or being left behind.
An ERP software can accurately forecast inventory requirements, and modern custom manufacturing-specific ERPs can determine what’s needed as early as the estimation phase. Inventory purchasing can be made easier by having real-time information about WIP and upcoming projects. This allows you to transition from purchasing excessive quantities to buying the right materials at the right lead- and delivery times. You also have the option of batching these purchases.
The ERP can also accurately report on returns and wastage, as well as provide a reliable valuation for the stock position at any time. An ERP can automatically order materials for you or remind your purchasing manager that inventory levels are changing. This makes replenishing inventory easier. If you don’t have an ERP telling you your inventory is full, shipping costs can be high to get freight expedited to the point where you are in desperate need of stock.
Operational expenses
ERPs can save manufacturers money on their operational costs in many ways. ERPs can be integrated into one system, eliminating the need to have separate software for each department. This reduces the cost of data re-entry, which can be expensive, and error reduction. It also saves you money on ongoing costs such as software updates, licenses, and training.
ERPs can also be used to save money in the design and engineering phases of projects. Consider the labor costs of skilled workers required to complete these critical steps in engineer-to-order environments. Any measure to keep these employees on higher-level tasks like actual design can result in substantial savings. Genius ERP features such as CAD2BOM which manages the data entry for BOM creation, are just a few examples. Transferring BOMs from your CAD system can take up to 20% of the engineering time in your shop. Having these two systems integrated will help you save a lot of money and time.
Moreover, all data is in one location, which allows for greater flexibility in production and quicker response to client requests. These small steps add up to hours that can add up over time to weeks or days. It is possible to provide information to customers on orders immediately, rather than having to reply to them and then enquire with another manager. This saves time and money.
Real-time data
It is not about what you know but how you know it. Real-time data allows you to change your course midstream and avoid costly production errors. An ERP can provide real-time data to help you avoid making costly mistakes in the future. Project tracking helps define each production step’s costs and optimizes operations to reduce underperformance.
Real-time data also has the added benefit of reducing delays in the routing and execution of projects. Instead of wasting time in back-and-forth conversations and information sharing during production, an ERP solution can be used as a live dashboard that can be consulted by anyone on the shop floor.
Functionalities that are tax-friendly
An ERP solution can help with the second most important inevitability of life: taxes. The tax and compliance implications of doing business in multiple states, provinces, or countries can be enormous for your company. ERP systems consolidate financial information into one central location, allowing you to track every dollar your business spends or earns. These records can be accessed at any time, so it is easier to keep up with tax obligations.
Manufacturers will be able to reduce the risk of costly accounting mistakes by simplifying income and expense tracking. Many ERPs integrate with tax compliance software systems to automate complex taxation and compliance processes.
Manufacturing IQ
Manufacturing is a science that your best employees are skilled at, but it can be difficult to find the right talent to replace them. The skilled labor shortage in manufacturing is expected to increase over the next decade. An ERP system can hold institutional knowledge that could otherwise be lost when senior workers retire. It also reduces the need for new skills and specialization. An ERP system can reduce the amount of specialization needed to perform complex manufacturing jobs and allows for the sharing of the knowledge and expertise required to move products throughout the shop. This can help companies save a lot on their hiring costs and ensure that everyone can contribute meaningfully to the project’s execution.
Conclusion
ERPs not only save money but also help you make more.
These are just a few examples of how ERP software can save you money. An ERP software can also help you generate more income over time. The right ERP software will allow you to easily identify the steps that you should take to grow your business. An ERP system will give you the foundation to scale your business and increase your profits.
