What is management by exception? How to implement it with Spectrum ERP?

What is Management by Exception?

Management by exception primarily focuses on identifying and handling cases that deviate from the specified acceptable norms. It implies raising a flag, in situations that might cause difficulties to the business. It involves determining the reasons for an exception, resolving the causes and handling deviation with the help of skilled staff and management guidance.

How you can set up “predetermined rules” for your business? 

Spectrum ERP measures and monitors your business activities in real-time. It also allows you to identify a set of business activities and the associated rules to monitor the metrics which are critical for the smooth functioning of your business.

When everything is proceeding within preset parameters, you will not hear anything from Spectrum ERP. However, as soon as any activities deviate from specified acceptance levels, or any rules are likely to be broken, Spectrum ERP sends alerts & notifications for information and approval from concerned authorities. This helps to focus on these aspects of your business and take appropriate actions as required.

Examples of Business Rules for Management by Exception

Spectrum ERP can help you establish rules about various standard procedures and documents such as deliveries, returns, sales quotes, sales orders, and more.  This ensures that people adhere to the criteria described within the acceptable range.

How much %Discount can each member of the Sales Team offer?

We first define the parameters of how much discount each member of the Sales team can offer while negotiating with the clients.  When the rules and regulations are followed, things proceed smoothly, but when someone wants to offer a higher discount than specified, he can raise a request for the same and an approval notification is sent to the approving authority.

How much material can be consumed?

Material consumption is linked with the bill of materials. If consumption is within the range, as defined in the bill of material, then the process runs smoothly. But in case, any excess material is required it goes through the approval process.

When can the Project Execution Start?

We first define parameters of when a project execution can start. For e.g. It can start only after all the required documents are signed off by all stakeholders involved and a certain amount of advance is received.  Now, if someone wants to start the project before any of these pre-conditions is fulfilled, he can raise a request for the same and notification is sent to the concerned approving authority.

Benefits of Implementing Business Rules 

With Spectrum ERP, we have helped our clients make their business process-driven and activities are performed timely and smoothly. Here are a few more areas where clients have implemented management by exception.

Budget: A Predefined budget is implemented for activities. If there is any deviation from the same, the concerned authorities can enquire reasons for the same and approve/disapprove instantly. This ensures projects, purchases, are completed within budgets.

Authorization: Set up predefined limits in terms of sales order, purchase order, service order authorizations. So authorizations are no longer required when it is well within the limits.  Approvals only required for amounts above the specified limit. This makes the approval process extremely fast.

Pending Items Review: Set alerts & notification for review of pending orders, payments, indents beyond a certain no. of days. This will ensure delay is avoided and approvals are timely.

Deviations: When there are any major deviations e.g. change in consumption pattern, prices, price variance etc. alerts and notifications are sent to concerned authorities who can take immediate precautions or remedial measures.

Thus, when business rules are set up, it requires minimum involvement of the management and they can focus on their core functions and strategies to grow business.

Summary

Using Spectrum ERP software to automate alerts and notifications means you can enhance your business processes and operations, to function at optimal capacity. You can minimize exceptions and reduce the risk of delays or errors.

Employees are empowered and themselves take the responsibility and decisions to ensure smooth functioning. Matters are escalated to higher-level only when things cannot be managed by the employees at their level.

Companies can significantly cut down the delays likely to occur due to pending approvals, authorizations. This has brought about speed in business and management can continue to focus on the more significant business activities.

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