How ERP helps Implement Standard Operating Procedures
Does your organization have Standard Operating Procedures in place? Did you know, Standard Operating Procedures are a great mechanism to ensure consistency, improve efficiency & productivity? Today, let us discuss what is the significance of SOP and how ERP helps Implement Standard Operating Procedures (SOPs) in an organization.
What is Standard Operating Procedure?
Wikipedia explains “Standard Operating Procedure” as “A set of step-by-step instructions compiled by an organization to help workers carry out complex routine operations. SOPs aim to achieve efficiency, quality output and uniformity of performance while reducing miscommunication and failure to comply with industry regulations”
If we consider the above explanation, SOPs establish the following:
1. Define the Task/Activity to be performed
2. Who will perform the task – roles & responsibilities of people involved
3. How the Task will be performed – with Clear Step-by-step Instructions
4. Bring Uniformity & Consistency – to how a task/activity is carried out – irrespective of who performs it.
Standard operating procedures thus, streamline processes and help a company establish standard practices or best practices to perform operations.
Why implement Standard Operating Procedures?
SOPs define the most efficient & effective method of carrying out activities in your organization. Therefore, SOPs must be properly documented, explained to everyone involved in the processes, and made easily available for reference to all concerned. With SOPs You will be able to achieve:
Consistency & Standardization
SOPs make the process consistent, standardized, and person independent. Anyone who follows the SOPs will perform the same steps & actions to achieve the desired results. This will ensure uniform quality of Products & Services in the company.
SOPs serve as a training document for explaining the activities/processes in detail to new and existing employees. Provides a handy checklist to ensure whether standard procedures and best practices are being followed or not.
Reduction of errors
Well defined & documented procedures reduce the chances of mistakes & errors significantly. All activities will be carried out appropriately, every time.
Well written SOP clearly defines roles, responsibilities, and expectations from each member. Employees know exactly whom to notify for concerns or whom to approach for approvals etc. This eliminates the chances of delays or miscommunication & improves coordination among teams.
Improved Productivity & Efficiency
When employees perform the same set of activities consistently over some time, it improves their efficiency & productivity. Effectively this speeds up the entire function & process.
SOPs being well-defined processes ensure there is little or no idle time, minimum wastage of materials and resources. All of this ultimately results in lower operating costs.
To summarize, the benefits of adopting Standard Operating Procedures are: Standard Business Practices, Optimum utilization of resources, Elimination of Wastes, Avoiding delays & bottlenecks, Strict Quality Control, Faster Production, Improved Efficiency and Cost Savings that will ultimately result in Improved Profitability
How does ERP help in Implementing Standard Operating Procedures?
ERP software integrates all important processes of an organization such as planning, production, purchasing, inventory, sales, marketing, finance, human resources.
With ERP software, you can define and implement standard processes, describe the workflow, specify rules & guidelines checklists and validations for each & every activity of every function. You can define approval workflow, to set up notification & alerts and also to manage by exceptions.
Thus, an ERP Software enables directly mapping the SOP into the core processes. ERP provides an easy option to generate SOP related documents or formats and provides relevant reports to concerned managers to verify whether best practices are being followed or not.
How ERP enables implementing SOP in manufacturing companies?
ERP Software provides standard entry screens which ensures that all relevant data is captured and all relevant processes are being followed. Let us now see how ERP helps implement SOP at various department level.
ERP Software makes it possible to use Material Requirement Planning methods for predicting inventory requirements. It helps define & implement companywide Procurement policy. It streamlines & automates procurement, allows aggregation of demands for enabling bulk procurements, defines the purchase lead time to avoid emergency purchase, and so on.
ERP software enables us to specify inventory control methods and procedures, write guidelines for warehouse management, and define reorder limits to prevent overstocking or understocking. This helps to maintain optimum inventory levels and ensure healthy working capital.
Asset & Plant Maintenance
ERP Software saves information about all plants, machinery, equipment. Outlines, procedures, schedules & timelines for inspections, checks, servicing, maintenance. Specifies conditions for preventive maintenance to ensure excellent physical conditions of plant & machinery and extract maximum output with minimum downtime.
Finance – Accounts Payables & Receivable
With the Finance Module of ERP, you can define Policy for timely collection & payments. ERP enables the use of the Dunning Process to send frequent reminders to customers for faster payments & to reduce the chances of bad debts. You can also define how & when to make timely vendor payments as per agreed terms & conditions.
Sales Module of ERP helps to define the Credit Control Policy that lays down guidelines for how much credit to extend, to which category of customers, and for how many days. It also includes details of maximum credit value and maximum no. of days for each customer. This helps to minimize credit risks.
ERP provides a variety of reports for every function & process, Senior Management can keep a close watch on whether the standard business processes are being followed, review the impact of SOPs on major business areas, and verify whether there is any improvement or not. Accordingly, they can revise SOP to fine-tune the processes further and implement revised SOPs to ensure company objectives are met.
Standard Operating Procedures provide complete clarity, direction, and roadmap to bring uniformity, consistency, improve efficiency & speed of operations. ERP software provides the technology platform to implement SOPs companywide and ensure strict adherence to SOPs in the company.