Benefits of ERP Implementation | Benefits of ERP System
We observe that companies are tentative to embark on a journey for ERP Implementation. primarily, because ERP implementation involves a long-term commitment as well as a considerable amount of time, money, and efforts to achieve digital transformation of the organization. Will ERP help improve our business operations? What improvement can we expect to achieve? What are the Benefits of ERP Implementation? These are some frequently asked questions, by companies contemplating ERP implementation. This article is our attempt to resolve the apprehensions and elucidate the numerous benefits of ERP System.
Why Manufacturing companies need ERP Software? Classic problems faced by Manufacturing Companies before ERP implementation
Manufacturing companies are usually spread across different units and locations. Their teams, departments, and functions operate in silos. This gives rise to the following difficulties in day to day management & operation of the company:
- Unable to get complete & accurate visibility of the business
- Right information does not reach the right people at the right time
- Inability to make data-based, timely decisions
- Poor coordination between units, locations, departments
- Difficult to implement companywide policies for business and finance discipline.
- Challenges in meeting delivery schedules
- Difficulty in identifying bottlenecks and areas of improvement
All these prove a hindrance especially when a company looks to grow and scale the business. Let us now look at how ERP Software is an effective mechanism to overcome these problems and achieve speed and efficiency in business.
What are the Benefits of ERP Software?
ERP Software creates a central digital nervous system for the organization. It makes it easy to gather data in a digital platform across the organization. It integrates all processes such as planning, production, purchasing, inventory, sales, marketing, finance, human resources into a centralized system using a common technology platform and ERP database. ERP provides a real-time accurate view of the business across all units, departments, locations. ERP provides intelligent solutions like dashboards, business analysis reports, exception reporting, notification alerts. This lays a very strong foundation for companies to reap the best benefits of the ERP implementation.
Let us now look at the significant changes and improvements that a company achieves by implementing ERP and what are the benefits of the ERP system.
- ERP provides transparency, accurate data, and real-time visibility
- Digitize, Automate & Implement Standardized Processes
- Improved Collaboration & Empowered Employees
- Proper Inventory Control & Optimum Inventory Levels
- Optimum Utilization of Resources
- Improve Supply Chain & Ensure On-Time Delivery
- Improved Customer Service
- Business Reporting made easy
- Define KPIs & Measure Performance against Industry Standard
- Control Costs / Reduce Costs
- Speed in Business & Competitive Edge
1. ERP provides transparency, accurate data, and real-time visibility
An ERP integrates disparate systems from multiple locations of a manufacturing organization into one single shared database. ERP enables capturing information in real-time to a single central location and makes it available, anytime, anywhere across devices such as mobiles, laptops, tablets, etc. This brings transparency to business processes and provides an accurate picture of the business operations.
2. Digitize, Automate & Implement Standardized Processes
ERP enables companies to digitize, automate, and implement standard business practices. This helps to streamline processes, define rules, policies, across departments, functions, and locations for implementing financial & business Discipline. With standard processes, companies can monitor progress, identify areas of delays, bottlenecks & strive for continuous improvement by fine-tuning the processes to improve efficiency.
3. Improved Collaboration & Empowered Employees
ERP helps eliminate redundant activities and achieve significant savings in manual efforts. ERP defines workflows and information sharing processes for various processes such as procurement, inventory, deliveries, returns, sales quotes, sales orders, etc. ERP enables alerts and Notifications on mobile/email for informing about deviations, obtaining approvals /authorization as required. All of this helps to improve communication & coordination among employees. Employees can make decisions & provide approvals “On the Go” and ensure the smooth functioning of the business.
4. Proper Inventory Control & Optimum Inventory Levels
Inventory management is the most important aspect of a manufacturing company. Having optimum inventory ensures smooth functioning as well as a healthy working capital of the company. ERP establishes efficient material requirement planning & standard inventory management practices across the company. ERP facilitates defining lead time, reorder points, safety stock, and set up alerts & notifications for approvals & authorizations, for inventory purchase. ERP provides real-time, accurate knowledge of inventory & items in stock across the organization. This prevents situations of overstocking or under-stocking and optimum inventory levels for smooth production.
5. Optimum Utilization of Resources
ERP software saves important information about the plant, machinery & equipment of the manufacturing company. ERP enables companies to define specific conditions that require immediate attention & actions. ERP send alerts/notifications for scheduled maintenance, routine checks, servicing, inspections. All of these ensure that plant, machinery & equipment are in peak physical condition for providing maximum output. ERP also provides detailed reports and trends about capacity utilization, downtime, and more. This help take corrective measures if resources are not being utilized to their optimal capacity
6. Improve Supply Chain & Ensure On-Time Delivery
ERP helps companies to establish material requirement practices, establish long term supply contracts, negotiate prices, maintain optimum inventory, speed up production, ensure quality standards with routine checks & inspections. Thus, ERP software helps to ensure a robust supply chain mechanism that ensures the right product, to the right place, in the right quantity with the right quality, at the right price.
7. Improved Customer Service
ERP helps to improve customer experience by providing them timely information about their orders, delivery, payments, and more. With CRM module companies can observe patterns/trends of each customer and get access to all communications with them. Thus, ERP helps to know your customers better and offer value-added service to them. With help of feedback from customers, companies can bring about improvements in products/services. Thus, companies can build better relations with customers and provide more personalized services to ensure customer retention and loyalty.
8. Business Reporting made easy
With a real-time view of data across the organization, employees no longer have to spend a significant amount of time gathering data across locations and reconciling it for preparing reports. ERP helps companies generate a variety of business reports at specified intervals, at the click of a button. ERP provides reports for Procurement, Inventory, Sales, Reports, Customer Reports, Financial Performance, Plant & Machinery Utilization, Expenses and Costing, and so on. You can view reports consolidated at the Head Office Level or even drill down to the transaction level. This ensure companies can make data-backed decisions for improving efficiency and productivity.
9. Define KPIs & Measure Performance against Industry Standard
Key Performance Indicators or KPIs measure how you are performing as compared to the key business objectives or goals of your organization. ERP enables companies to define KPIs for functions such as Plant & Machinery KPIs, Inventory KPIs, Procurement KPIs, Sales KPIs, Quality KPIs, Customer KPIs, Employee KPIs.
With KPIs, ERP helps companies to monitor and analyze the performance weekly, monthly, or quarterly to achieve operational efficiency. Companies can also compare their results with the prevalent industry standards to identify areas of improvement. This ensures companies stay focused and on track to achieve their business objectives.
10. Control Costs / Reduce Costs
ERP software provides real-time, in-depth reports for Cost of Production, Cost of Overheads, Departmental Expenses, Cost of Materials, Work in Progress (WIP), etc. Thus, ERP software, makes it easier to keep a close watch on various costs incurred for raw materials, purchases, procurement, inventory maintenance, etc. Companies can analyze the trends/pattern of expenses. Managers can verify whether expenses are according to estimates or exceed the estimations and accordingly take steps for corrective measures. ERP enables companies to define standard processes for procurement, inventory management, supply chain, and more. All these measures enable companies to control /reduce manufacturing costs.
11. Speed in Business & Competitive Edge
Speed in Business means how quickly your business performs. ERP software helps to improve the efficiency and productivity of manufacturing companies and speeds up the time to production, time to purchase, time to deliver. Companies can manufacture more products and service more clients in the same amount of time. All this ensures faster time to market and provides a competitive edge that will eventually improve the profitability of the company.
ERP Software creates the digital backbone of the organization. ERP software digitizes and automates processes. ERP software provides real-time & accurate information about the business. ERP facilitates implementing business and financial discipline by implementing companywide rules & policies. ERP improves collaboration & coordination among departments. With KPIs & Reports, ERP facilitates building a culture of making data-backed informed decisions for making optimum utilization of time and resources and achieving continuous improvement in all areas of business. Thus, ERP improves business operation management, ensures cost reduction, enhances customer satisfaction, and contributes to overall success for the company.