How An ERP System Can Reduce Business Costs
In the manufacturing sector, an ERP system is one of the key custom software most organizations use. The benefits of an ERP system are well documented, ranging from improving inventory management to optimizing customer relationships, sales and even forecasting. However, there is an even more important function of implementing this custom software, namely reducing the overall cost of operation for a company. In this blog, Vestra Inet will reveal a few key ways in which an ERP system brings down costs for any business.
Financial Benefits Of An ERP System
1. Inventory Management, Reduction And Turnover
Inventory management is an umbrella term encompassing many processes such as the cost of storage, shipping, and receiving. A well-crafted custom inventory management software, part of a broader custom ERP, can make a big difference here by automating the process and integrating reports. This, in turn, will reduce the cost of storing and managing inventory.
Furthermore, it can also aid in reducing inventory and improving turnover. By seeing past trends and forecasting models, the company can decide to reduce certain inventory that is not in demand and ramp up the stock that is required.
2. Material Procurement And Purchasing
Some manufacturers run a complex supply chain wherein they purchase and sell products. However, emergency purchases can be costly and detrimental for any company. Situations like this can be avoided altogether with a robust custom ERP system. If an organization is purchasing stock from trusted suppliers, then adding a supplier portal can help them discern requirements with ease. Therefore, the production from the supplier front is also optimized and the cost of procuring materials is brought down.
3. Reduction In Wastage And Delays
Another department where companies lose money is material wastage during manufacturing and any delays. With an ERP system, the manufacturing process and its planning/scheduling can be optimized. This might include changing certain processes and better handling of client demands/requirements.
4. Smooth Information Flow
One of the biggest benefits of custom ERP is the smooth flow of information that can all be accessed from one place. Automated report generation, notifications and task management can all be combined to create an efficient operation where various aspects of business run seamlessly. For instance, the custom inventory management software combined with a forecasting feature can boost the level of customer service and avoid any adverse situations due to the smooth exchange of information. Similarly, it can create a synergy between the production and sales teams, as both are aware of the lead times and requirements of the customer.
5. Improving Manufacturing Labour Costs
Manufacturing labour costs encompass rush orders, overtime, re-works, machine setups and the overall throughput of a factory. With a custom ERP solution, however, all these facets can be easily handled by creating a highly effective work schedule. This will single-handedly bring down any outages and incidents requiring re-work, reduce instances of last-minute jobs, and improve the overall throughput. Therefore, it can bring down manufacturing-related labour costs by a significant margin.
Conclusion
In summary, an ERP system can financially benefit any business in these 5 ways. However, this list is by no means exhaustive, and its cost-saving benefits can extend to other departments as well.
