Most of the manufacturing and distribution companies go for ERP implementation because it helps in increasing profitability and productivity. There are many factors which can help these companies to reduce expenses and get the potential ROI.
Some of the key factors which directly cause a reduction in cost are -
Inventory Reduction: The main benefit of ERP implementation is inventory reduction in which the companies can asses when to purchase. It is not required to stock the products before it is in use. Extra stocks increases wastages and it also requires maintenance and storing expenses. The software can decide where to store the inventory after completing the process of purchase as the latest data of every department is updated in the software.
Automated inventory helps the company to easily retrieve data for manufacturing and distribution, and the company can define its targets.
Easy to view workflow: The complete analysis of data can be viewed through automated systems which helps the management to continue work and to have better plant utilization. Software increases production cycles and helps in reducing raw material. Manufacturing units can schedule tasks easily and effectively. These features help in reducing raw material inventory and the expenses on storage of finished goods is reduced.
The customer service is also improved as the products are delivered on time to the customers. Many organizations have automated message service systems find it easy to stay in touch with the real-time customer and it enables the buyers to submit their complaints and problems directly to the manufacturer.
There are many benefits of automation such as increased plant utilization, productivity and customer service, and these factors helps an organization to get the required competitive edge over its competitors.
Analysis of KPIs: An organization can improve its performance by understanding the major KPIs on demand. Software provides a combination of data which can be used to find out the KPIs and fields which are not performing as required.
When a company defines its targets for manufacturing or productions - the funds allocated to various processes are defined by the software within minutes and the future transactions can be tracked by the software, which helps the management of a company to define its Key performing businesses and fields.
Effective and timely decisions: It help an organization to grow as it can provide easy, effective and time decisions to the management. An ERP software can define the accounting period in minutes and the management can take decisions based on information which can be fully trusted but in case an organization tries to define the accounting period with the help of a group of consultant, the cost can be more and the result may not be as accurate as provided by the software.
In general it is found that most of the companies have around twenty to twenty-five percent of reduction in inventory cost due to system implementation and the cost on manufacturing can be reduced by seventeen to twenty percent whereas the expense on administration and management is reduced by sixteen to twenty percent.