Reasons to get ERP
Many people say that ERP is the future, that it is completely necessary nowadays. Through these lines we are going to explain several topics regarding why it is so important to use an ERP in order to get organizational efficiency.
With or Without ERP
An enterprise that has no ERP according to its needs can find many kinds of software that do not allow interaction, and that cannot be customized. For that matter they are not able to optimize the organizational business activities. The engineering design of the software will be needed in order to improve the product, and to follow the client’s behavior and choices since the first contact is quite important. Administration of the different receipts interdependence will be very complex, such as invoices regarding materials purchases, general expenditures or salaries.
All of these things change when you implement ERP. Information flows constantly and allows you to follow a client’s processes at any moment, no matter which part of the process they are going through. Purchases and expenditures are registered in a centralized database which allows you to have close control over these activities. In this regard ERP helps you to prevent possible abuse.
Marketing, sales, quality control, products processes, supply lines, stocks and many other areas can be integrated in one single database with ERP. This will help in avoiding the occasional loss of information and retyping mistakes. It integrates all departments and functions across a company in a single computer system that is able to serve all those different department’s particular needs.
ERP systems also implement and automate business processes by putting them into a useful format that is standardized and common for the whole organization, and it could even be used between their suppliers and customers. It captures data about historical activity, current operations and future plans and organizes it into information that every staff member can use to help develop business strategies.
ERP integrates financial data. Managers try to understand the companies performance, and they may find many different versions of the truth. Financial department have their own set of revenue numbers, and the sales department has its own as well.
The different business units may have their own versions of how much they contributed to revenues. ERP creates a single version of the truth that cannot be questioned because everyone is using the same system, giving managers correct and complete information.
A special case is found in manufacturing enterprises. These companies – especially those with an appetite for mergers and acquisitions – often find that multiple business units across the company make the same kind of work using different computer systems. Standardizing those processes and using a single, integrated computer system can save time, increase productivity and reduce head count besides improving the quality of information.
Something alike happens in non manufacturing organization when they acquire new companies or merge with others. A sole software is needed to increase the right flow of work through all of them, inside and between each other.
In companies with multiple business units, Human Resources may not have a unified, simple method for tracking employee time and communicating with them about benefits and services, disciplinary measures or even suspensions. ERP can fix that. To fix these problems, companies often forget the fact that ERP packages are generic representations of the ways in which a typical company does business.
As most packages are exhaustively comprehensive, each industry has its own qualities that makes them one of a kind, and of course they have special needs. ERP systems were designed to be used by manufacturing companies, which have consulted with the different ERP vendors to modify ERP programs to their needs.
Making Differences with ERP
ERP makes huge differences in inventory procedures. Without ERP, a business may turn over its inventory once or twice a year. However, with ERP automating internal processes such as production planning and procurement allows many enterprises to increase inventory turns tenfold, reducing inventory costs by ten to forty per cent a year!
The result is a significant reduction in inventory expenses, as well as associated transportation, storage and warehousing costs, not to mention reduction of personnel for inventory tasks.
Some organizations physically count inventory every month, and in some cases, each weekend. They often have an inventory accuracy rate as low as forty to fifty per cent. An ERP system can increase inventory accuracy up to ninety per cent or even more, while reducing the need for frequent physical audits.
For many, a physical inventory is not only costly in itself, but it also might require a temporary shutdown of the business to count, tag and check stock, losing the chance to sale in the meantime and even losing clients on some occasions.
To remain competitive, many companies are looking to improve their customer order fulfillment rates. Recent studies show that ERP systems can increase fill rates to eighty or ninety per cent by providing the information that allows the company to have the right product in the right place at the right time -centralized information in real time.
The result is of course higher customer satisfaction and retention because of the personalized attention. It is certain that customers will take their business elsewhere if the products they want are not available when they need them, or if they feel that the enterprise does not think about their needs. This can also happen if their requirements are not properly taken into account.
When properly used, an ERP system can improve organizational time from days to a few hours by grouping similar production jobs together, ensuring coordination of people, tools and machinery, and planning for maximum equipment use and efficient machine maintenance to minimize downtime. This is all done through computing arrangements by using the possibilities of this great software.
Optimizing production in this manner translates into increased capacity, which means you can make more products with the same amount of machinery, time and people, thus increasing profits without having to increase capital expenses as you would probably need to do if you do not have an ERP system.
Another problem that you can solve with an ERP is the involuntary production of unacceptable products. In some plants, re-work rates might reach even thirty per cent of production depending on the supervision and qualifications of the employees. Because of possible slips the production, staff may not realize there is a problem until after the product has been manufactured.
ERP software with a strong manufacturing component pinpoints quality issues, providing the information needed to increase production efficiency and constantly reduce re-work by pointing out relevant points in every production process.
Some companies take up to ninety days to collect information on customer invoices. An ERP system can automatically generate a list of late paying customers, send notifications as needed, and notice customers whose credit should be put on hold before more products are sold, either because they are going to exceed their credit limits or if they have not paid for a relevant period of time.
ERP systems give you the power to proactively examine accounts receivable before significant problems occur, avoiding late reactions.
Real Benefits for the Real World
Nowadays innovative companies need integrated management systems properly designed to keep every promise made by themselves to its internal in case they exist, or even if you want to consider your employees as external customers. But keeping those promises under the pressure of constantly changing customer’s requirements and needs demands that you have innovative people empowered to resolve those daily challenges, and for that matter they must have pertinent tools.
Having tools without having a strong philosophy tends to fail when attempting to manage the processes and materials required to keep each and every promise
As you already have seen, ERP is a system of planning that includes a well developed philosophy for making and keeping promises. But unfortunately ERP has often been implemented as a software product instead of being taken into account as a company wide philosophy.
The biggest benefits of ERP are found in the integrity of the management systems used to provide direction and re- direction within the organization, making work relations to develop and improving labor efficiency. What most people do not take into account is the fact that when considered as a philosophy of relationship, ERP provides a framework from which individuals can focus on work that is real, work that is possible, work that is necessary to correctly manage important daily work assignments, motivating personnel to grow and work in an organized way.
This kind of software is the fundamental piece that you need to grow up while being competitive for the time being. The main reasons have been explained, but there are a lot more that you can discover for yourself when you start using ERP. You can find many advantages for different processes, and you only have to make up your mind.