An Enterprise Resource Planning (ERP) system manages the flow of information across an entire organization. These systems run on a software application, which automates the above mentioned activity. By optimizing the manufacturing and distribution operations, it will also be able to focus on new business opportunities. Flexibility and scalable design makes a resource management software suitable for all organizations irrespective of their size.
Problems without ERP software and its impacts-
Consider a company that is using separate systems to perform functions for ordering, accounting, inventory, purchasing, etc. Then it is clearly implied that the particular company has unorganized, disjointed practice. Essentially, the record keeping will be scattered. This kind of practice uses different systems for every single process that has to be carried out. As a result, the room for errors in this process is huge. Such errors will give rise to the problem of unsynchronized information between systems, which leads to breakdowns in reporting. Such errors as wrong quantities, wrong prices, missed orders, running out of stock, etc.
Another major hurdle is, eventually the particular company will experience a great difficulty in growth. This happens because a company will continue to add more people to their processes. While it is natural to add people and processes to a growing business, a poorly organized business requires more people to perform low value activities such as double-entry, reconciling the differences between information in the systems and assembling data to assess the happenings in making decisions.
An ERP system solves the problem efficiently because, simply put, all the processes are integrated. This means that from the order entry process, people can see if there is an inventory in the stock, then they can sequence the move to take the inventory out of stock and ship it. When shipment happens, the customer receives an invoice and accounting for sales to the general ledger is completed. This process occurs without double entry, and it minimizes the amount of errors that occur.
A fundamental way to tackle larger problems is to break them down to smaller units. With a resource planning tool in place, the capacity to divide work is a lot easier. When the processes are fully integrated, the number of people required to perform a particular task is minimized, since the information is always real-time.
Benefits of Implementing an ERP Software System-
The processes and workflows are streamlined. Redundancy in data entry and processes are eliminated in formulation, quality control, and planning and production department. The entire enterprise is made visible to those who are making daily critical decisions, thus easing the opportunities in improving work production. By keeping a company’s internal business process running smoothly, it can lead to better outputs that benefit the company in many ways. It also creates a more agile company that better adapts to change. It makes a company more flexible and less rigidly structured, so organization components operate more cohesively, enhancing the business internally and externally.
Resource planning software helps in centralizing information from all aspects of an organization. It provides real-time information to all functions of the company, while reducing error prone manual tasks. It can help organizations with financial management, supply chain management, service management and customer relationship management (CRM). Sharing of information is allowed throughout the entire company, based on security privileges, thus improving workflow and efficiency by providing access to the information.
Real-time estimation of cost-
Some ERP software offers real-time cost estimation, thus helping in tracking the costs of materials (including intermediates), labor, packaging and finished goods. In addition, What-if cost-analysis helps in making pricing decisions easier. Thus it improves the bottom-line with better visibility throughout the entire budget, pricing, and analysis process.
Improved Customer Satisfaction and Reduction in Costs-
Based on improved on-time delivery, increase in quality and shortened delivery times, improvement in customer satisfaction is a reality. Inventory costs are reduced resulting from better planning, tracking and forecasting. Better visibility into accounts is provided and thus the numbers of billing and/or delivery errors are minimized. By taking better advantage of quantity breaks and tracking vendor performance, vendor pricing can be decreased.
Independency in operation between main and subsidiary level of the company’s Two-tier resource planning software and hardware, operating one at the corporate level and the other at the division or subsidiary level, lets the companies run the equivalent of two ERP systems. The regional distribution, production or sales centers and service providers continue operating their own business model, separate from the main company, using their own ERP systems. Since these smaller companies processes and workflows are not tied to main company’s processes and workflows, they can respond to local business requirements in multiple locations.
ERP software saves time and expense by integrating infinite number of business processes. Management can make decisions faster with high accuracy, thus paving way for improvement in all aspects.