Wednesday, October 28, 2009

Advantages of ERP

1.Faster inventory turnover
Without ERP, a business may turn over its inventory once or twice a year With ERP to automate processes such as production planning and procurement, many manufacturers and distributors increase inventory turns by tenfold and reduce inventory costs by 10% to 40%. The result is significant reduction in inventory expense, as well as associated transportation, storage and warehousing costs. This, in turn, leads to better cash flow.

2. Improved customer service
To remain competitive, manufacturers are looking to improve their customer-order fulfillment rates. In many cases, an ERP system can increase fill rates to 80% or 90% by providing the information that allows the company to have the right product in the right place at the right time. The result is higher customer satisfaction and retention. Although it’s hard to put a price on lost business, customers will take their business elsewhere if the products they want are not available when they need them.

3.Better inventory accuracy, fewer audits
Some manufacturers physically count inventory each month-in some cases, each weekend often have an inventory accuracy rate as low as 20%. An ERP system can increase inventory accuracy to more than 90%, while reducing the need for frequent physical audits. For many, a comprehensive physical inventory is not only costly in itself, but requires a temporary shutdown of business to count, tag and check stock.

4. Reduced setup times

Manufacturers often spend anywhere from one to three shifts setting up major pieces of production machinery. An ERP system can improve setup time by 25% to 80%-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. Optimizing production in this manner translates into increased capacity, which means you can make more products with the same amount of machinery and people, thus increasing revenue and ROI without having to increase capital expenses.

5. Higher quality, less re-work
In some plants, re-work rates, because of unacceptable quality, may fall between 15% and 40% of production output. The production staff may not realize there is a problem until after the product has been manufactured. ERP software with a strong manufacturing component proactively pinpoints quality issues, providing the information needed to increase production efficiency and reduce or eliminate re-work.

6. Timely revenue collection, improved cash flow
Some companies take up to 90 days to collect on customer invoices. An ERP system can automatically generate a list of late paying customers, send notifications as needed, and "redflag" customers whose credit should be put on hold before more products are manufactured or shipped. ERP systems give manufacturers the power to proactively examine accounts receivable before significant problems occur, instead of merely reacting. Timely receivable equates to better cash flow, freeing up funds for the business to invest in revenue generating assets.

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