The Top 10 Benefits of ERP Systems Explained
The benefits of ERP systems are vast. It can automate manual tasks, helping you to save time, increase efficiencies, and drive competitive advantage. It keeps your business data organized and makes that information available for advanced reporting and analysis. Today, many companies prefer cloud ERP because it offers the benefits of anytime/anywhere access, 24×7 management, and security monitoring.
ERP software, short for “Enterprise Resource Planning”, encompasses inventory and supply chain management, manufacturing, human resources, and multiple other aspects of business operations.
Implementing an ERP system is not as complicated as many people believe it might be. In fact, modern cloud ERP options offer a very rapid return on investment. ERP can benefit companies as small as just a few employees, very large organizations with multiple divisions around the globe, or any size company in between.
Let’s break down how ERP systems work, what the benefits of ERP systems are, and how you can select the right ERP software for your company.
How do ERP systems work?
ERP systems provide a very broad range of business functions, all within one comprehensive application. That means your business data is stored in a single location, giving you a 360-degree view of your business operations.
A good ERP solution will help you organize and manage your business processes by connecting various functions like customer relationship management, supply chain planning, and inventory management, manufacturing, warehouse operations, human resources, and more. There are multiple benefits to this unified approach, including better communication, time savings, efficiency, and improved accuracy. ERP software helps companies eliminate manual processes and increase productivity.
ERP systems are typically used in the following industries:
- Wholesale Distribution companies benefit from supply chain, inventory, and warehouse management capabilities. ERP software connects purchasing, receiving, and order fulfillment in one solution, seamlessly tying together those workflows.
- Manufacturing organizations rely on material requirements planning (MRP), production scheduling and job costing, and other features that drive increased efficiency and profitability.
- eCommerce companies benefit from direct integration between the inventory and sales order fulfillment systems with their ERP software and the web-based eCommerce platforms where customers shop and place their orders.
- Aerospace & Defense companies typically have compliancy. The best ERP solutions offer these industry-specific benefits and more.
- High Tech & Electronics businesses must track serialized components, complex subassemblies, product revisions, and customer installations. ERP software simplifies these kinds of highly sophisticated business operations.
- Automotive Manufacturing companies benefit from streamlined product planning and scheduling based on lean manufacturing principles, machine metrics and high utilization rates, and improved collaboration with suppliers and customers.
What are the benefits of using an ERP system?
ERP system benefits traditionally include:
- Reduced costs: A good ERP system saves money by increasing visibility to the factors that drive your operating costs, by improving efficiencies associated with processing transactions, by identifying opportunities for consolidated volume purchasing, and more. Companies can better manage their labor and operating costs when everything is managed in a single system.
- Increased accuracy: Because an ERP system stores all of your information in a unified database, real-time data flows automatically from each stage of a workflow to the next. When you purchase inventory, for example, the costs are updated automatically throughout your system. You benefit from an accurate valuation of your existing inventory, as well as accurate information about the profitability of each sales order.
- Real-time business intelligence: An ERP system gives you better visibility to your business data. You can see real-time information about profitability, costs, and expenses as they occur. You can easily identify your most profitable customers and products. You can understand how the costs of human resources are impacting your bottom line. Real-time business intelligence yields tremendous benefits because it helps you make better, more informed decisions.
- Elimination of manual processes: Too many businesses waste enormous amounts of time manually entering data into various systems, resulting in duplication of effort. This is not just tedious and time-consuming, – it usually also leads to errors, omissions, and inconsistencies between multiple systems. An ERP system provides a single repository for information, with data flowing seamlessly from one document or process to the next.
- Increased efficiencies: Key benefits of ERP applications include the ability to identify bottlenecks in your business processes and focus on the areas that stand to benefit the most from improved efficiency. A good ERP solution helps your business to do away with repetitive manual tasks, which in turn saves valuable time.
- Improved reporting: A common complaint among business managers is that they simply can’t get the information they need to make good business decisions. One of the first benefits most businesses experience when they implement an ERP system is better reporting. That can include everything from accurate inventory totals to human resource expenses, sales volume for various products or territories, and more. An ERP system gives you better visibility to all of your business functions.
- Better profitability: Unfortunately, too many business executives have limited insight into the factors that drive profitability. An ERP system helps managers zero in on what matters most by identifying which activities are generating the biggest margins. In manufacturing businesses, for example, costing must account for labor and machine time, materials, scrap, and setup time, among other things. A modern ERP system helps business managers to understand all of the factors that drive profitability so that they can focus on the things that have the biggest impact.
- Improved collaboration: Managing business operations effectively requires teamwork. An ERP system enables various members of your organization to do their part effectively and efficiently. Role-based task lists, dashboards, and user-level security mean that each employee using your ERP system will see exactly what they need to see, and no more. If members of your team are working remotely, or if your organization operates out of multiple locations, a cloud ERP solution can be especially beneficial because it offers anytime, anywhere access.
- Data security: The security of your confidential business data is paramount, and improving customer relationships depend on your ability to maintain the privacy of the information they share with you. An ERP system maintains all of your business data in one place, secured by a proven system for safeguarding its confidentiality. A cloud ERP system is an especially good way of maintaining high standards for security because cloud ERP is hosted by data centers that are staffed by experts, monitored 24×7, backed up frequently, and updated routinely with the latest security software.
- Simplified compliance: A modern ERP system includes features that offer built-in compliance. If your company is doing business with European customers, for example, you’ll want an ERP system that facilitates compliance with the EU’s General Data Protection Regulation (GDPR). If you’re an FDA regulated company in the US, you’ll need features that support lot & batch tracking and recall capabilities, among other things. If you’re a government contractor selling to the Department of Defense, an ERP system that meets DoD security standards enables you to easily comply with those requirements. In fact, a cloud ERP system is especially well-suited for companies with the highest security standards.
How do you select the right ERP system?
Selecting the right ERP system is not as daunting as it might seem initially. Here are some of the factors you should consider as you get started in that process:
- Cost and ROI: The cost of ERP systems can vary considerably, – but so can the benefits you reap from them. Look for a system that will deliver high value for the money. ERP software will serve as the central nervous system for your business, so it’s important to weigh the benefits with the initial cost of software and implementation of ERP services.
- Features: Identify the most important requirements for your company and look for software that will benefit your business accordingly. Manufacturing and distribution businesses, for example, often have very specific needs that are driven by their unique business functions. Some ERP vendors offer industry-specific features that enable you to get started quickly and achieve a rapid return on your investment.
- Reputation: There are many different vendors that offer ERP solutions, but their reputations vary widely. Look for companies that have a proven track record of benefits for the businesses that buy and implement their ERP software.
- Security: Make sure that any ERP vendor you’re considering meets the highest standards for information security, and can back that up with industry audits and certifications.
- Scalability: Look for software that can grow as your business expands. Will it accommodate change? Will it handle the volume you hope to achieve as you achieve your growth objectives?
Need help selecting an ERP system?
Very often, the best approach is simply to sit down with the experts and talk about your goals and objectives. What specific benefits of ERP systems are you looking for? What unique challenges is your business facing? How might ERP software help you grow, operate more efficiently, and increase profitability?
If you would like to begin that conversation, please reach out to the experts at Synergy Resources. Our goal is to first understand your business, then identify the right ERP system to fit your needs.