Implementing a new ERP
or
Best of Breed solution is a great way to reduce costs
and to improve plant efficiency.
If you are looking for ways to optimize your business operations
and to cut those crucial costs
especially in today’s business landscape.
Then you are in the right place to read this article.
I am P.K. Saxena
and
I am CTO in Sofcon Systems India Pvt. Ltd.
Sofcon Systems is an Automation Solution Provider Company
and
it is located in NOIDA since more than 27+ years.
I will be taking you through this interesting journey
and
my guide will be Kyler Cheatham.
Kyler is Global Marketing Director in Third Stage Consulting Group.
They are a global technology agnostic and independent advisory firm
that helps their clients reach the third stage of their Digital Transformation.
I intend to explore in this article the role of ERP
or
Best of Breed Solutions in reducing those important business costs.
In fact Enterprise Resource Planning systems
or
ERP systems are equipped with
many powerful tools.
These tools can help businesses streamline their important processes.
Also they can help in improving plant efficiency.
And in turn they can help in ultimately saving money.
So let us start our journey
by finding the answer of our first basic query
“What is ERP?”
Understanding ERP and its Benefits
So before we do a deeper dive into how ERP systems can reduce business costs,
we should explore.
What is ERP?
And
What are its benefits?
So what is ERP?
ERP is an Integrated Software System.
It centralizes and automates various business processes across the business
and across different departments such as
Finance /
Human Resources /
Supply Chain Management /
Customer Relationship Management and much more.
Another huge benefit of an ERP system is that it streamlines process.
ERP eliminates redundancy in tasks and in data entry by integrating processes.
As well as it leads to Greater Operational Efficiency.
Another huge benefit of an ERP system is that
it enhances Data Management
and
it enhances Data Visibility.
In fact an ERP solution provides Real Time Data
and
it provides Data Analytics.
Moreover it enables the business to make those Data Driven Decisions.
As well as it identifies areas of any Cost Saving Improvements
or
Efficiency Opportunities.
Cost Reducing Aspect of ERP
So now that we have learnt
what ERP is and what its some of the benefits are.
Then let us really dive into some of those direct cost savings
that contribute to reducing the business costs.
Inventory Management
One of the first in the list is Inventory Management.
ERP systems optimize inventory Levels by providing accurate Demand Forecasts.
Also inventory tracking helps in preventing any sort of overstocking
or stock outage.
Further this helps in reducing any carrying costs
that might not be moving out of your Warehouse.
Supply Chain Management
The second one in the list is Supply Chain Management /
and
Procurement Activity.
Indeed ERP really streamlines the Procurement Process.
For example
it allows businesses to negotiate better deals for suppliers.
In order to consolidate those purchases
and
to take advantage of bulk discounts.
This is one area that we really see as a main cost savings for ERP systems.
Because it allows customers to lean out their business cost
and
really understand
where their raw materials are coming from.
Moreover it also diversifies their Supply Chain Management system.
So if there is any issue with getting raw materials
or
specific Goods
that they need to produce their product.
Then they have that inventory portfolio in which
they can go to another supplier
and get that cost savings realized.
Financial Management
Another huge cost savings that we see is in Financial Management.
An ERP system or a Best of Breed Finance system can really automate Financial Processes that are involved in things like
Invoicing /
Accounts Payable / and
Expense Management.
This efficiency really reduces the time
and
effort spent on those manual tasks
specifically within the Financial Departments of your organization.
Resource Optimization
Further Resource Optimization is another huge cost-saving area.
An ERP system helps in effective resource allocation
by analyzing that data on
Employees Performance /
Machine Utilization /
Production /
Output Loading /
and
Cost efficiency operations.
It gives you the opportunity to not discipline
but to coach the employee on more
efficient work production.
Or
To move employees in areas where they might Excel throughout the organization.
Complexity Reduction
Another area which we have found that ERP systems really help those cost
savings is reducing its complexity.
An ERP system replaces multiple Standalone systems with a single integrated
platform.
This really cuts down on its Maintenance
and
Software Licensing costs.
Case Studies
Examples of ERP Cost Savings
Let us take a look at some real world case studies and examples.
These examples demonstrate how ERP implementation has successfully reduced
business cost.
So let us take a company and we name them as Company A.
For example after implementing an ERP, Company A reduced its inventory
carrying costs by 20% through optimized stock levels.
As well as through those improved demand forecasting.
Now let us look at Company B.
Company B also streamlined is production process with ERP.
But it resulted in a 15% reduction in production cycle times and correspondingly
decrease in labor cost.
Further let us look at Company C.
Company C streamlines its operations by centralizing its financial data and
automating invoice and
payment processes.
Hence company C is able to reduce its accounts payable processing cost by 30%.
Please note that these results do not mean that it is exactly what you will get for
your company.
But it helps us in understanding those cost savings areas where we are looking at
resource’s time efficiencies and
overall costs of manual tasks.
In fact you really have an opportunity to operate your organization through a
centralized ERP system to reduce business cost.
Tips for Successful ERP Implementations
ERP systems offer significant cost savings.
However potential successful implementation remains a key Subject.
Or
You will not be able to realize its key business value which we highlighted with
examples of Company A, B
and C.
Hence I am going to walk you through some tips for a smooth ERP
implementation in this journey.
Let me move this discussion further and state that each organization is different.
So when you go into ERP implementation planning phase in your organization.
Then in order to create a straight ERP implementation plan,
you really need to have awareness of following two questions.
Q1-What are your needs?
And
Q2-What are your goals as a business entity?
So let us go through some high level tips
that you can use for every ERP implementation
in order to optimize your project for Success.
First Tip
The first one which we discussed in introduction part of this article was that
you should clearly define your objectives.
Hence you need to set clear and measurable goals for the ERP implementation
that focus on cost savings areas.
Further you should plan to have a discussion of whether you want to save costs
or create efficiencies within your organization.
Indeed having that alignment in the beginning of the project planning
or
the implementation planning is going to ensure that everyone is marching to the same beat.
However when everyone is looking at ways to optimize your project.
It also gives you measurable goals post goal live and after those key metrics are implemented.
Basically the aim is to ensure that your Digital Transformation is a journey not just one destination.
Second Tip
My second tip is really choosing the right ERP system.
Select an ERP system that truly aligns with the needs of your organization.
As well as it offers modules to address those specific cost savings requirements.
You cannot judge how many times we have seen a business within an evaluation
process that their project is either being shelved.
Or
their Software vendor is trying to push them into a Cloud solution.
Generally most of the Software vendors are trying to make more money out of that.
What you should to do is really to identify your needs as a business.
Also look at those goals and objectives through cost savings.
And understand and evaluate which software makes sense for you.
If you have more questions about software selection then you can go through
software selection guide book whose link is given below.
Third Tip
Specifically the next tip I have for you is —
You should involve key stakeholders.
As well as you should engage employees,
department heads and
management people.
Because you have to ensure their cooperation in order to take help from all these
people in the implementation process as I mentioned earlier.
This alignment is going to be critical to ensure you have a smooth
implementation.
Fourth Tip
My last tip is to plan a thorough user adoption strategies.
Generally it is something that a lot of organizations overlooked.
Because this is not just training.
It is planning of how you ensure that your employees are actually having a
positive experience with your technology.
So you want to provide that comprehensive training to employees to maximize
the benefits of the ERP system.
In fact that it is considered a new cost saving feature.
Further you need to ensure to have an effective communication plan with all
connected people.
Also you should offer a feedback cycle for your employees
so that they really feel engaged with this decision throughout the business.
Take Away
In short ERP systems are more than just business management software.
They are powerful allies in the quest to reduce business cost
and drive efficiencies by streamlining Processes /
Enhancing Metadata Visibility /
and Optimizing Resources.
ERP systems empower businesses to make informed decisions
and to improve their bottom up.
If you found this information helpful
then please give us a feedback
and share with your colleagues who might benefit from this.
Please also do not forget to comment below
and share your thoughts
and experience about ERP implementation
specifically when it comes to cost savings.
As I mentioned in the beginning of this article.
I also highly recommend to download Third Stage Firm’s 2024 Digital
Transformation report which can be found in the link below.
Here at Sofcon Systems our team helps you to plan your ERP implementation by
giving Technology agnostic advice.
Please do not get your ERP implementation planning done from an SI
or
a Software vendor as their agendas might be different from your business goals.
If you have questions about a custom implementation plan
then please feel free to reach out to me directly at pk.saxena@sofcononline.com.
Or
Please contact me at my WhatsApp No. +91.9810637873.
Digital Prabhat
Resources:
2024 DIGITAL TRANSFORMATION REPORT:
SUPPLY CHAIN MANAGEMENT PLAYBOOK:
