According to the Council of Supply Chain Management Professionals, the cost of US business logistics is over one trillion dollars a year. That is seven percent of the United States GDP, which is larger than the entire GDP of Mexico. The financial health of the U.S. economy and your business depends on networks of smoothly running supply chains. One of the best ways of how to improve your supply chain strategy is through utilizing ERP (Enterprise Resource Planning) software. Below are the different ways that ERP software can increase your business profits and efficiency while reducing costs and wastes.
1. Automatic Purchasing
Continually monitoring inventory levels takes up too much time. Newer ERP systems with Supply Chain Management (SCM) functionality feature automated purchasing. This means that the ERP software can be programmed to automatically place orders with vendors when inventory levels drop below a certain level. A critical part of any supply chain strategy is being able to preemptively maintain inventory levels. Automatic purchasing will free up employees to concentrate on other important duties.
Process standardization is central to the success of any supply chain strategy. Having a standardized ERP system will increase efficiency while saving time and money. Another benefit is that employees will share a standardized system of tools, which will increase accuracy, encourage teamwork and reduce miscommunication.
3. Increase Transparency
Waste, mistakes and even fraud are permanent supply chain strategy problems that can be fixed with the right ERP system. One of the biggest problems of inventory management is reconciling the software numbers with a physical inventory count. There are always products or units that are forgotten about or simply disappear. Increasing internal SCM transparency is critical to reducing unexplained inventory and financial losses.
4. Gain Data Insight
Decision making for your supply chain strategy depends on accurate and timely data and information. Having real-time reports available at all times will provide valuable insight into the supply chain health of your manufacturing business. ERP software allows both users and management to be able to instantly access inventory, purchasing and production data for critical decision-making purposes.
5. Real-Time Inventory Management
Traditional inventory management involves the overuse of spreadsheets and hand checked lists. However, modern ERP software offers inventory features that provide real-time visibility of exact inventory levels. In addition to this, traditional inventory management software has limited scalability, while modern ERP software has unlimited flexibility that will match your businesses’ growth and unique needs.
6. Monitor Vendor Performance
A smoothly running supply chain system depends on outstanding vendor performance. Therefore, vendor performance needs to be monitored and rated through robust metrics available through ERP systems. With a few clicks of a mouse, management can review vendor cycle times and error rates. This data is invaluable during vendor re-negotiations.
7. Raise Cost Awareness
There are many uncontrollable factors and variables with supply chain management. As a result, different managers along the supply chain often are unaware of each other’s expenses. Having centralized financial data pinpoints exactly when and where the organization spends money. This will encourage cost related communication and strategies for consolidating expenses and streamlining processes.
8. Improve Returns Management
Every solid supply chain strategy needs an efficient returns management system. Manufacturers must be able to effectively handle returns so they can quickly re-process or re-manufacture returned products or units. Many manufactures understandably focus on continually moving new products out the door and therefore, returns often fail to get the attention they deserve. Being able to better manage returns will reduce waste and identify consistent product problem factors.
9. Just-in-time (JIT)
ERP systems naturally work well with both just-in-time manufacturing and JIT Inventory Management to decrease inventory costs and increase inventory turn around. As a result, there will be less overhead costs and order fulfillment communication mistakes. Operate at the optimal inventory levels and reduce warehouse costs.
10. Streamline Accounting
ERP systems are often integrated with different business areas, such as HR, management and finances. An ERP system will reduce excessive paperwork and invoice mix-ups. In addition to this, ERP systems are integrated with Electronic Data Interchange (EDI) and Electronic Funds Transfers (EFT), which will drastically reduce payment processing administration and associated wait times.