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Five Surprising Ways ERP for Manufacturing Reduces Costs

Published on: Sep 07, 2016

Pay some, receive more; that’s the surprising way in which ERP for manufacturing reduces costs. When you invest in an ERP system, you’ll reap benefits that far outweigh the initial costs. One benefit your manufacturing firm can derive from an ERP system implementation is a reduction in costs.

A study from the Aberdeen Group invited 81 discrete manufacturers to share information about their ERP use and implementation. Some of the questions asked in the study yielded insights into how an ERP system can reduce costs. These five cost reductions may surprise you, but if they intrigue you, it’s time to look into what an ERP system can do for your company.

The Surprising Ways ERP for Manufacturing Reduces Costs

It helps to understand some of the overall benefits of an ERP system before diving into how it can reduce costs. An ERP system improves visibility through real-time data sharing across the company. Reports that may have taken days, weeks, or months to reach your desk from across the company can now be accessed instantly. This real-time data sharing enables business leaders to make swifter decisions, proactively manage business operations, and reduce costs.

ERP for manufacturing helps reduce costs for manufacturers by:

  1. Reduced downtime: Most ERP systems provide an option for automatic alerts. According to the Aberdeen Study, Leaders who used these alerts could receive notification when production halted due to equipment malfunctions. They could then shift operations to another part of the factory or to another facility. Reducing downtime leads to a reduction in costs, wasted time, and more.
  2. Improved efficiencies: The information contained in an ERP system can help you plan your operations more efficiently. If equipment stands idle, it loses money. You can see at a glance which equipment can handle new orders and where you can shift processing. This results in enhanced efficiencies throughout the company.
  3. Better forecasting: With access to past sales history and current ordering trends, you can better forecast inventory levels. This enables you to order just as much as you need without tying up capital in inventory.
  4. Negotiate better rates: The more you can plan ahead, the more leverage you have to negotiate rates with suppliers. When you’re stuck with a rush order, you end up paying premium costs for raw materials. With plenty of lead time, however, you can shop around for the best price or negotiate with your existing supplies. The enhanced supply chain visibility provided by an ERP system enables you to plan ahead, which impacts costs.
  5. Track costs: You can only fix what you can see. When you can track costs across the company, you may be able to spot areas for improvement. You can see where costs are high and where they are acceptable. Greater visibility into all parts of your organization, including costs of materials and labor, can help you find better sources and rates to increase profits.

ERP Systems Benefit Manufacturers in Many Other Ways

An ERP system provides manufacturers with many benefits. To learn of all the exciting benefits your company can gain from an ERP system, download the free whitepaper today from IWI Consulting.

ERP systems such as Sage EM (formerly known as Sage X3) and Sage 300cloud (formerly known as Sage EM) for discrete manufacturers can really make a big impact on decision-making potential. IWI Consulting provides you with expert insights and resources such as the whitepaper from Aberdeen Group so that you can enhance your business decision-making capabilities.

Download ERP in Discrete Manufacturing—It’s not what you have it’s how you use it and start learning from your peers with expert best practices and insights that will help you gain a competitive edge.

IWI Consulting Group helps Canadian businesses and nonprofits find ERP solutions to fit their needs. We work with you to find the best data solutions for your company that can help boost productivity and profitability. Learn more on our website or call us at 1-866-916-3851.