Benefits of ERP (Enterprise Resource Planning)

The reason ERP packages are called integrated is the automatic data up gradation between related business components.
In the case of ERP packages the data of related business functions is also automatically updated at the time a transaction occurs. with this reason, managers at different roles and designations are able to grasp business details in real time, and carry out various types of management decisions in a timely manner and with more accurately based on this information.

2. Flexibility

Diverse multi functional environments such as language, currency, accounting standards and so on are covered in one system and functions that comprehensively managed multiple locations of company branches can be implemented automatically. To cope with company globalization and system unification, this flexibility is essential, for development and maintenance, but also in terms of management.

3. Better Analysis and Planning Capabilities

By enabling the comprehensive and unified management of related business and its data, it becomes possible to fully utilize many types of decision support systems and stimulation systems. It becomes possible to carry out flexibility and in real time the feeling and analysis of data from a variety of dimensions, decision makers able to the information what ever they want in time, thus enabling them to make better and informed decisions.

The ERP vendors were very quick to realize that in order to grow and to sustain that growth: they have to implement the latest developments in the field of information technology. So they quickly adopted their systems to take advantages of the latest technologies like open systems, client server technology, internet/ intranet, computer aided acquisition and logistics support, electronic commerce etc. It is this quick adaptation to the latest changes in information technology that makes the flexible adaptation to changes
to future business environments possible. It is this flexibility that makes the incorporation of the latest technology possible during the system customization, maintenance and expansion phases.

5. Reduced Inventory and Inventory Carrying Cost

ERP system allows customers to obtain information on cost, revenues and margins, which allow it to better, manage its overall material cost structure and lead to inventory reductions to the order of 20 per cent or better.
This provides not only a one time reduction in assets (cost of the material stocked), but also provides ongoing savings of the inventory carrying costs, costs of warehousing, handling, obsolescence, insurance, taxes, damage and shrinkage.

6. Reduced Manpower cost

Improved manufacturing practices lead to fever shortages and interruptions and to less rework and overtime allows 10 per cent reduction in direct and indirect labor costs. By minimizing rush jobs and parts shortages, less time is needed for expediting, material handling, extra setups, disruptions and tracking splits lots odd jobs that have been set aside. Production supervisors have better visibility of required work and can adjust capacity or loads to meet schedules. Supervisors have more time for managing, directing and training people.

7. Reduced Material Costs

Improves procurement practices lead to better vendor negotiations for prices, typically resulting in cost reductions of 5 per cent or better. Valid schedules permit purchasing people to focus on vendor negotiations and quality improvements rather than spending their time on shortages and getting material at premium prices. ERP systems provide negotiation information, such as projected material requirements by commodity group and vendor performance statistics. Giving suppliers better visibility of future requirements help them achieve efficiencies that can be passed on as lower material costs.

8. Improves Sales and Customer Service

Sales people can focus on selling instead of verifying or apologizing for late deliveries. In custom product environment, configurations can be quickly identified and prices, often by sales personnel or even the customer rather than the technical staff. Taken together, these improvements in customer service can lead to fewer lost sales and actual increase in sales, typically 10 per cent or more. Corrective actions can be taken early such as determining shipment priorities, notifying customers of changes to promise delivery dates, or altering production schedules to satisfy demand.

Improves collection procedures can reduce the number of days of outstanding receivables, thereby providing additional available cash. Credit checking during order entry and improved handling of customer inquires further reduces the number of problem accounts. Improved credit management and receivable practices typically reduce the days of outstanding receivables by 18 per cent or better. Trade credit can also be maximized by taking advantage by supplier discounts and cash planning, and paying only those invoices with matching recipients. This can lead to lower requirements for cash-on- hand.