Some background before we begin
I work with all sorts of companies and many of them already use an ERP, but many more do not and are evaluating solutions. You may think a lot of my conversations revolve around the software itself, explaining its functionality, the technology, how it’s licensed, etc. While I do have many detailed conversations about those things, most of my discussions center on what challenges businesses are having and how an ERP might benefit them. There are all sorts of reasons to implement and use an ERP, which vary from company to company. But one of the main benefits of ERP that is close to being universal for all companies is being able to control overhead costs.
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Grow without adding admin overhead
All companies—especially manufacturing companies—consistently look for ways to become more efficient. Improved efficiency is based on finding better ways to perform processes, whether that is how the product is actually made, or the procedures employees follow to make that product on a day-to-day basis. It is common for companies to buy new machinery or equipment in an attempt to manufacture their product more efficiently, which makes sense because the return on this investment is usually pretty easy to see. For example, if I make 4 widgets per hour with my current equipment, but can get 12 widgets per hour made with the new equipment, the benefit is obvious. Take the cost of the equipment and the cost to get it up and running, and it’s clear when the investment pays off.
People and the procedures they follow are a little more difficult to calculate because this is not as finite as a manufacturing process. But a company usually wants to know more about an ERP system and its benefits because they can’t continue to “throw people at a problem”. For example, a company might be getting numerous sales orders, but the order entry process is manual; so, if demand increases, they have to hire another order entry person. This can continue for a while, but eventually the company will come to the conclusion that if they had a more efficient way of entering orders (like a modern ERP), they would not have to hire another person and increase overhead costs with an additional salary, benefits, etc. Sales order entry is just one area where an ERP can save on admin costs, but an ERP touches almost every facet of a business. Manufacturing companies perform a variety of tasks based on processes and if you automate all of those processes with an ERP, you are operating more efficiently without adding more overhead.
Related: The Incomplete List of ERP Benefits & Advantages
In conclusion
Implementing ERP software can be a monumental turning point for a company because it enables visibility where there was none before and unleashes efficiency where there were bottlenecks. Overhead is a large expense for every company and if you don’t manage it well, it can disrupt the business. The benefit of ERP is it will help get the processes correct and support those processes, so you can avoid adding overhead while unleashing the growth so many companies strive for.
If you want to know more about ERP systems and their benefits, how about talking to an expert who is not a sales person? Click here to sign up for a free phone consultation with Visual South President, Jack Shannon.
