The benefits of ERP for manufacturers and distributors

The benefits of ERP for manufacturers and distributors

There are a number of challenges that are keeping manufacturers and distributors awake at night. The pandemic, global trade wars, new regulations and new technology are some of the uncontrollable forces that are driving fundamental changes in the industry. While businesses figure out how to navigate these external shifts, there is still the need to resolve a number of fundamental internal pain points that have been around for the last decade. The most critical of these being the reliance on manual or paper-based processes and the disparate and aging management systems.

IDC predicts that to address these challenges, global spending on digital transformation technologies and services will grow 10.4% to $1.3 trillion in the next year. In a recent SYSPRO study around the role of the CFO in a post pandemic future, over 52 percent of CFOs identified the investment in enterprise technology such as ERP, BI, and CRM, as a key strategic focus area to address the challenges presented by these recent industry disruptions.

While the stats reveal that there is an increase in the adoption of technologies such as an ERP, many may still believe that implementation is complex, and success is hard to measure.

For a successful ERP implementation, it is crucial to identify pain points within your organization, understand how the implementation will improve your customers’ experience and clearly articulate how you will measure success. To enable this, it’s vital to understand what ERP is, what it is not, and its key benefits.

What is ERP?

In short, ERP systems standardize, automate and integrate core business processes. Standardizing business processes allows an organization to consistently do things the same way and easily identify a problem if it occurs. The automation of business processes reduces human effort and consequently error, while improving operational efficiency and productivity. By integrating disparate business processes, ERP simplifies data and information transfer across the organization, ensuring coherent information in all systems while also avoiding duplication of effort. Simply put, the ERP becomes the heart of a business.

With a broad understanding of the function of an ERP solution, it is also important to break down some of its benefits for business:

ERP offers a single source of truth

As the single source of truth, ERP allows businesses to operate with real-time data. Leadership can therefore make decisions consensually as they share the same data and insights. The business can also automate tasks, while eliminating the tracking of operations via spreadsheets, which in turn can drastically reduce manual errors, duplication of work and free up employees’ time so that they can focus on more important tasks. The ERP platform can also connect to Internet of Things (IoT) devices to collect live data to assist in closely monitoring critical processes and quality. Having a shared, single source of information ultimately provides manufacturers with a complete and detailed view of their sales forecasts, incoming raw materials to meet those forecasts, operations and progress of orders through the factory, distribution of orders to customers, cash position and account status for suppliers and customers, etc.  All the key information required to make the business a success is available in one place with an ERP.

ERP allows for comprehensive compliance as well as traceability

Globally, manufacturers and distributors need to comply with many regulations to ensure a safe working environment, product traceability and adherence to regulatory reporting.

From defense contracting through to food and beverage production, manufacturers require granular traceability of product details such as supplier and material sources, material changes, and customer deliveries of specific batches, as well as the ability to audit all transactions. To fulfill these requirements ERPs collect and organize data seamlessly across the organization.

For example, as more countries transition to electronic tax submissions, ERP easily supports digital tax returns and has the ability to separate and combine related tax data for enhanced tracking and monitoring of tax receipts and submissions. From a traceability perspective, a product recall system allows manufacturers to perform a full product recall quickly and efficiently by having instant access to all the critical information needed to track a suspect product, throughout the value chain. It supplies the necessary information to identify, isolate and take action within the predetermined recall time limit.

ERP offers accurate forecasts

With businesses increasingly shifting routes to market to remain competitive, having accurate and real-time visibility into inventory levels is vital to improve profitability and manage cashflow. The ERP system supports this and allows businesses to analyze forecasted demand, accurately predict production targets and meet demand levels. A strong point of any ERP is the ability to automate the processes of balancing material supply and product demand. This helps manufacturers and distributors optimize their ordering processes, take advantage of economic order quantities and batching so that they realize economies of scale.

Keep your ERP objectives top of mind

While change is inevitable, an ERP system can not only assist businesses to weather the storm but to succeed in adversity – as long as key objectives stay top of mind. It is important to select an ERP provider that understands your unique industry needs and can act as a trusted advisor to your organization. When implementing your ERP system, establish clear expectations and KPIs, define roles and responsibilities, and ensure that these are carefully measured and discussed. It is also vital to ensure there is sufficient executive sponsorship and involvement in the process of selecting and implementing the ERP so that the organization adopts it fully. In the absence of executive involvement, your ERP project implementation will probably suffer. Having a senior leader guide and understand the process helps to improve decision making and avoid unnecessary delays.

By getting these fundamental elements in place right at the start of the journey, a business can reap the benefits of an ERP and achieve the desired ROI from the investment. You can learn more about common myths and truths of ERP implementation in this on-demand webinar to make sure yours succeeds.