Reducing Inventory and More through ERP

Even though there is little doubt about the benefits of an ERP systems, these solutions can be a huge investment for a company to make. Therefore, most people would look for a very well reasoned return on investment calculation, before they give the green light. This article is written to help convince corporate to justify the cost of an ERP system.

        The article will go into both actual and impalpable benefits of deploying an ERP system and will give you a good sense of justification for the cost incurred. 

Inventory Reduction        

         In a typical successful ERP system in a production company, a 20 percent inventory reduction becomes a common benchmark for most to accomplished.This is not only a one time savings of 20 percent of inventory cost, but there is a recurring element to it as well, especially in lower warehouse costs, handling, transportation, and reduced damage and obsolescence, and more. Together, these can contribute another 5-10 percent to inventory related savings. In conclusion, the overall savings in inventory cost can be attributed through management of product alone, resulting in at least 30 percent of the total inventory by your company.

        There are more benefits than just reducing inventory and its carrying cost. The ERP system also ensures that only product that is useful is regularly stocked. Reducing inventory on items that don’t sell. Since inventory would only be acquired based on actual requirements, a buildup of obsolete material would be prevented and there would be fewer shortages of parts. An implementation of such a method would ensure that manufacturing is leaner and funds are distributed to other operations that could use it.

Reduction In Material Costs 

         ERP systems can lead to improved procurement practices. Company forecasting will improve, and your company will be able to place orders well in time and avoid emergency, last minute, purchases. Which will result in better price negotiations with new or existing vendors. You will be able to leverage with vendors based on forecast demands, where they you both could gain from the partnership through cost saving arrangements. Better demand forecasting allows your purchasing department can obtain better terms from your vendors and could possible meet a 5 percent reduction in your overall purchasing cost. 

Lower Labor Costs 

         With manufacturing practices improving with your ERP, your working schedule will run smoother with fewer outages and interruptions. This can translate to a reduction in rework and reduced overtime pay for similar amount of production. Improved forecasting demand with an improved workflow also means that you have a reduced number of rushes demanding additional time from your already busy schedule. This reduces the requirements to re-set up manufacturing machines and tools, resulting in a throughput in your factory. All of these factors add up to lowering production costs and better quality. Utilizing your ERP system successfully can lower direct and indirect costs by as much as 10 percent, by reducing overtime and rework and speeding up the flow of work in the shop. 

Improving Sales and Customer Satisfaction 

         Another area in which an ERP system can improve practices within sales and customer service departments. With better coordination and company streamlining of products, can lead to improvement in sales. The lead time to ship orders reduces and new customer requirements can be priced and produced much more quickly. In many cases, customers are themselves able to interact with the ERP system to figure out costs and specifications directly without having to go through sales representatives.

        Making the entire production system more agile is just another result of a well implemented ERP solution. This kind of system allows customers to alter their demands fairly late into the production cycle. This improves customer loyalty and brings about a better working environment. Your customers are able to have more control on delivery dates with more accurate precision.

        These factors add up to better customer service resulting in improving customer relations and retention. The company running a well oiled ERP will see fewer sales, increase overall sales, and improve customer satisfaction. 

Impalpable Improvements Due to ERP 

         Besides the fairly easily measurable improvements in efficiencies and production and cash flows, there are many improvements that are more impalpable in nature, but are equally important to the company. These are also important considerations when you decide to go for an ERP system implementation. Many of these impalpable improvements are critical to the future success of the company. 

Design and Production Process Improvements 

         ERP systems utilize a common database that runs through the factory floor, as well as through the design department. The ERP system allows far better control over the design and production process. This allows any planned changes to product specification are in well control and do not allow inconsistencies in design. In last minute changes, the communication of such a change is relayed to all departments involved with the design. This results in greater stability and agility of the manufacturing process and allows for a faster response time.

        In many cases, the ERP itself can incorporate the design and engineering rules that support or deny configuration changes. This results in customers, or sales representatives, seeing first hand which changes are possible, and which are not. New cost estimates can be calculate quicker and at a moments notice.

Management Information System Function Improvements 

         An ERP system is implemented as a composite software package and this has a number of benefits when it comes to management information systems. The MIS is no longer required to collate information from different data sources and is able to offer an instantaneous view into the company’s basic fundamentals. The management information system staff is able to service user needs better as a result of the new integration.

E3.Series Electrical Data Management

E3.EDM is the data and process management solution for E3.Series. It natively manages E3.Series engineering project data and libraries, as well as the E3.Series engineering workflow. Key areas include: 

• It is designed to support native E3.Series data model and directly supports E3.Series data objects, libraries, and its environment. 

• It uses role-based process and workflow management for support of typical electrical engineering roles such as designers, system architects, library managers, project, and program managers. 

Manage Engineering Data in a Native Environment 

• Change management: The ability to create snapshots of the project, document changes, and roll-back to previous versions when necessary enables users to track and manage changes in project version. 

• Increased transparency: Project managers will benefit from “where used” information on a component level to understand dependencies and design reuse. 

Being able to manage data where it is being created, by a data management application that supports the depth and complexity of design information boosts engineering productivity and enables downstream business benefits that have a direct and measurable impact on cost, quality and time-to-market. 

Benefits from Providing Engineering Disciple Integration       

        Managing the interdependencies between electrical and mechanical design are key requirements. Synchronizing collaboration data among authoring environments has obvious benefits: 

• Every developer works on the most current version of the design, increasing engineering productivity 

• Late changes are expensive and can be avoided, the reliance on physical prototypes is reduced, lowering cost and saving time 

Benefits from Mapping Engineering Process Workflow 

        As each engineering discipline - mechanical, PCB, electrical, software - uses its own specific engineering methodology, the processes in each are different and discipline-specific. Support of the specific electrical engineering processes and the roles and tasks used within this process drives several benefits: 

• Specific requirements of the electrical engineering processes can easily be mapped and configured, reducing the integration and operating costs of the system