Monday, November 24, 2008

ERP Helps Enable a Successful Business

Rising costs and a troubled economy have caused cost reduction to be the top business driver behind most technology initiatives today. In their report “2008 ERP in Manufacturing”, Aberdeen Research found that the pressure to reduce costs has surpassed both growth and customer service as the main business driver of ERP strategies. Not only are production costs rising, but the cost of quality, the cost of transportation and the cost of energy are becoming more and more challenging to the bottom line.

An ERP system that is properly matched to the needs of the company and utilized as an overall part of the business processes is able to serve as a business enabler to provide the visibility needed to control costs and enhance customer service. It does so by providing a framework for standardized business processes utilizing best practice concepts and allows coordination between different business functions. Some of the key benefits of a successfully utilized ERP system include:
  • Better visibility to business processes across multiple functions and departments
  • Improved customer responsiveness
  • Reduction of inventory and improved inventory accuracy
  • Reductions of administrative and manufacturing operational costs
  • Improved manufacturing schedule compliance and complete on-time delivery
  • Reduced customer lead time and improved quality performance.

Metrics to be used to measure success in an ERP environment include:

  • Inventory Days Supply – number of days inventory based on projected usage.
  • Manufacturing Schedule Compliance – percentage of work that is completed on time per the manufacturing schedule
  • Complete and On-time Shipments – orders shipped complete and on-time per the customer’s requested date
  • Order Cycle Times – various cycle times can be measured, but the customer order date to the delivery date cycle measures the time from a customer point of view
  • The Bottom Line – The most important measure! As cost performance improves, so will the bottom line.

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