Benefits of Using an ERP System (part 2)

The advantage of using an ERP system in detail we try to explain in detail, these benefits are just a small example and are also influenced by the process of each company as well as each industry may have differences.

1. Savings (Direct Saving Cost)

The advantage of using an ERP system that is most frequently debated is the part of how to calculate the savings / efficiency gained after using this system compared to before. It is very important for us to be able to try to calculate the value obtained from efficiency so that the return of the system investment can be estimated at the beginning of the project.

some examples of the efficiency of using an integrated ERP system as follows:

a. The value of inventory or stock becomes lower, the system can provide more accurate and fast stock information. Thus the stock level can be better managed, if previously we prefer to accumulate goods in case if production wants or customer demand rises we do not lose sales. With a stock value that suits your needs, there will be savings from the financial side which is usually used to buy excess stock of goods. This savings can also increase cash because of getting interest, or reduce the interest costs of bank funds that we usually use to buy stock. Another thing that is obtained from decreasing stock levels, we also save the cost of storage warehouses so that warehouse operations can be more efficient, as well as avoiding goods being expired (expired) for certain goods because of too long storage.

b. Cash Flow Efficiency, with an ERP cash flow system can be better, so that we can manage inflow and cash outflow. Like monitoring accounts receivable by increasing the level of bills (collectibility) from before which is always 10 days late on schedule (Payment Terms) faster, with once we get funds to buy goods or get interest from funds that have been held by the customer. If we use bank funds, we can also save loan interest very significantly.

c. Save operational costs, by using our ERP system can certainly save operational costs as in the previous example, save on the cost of storing goods / warehouses, save on interest costs for funds we borrow from banks, and last but not least by getting the effectiveness of the processes in the system then will also result in savings in terms of labor costs, for example, which has been taking more time (Overtime) to be faster so that it can reduce overtime costs.

d. Reducing communication costs (Reduce Communication Cost), in industries or companies that have separate locations will be greatly helped by an integrated system. This is very helpful in consolidating data between branches, so that the cost of communication coordination and data collection time becomes faster.

e. Increase revenue (Increase Revenue), this is often considered not a direct result of the benefits of using an ERP system. With more accurate and faster information, we can better estimate the needs of goods for customers and react more quickly to changes. This will result in increased revenue, in addition to increased revenue because we can minimize the potential sales that have been lost ( loss of potential sales ) because demand can not be served due to the unavailability of goods.

Once again the magnitude of the benefits that can be obtained by using an ERP system is very dependent on the work processes within a company and also can be very different for each industry.

(Continued on the Advantages of Using ERP System Part 3)