In the download of the latest “2008 ERP in Manufacturing Benchmark Report” from the Aberdeen Group , the responses of over 1200 manufacturers are reflected.  Below we see an overview of the three major types of ERP End-User Companies: Best in Class, Average, and the Laggards (the ones that are not keeping up with latest software releases and/or technology).

Let’s look at a few of these items:

Using ERP to track costs is like using the seat belt in your car.  It’s a tedious thing that we have to remember to do, but if we ignore the tools, we are destined to fail.

If we just take the set of figures from the Average companies in the Benchmark Report, we can see a 12% reduction in Inventory, a 9% drop in operational costs, and a 10% reduction in administrative costs.  If a company is carrying a million dollars in inventory costs, wouldn’t a 12% decrease be a welcome sight?

Effectively running an ERP solution doesn’t just reflect in Inventory.  Since ERP touches so many aspects of the overall business, cost reductions can be seen across the board including administrative costs.  People spending less time on unneeded tasks – time better spent on things more important to the overall business.

IMPROVED OPERATIONAL EFFICIENCY

Using ERP will, by its nature, provide improved operational efficiency.  The most important step is, of course, setup.  Knowing the business and its processes will help to get the initial setup started; then seeing how to refine the processes for better efficiency is easier to do.

An analysis of a process using the information from ERP may look something like this: If Product A is currently being produced using 15 steps that take x amount of time, can the time or steps be reduced in order to save on costs – without sacrificing quality?

According to the Aberdeen Group study, improvements in manufacturing range from 5% to 18%.  That can translate into savings “down the line” with shipments.  Improve the manufacturing schedule and a better shipping schedule can be maintained.  I can’t tell you how many times I’ve loaded trucks at the end of the month because of poor manufacturing schedules at the beginning of the month.

Of course, it’s not always manufacturing that’s to blame.  There are a lot of ways to reduce your costs by using ERP the way it is designed.  For instance, constantly shipping backorders for the same order begs the question: Why?  Is it an inventory issue or a case of someone sending only a partial order because the parts are late from the vendor?  My favorite (not) scenario is the one where the parts are in-house, but still sitting on the loading dock because no one remembered to do receiving that morning; therefore, the ERP system said we were out.

Just starting out with “Why” can net numerous answers on how to make things run smoothly; and running smoothly usually equates to savings in time and money.