How exactly do ERP systems save manufacturers money?

Genius ERP: ready out-of-the-box for custom manufacturing.

You hire, buy equipment and expand operations in the single goal of generating a return. An ERP system is implemented for the same end result. However, instead of expansion to achieve growth, with an ERP system growth comes out of what you already have in place. In a nutshell, ERPs save manufacturers money. But in what ways exactly? 

Here are five common places savings can be found.

Inventory costs

Inventory carrying cost is a blocker in any value chain. The solution: get as lean on inventory as possible for your type of manufacturing. By trimming down, companies free up capital and reduce the likelihood of damaging parts and components or seeing certain pieces go obsolete or unused on shelves.

An ERP system can accurately forecast inventory requirements, and modern ERPs for custom manufacturers can determine what's needed as early as the estimation phase. With real-time insight for WIP and upcoming projects, inventory purchasing can more easily transition from over-purchasing, to purchasing according to the specific lead and delivery times of the materials you need, with the option to batch these purchases.

Another benefit is the ability to accurately report on wastage and returns, as well as providing a reliable valuation of the stock position at any given time.

Operational costs

There are a couple of ways that ERPs save money for manufacturers on operational costs. For one, because ERPs are comprehensive systems, they eliminate the need for separate software in each department. This saves money in terms of data reentry (which can be costly), error reduction and the recurring costs of licenses, updates and training on software.

Another example of where ERPs generate savings is in the engineering or design phases of a project. Considering the cost of qualified workers needed to execute these essential steps in engineer-to-order environments, any measure to keep these personnel on high-level tasks (like actual design) translates into substantial savings. For example, Genius ERP has functions like CAD2BOM, which handles the data entry in BOM creation.

Furthermore, with all data in one place, there is greater fluidity in production and response to client demands. These minutes add up to hours, which add up to days and weeks at the end of the year. For instance, just being able to give a customer the information they need on an order immediately instead of having to say ‘let me get back to you’ and then inquiring on things with another manager in another department save time and money at each turn.

Real-time data

It’s not just about what you know, but when you know it. Having real-time data means being able to shift course midstream to avoid what would otherwise be costly errors in production. Instead of dealing with mistakes after they have been made, mistakes can be dealt with pre-emptively. Furthermore, project tracking systematically helps to define the costs of each step of production, and helps manufacturers optimize operations and address underperformance.

And the other benefit of real-time data is a reduction in slowdowns during the routing and execution of projects. A lot of time is lost in back-and-forth conversations and information sharing during production, when instead an ERP system can act as a live dashboard that anyone on the shop-floor can consult. 

Tax-friendly functionalities

An ERP system helps with life’s second-most widely pronounced inevitability: taxes. With financial information consolidated into one central place, ERP systems actively track every dollar your company spends and earns. These records are not only available, but also easily accessible any time into the future.

By simplifying this type of expense and income tracking, manufacturers will more easily avoid costly accounting errors.

Manufacturing IQ

Your best guys and gals know manufacturing like a science, but it is hard to find talent that’s able to replace them. An ERP system lowers the level of specialization required to execute on complicated manufacturing, and helps to share the knowledge and expertise needed to move production across the entire shop. Over the long run, this can save companies quite a bit on hiring costs while ensuring that even the newest of workers can meaningfully contribute to project execution.

And not only do ERPs save you money, they help you make more money as well

All the points above show how ERPs save money. The other side of an ERP system is how it will help you to generate more money over time. With the right system in place, you can more easily define the practical steps you should take for growth. You'll have the right foundation for scaling up in place.

Michael Connors

Michael writes on manufacturing, technology and current affairs for Genius Solutions in the role of content strategist. He studied journalism and worked in both news and PR before joining the company in 2017.

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