Efficiency
A manufacturing company can use ERP to make its internal processes more efficient. The real-time information flow in these systems simplifies data collection, analysis and reporting, which improves decision-making. ERP streamlines demand planning, inventory restocking and production scheduling functions, reducing the need for maintaining multiple databases and separate reporting systems. Streamlining of various manufacturing functions also reduces the possibility of production delays because management can make adjustments almost in real-time. For example, if there is a bottleneck in a supplier's production facility, management will know about it almost immediately and start making alternative plans, such as ordering from a backup supplier, rescheduling production and assembly operations, and informing customers of potential delays.
Cost Reduction
Cost reduction is a key reason why small and large businesses invest considerable time and money in implementing ERP systems. Efficient processes are the first step in reducing waste and increasing productivity, which usually leads to reduced production costs. Streamlined design processes mean less rework, which also reduces costs. ERP systems improve sales forecasting, which leads to improved inventory management throughout the supply chain. For example, if a parts supplier knows when each one of his customers will need new supplies, he can plan his production shifts to manufacture just enough to fill demand, and he will not have to carry excess inventory or not have enough parts on hand to fill customer demand.
Quality
Quality improvement is an important goal of ERP. The software technology usually allows management to benchmark its quality performance against other manufacturing companies in the same industry and against established quality standards, such as the statistical Six Sigma tool for measuring defects. ERP makes it easier to detect and correct defects in finished products and problems in the manufacturing process. Quality improvements usually lead to increased customer satisfaction, which increases customer retention and corporate profitability.
Profitability
Efficient processes, cost reductions and quality improvements generally lead to higher profit margins. Quality adds value to a brand, which drives market share growth. Integrated demand planning, inventory tracking and financial reporting allow management to anticipate changes in customer buying habits and make the necessary adjustments to sustain profit margins.
Decentralization
Enterprise resource planning systems can decentralize decision-making because managers at all levels have real-time access to the same data, such as production status summaries and financial reports. Mid-level managers and even shop supervisors can make operating decisions, such as ordering additional inventory or changing the production schedule.