Why Companies Purchase an ERP System

I was talking the other day with a friend of mine who has a company that creates specialty conveyor components for the food industry. His workload has been rapidly growing for the past year and he was venting to me about how he’s not sure how much longer they can go at this pace. While being busy is, of course, a good problem to have, he admitted that they need to change fast, or he fears something big is certainly going to fall through the cracks. Knowing how many companies I’ve seen benefit from an ERP (Enterprise Resource Planning) system , I gave him my top 5 reasons why his company should invest in one.



1. Estimating & Quoting­— Having a 360-degree view on your business has its advantages.

Have you wondered if the reason you didn’t win that last job is because your quote may have been too high? Or too low? Either scenario isn’t good. You want to be competitive and make a profit but maybe you’re not really covering all your bases and you’re putting questions in the minds of your clients whether you’re big enough to handle their job.

This is one area where an ERP system can really set your mind at ease. Imagine having all the costs associated with producing a job called up with the click of a button. That’s what a good ERP software system can do. You’ll produce more accurate estimates that you can deliver quicker than your competitors with no wasted time or loss of revenue. Not only will you have confidence that your costs are covered, with an ERP system you’ll also be able to know if that customer comes back, whether the product was returned and why and if customer service had any feedback or complaints from the client. This 360-degree view provides valuable insight for future jobs while giving you confidence about such an important part of your business.


2. Customer Changes — Lower costs and less time lost means more profits gained!

Every company has experienced that moment when the call comes in. Dread washes over your customer service person’s face and your production leader tells everyone on the floor “the customer has requested a change in the design!” You can’t say no to the client, so you bite the bullet and tell them “yes, you can make that change,” and “yes, you’re going to do everything you can to make the original delivery date.” Then you take the rest of the day trying to figure out how to deliver the product and recoup your materials and time lost.

With an ERP system, client changes won’t throw you for quite that same loop. Because every facet of your business — sales, customer service, planning, accounting, production, distribution, HR — is integrated and data is shared across all levels, all relevant departments are notified when the schedule or product changes. If it’s a change in delivery date, production queues are modified, distribution knows delivery will shift, accounting knows payment terms will change and HR will know if overtime is needed and can adjust payroll. Not only will your company be more agile, you may even gain other customers based on your competitors not making those changes so easily.


3. Real-Time Info — Accurate, at the moment reporting so your business can change on a dime.

What shop doesn’t want to improve their production performance and have greater schedule accuracy? My friend with the food conveyor company could benefit greatly with being able to quickly access where production is at any given time and use that info to plan for incoming work. With an ERP system, he would have real-time data that would allow him to make smart decisions regarding machine efficiencies, how to improve slow-downs in a specific job and know which parts are on order so that he can have the confidence to complete the next job, on time and on budget.


4. Growth — Get a business advantage via technology.

Another direct advantage to my friend investing in an ERP system is how it could help them manage their growth. His team members and machines can only run at full capacity for a certain time before quality begins to fade, clients begin questioning their processes and service and the company ends up losing out on repeat (and new) jobs. He even risks facing downsizing instead of planning for more production space and workers. Admitting that your current technology and processes are costing you money is the first step in gaining a big business advantage. Those companies who understand the ROI that an ERP system can provide are those that will still be around in 20-30 years. It’s a big step to evaluate and implement an ERP system but it would be an even bigger failure to turn away business when you have the tools and knowledge to grow.


5. Alleviating the Headaches — It IS possible to have a smooth, consistently running company.

While this isn’t an area that can be directly tied to a specific module or feature of an ERP system, it’s still an important factor in my book when weighing the pros and cons of an ERP investment. We all want our businesses to be more profitable, running at full capacity with consistent results, have employees that enjoy what they do, all while providing a less stressful work environment. This provides the ideal work/life balance, right? Some of the headaches, constant questions and problems that arise on a day-to-day basis could be eliminated with the features and improved processes that an ERP system could provide your company. As I told my friend, you can’t run on fumes and frustrations forever. Your business has two paths: 1) sacrifice new jobs and customers and ultimately suffer or 2) improve and grow so that you control the future of your company. “That’s an easy choice,” he said.

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