What are the Benefits of ERP Systems?
Are you looking for a way to make your apparel business more efficient? ERP systems can help you do this. In this article, we will discuss the benefits and disadvantages of ERP systems, as well as what they are and how they work. If you’re not sure about whether an ERP system is right for your company, it’s important to learn all about them before making a decision. Here is some information that might be useful.
What is an ERP System? A Brief Overview
We’ll be discussing the benefits of ERP systems and contrasting them against MRP systems in the article, so before we go into the benefits and disadvantages of an ERP system, it will be good to give a brief overview of what it is.
At its core, an Enterprise Resource Planning (ERP) system is a software package that allows a business to run more efficiently, easily, and reliably through features and tools that assist in automating tasks that centralize the business’s database.
When a central repository is created for the business database, an ERP system works to grant remote access and ensure timely delivery of essential data throughout business functions. The primary benefit of this enhanced system is often increased productivity, leading to a better bottom line for a company. Read our ERP guide for more detailed information.
What are the Benefits of ERP Systems?
The primary reason for adding an ERP system into business workflow processes is to eliminate redundant tasks and instead direct the team toward more instinctual tasks that generate more value-added activities and output for clients. When the ERP system accomplishes this goal, it brings a wide range of benefits to a business. Some specific benefits include:
Pros of ERP Systems
- Lower inventory costs: You only carry as much inventory as you need and avoid issues such as too much inventory, which leads to more overhead costs, and too little inventory which can lengthen fulfillment times. Bear in mind that many companies see significant ROI after six months on just inventory and resource savings alone.
- Improved customer service: With an ERP, you get improved access to customer information, response times, on-time delivery and order accuracy. In addition, if the system has customized, flexible and scalable capabilities, there can be further improvements to customer service and other aspects of the business.
- Increased cash flow: An ERP provides better invoicing and collections tools that allow cash flow to come in quicker and easier; meanwhile, faster cash retrieval spells out more cash on hand you can use for growth or other business requirements.
- More in-depth company reporting: Tools and features of an ERP provide more enhanced reporting gleaned from real-time data. As a result, a company has one valid source of information being pulled from a single, integrated database for all its processes and operations.
- Increased cost savings: You get a better ROI through improved inventory planning, procurement management, customer service and vendor relationship management. Better cost savings mean a more competitive business model, too.
- Business process modernization: A modernized ERP brings standardization to businesses and provides dedicated security resources. You also avoid installing malware and data is distributed throughout multiple servers.
- Real-time reporting: ERP systems provide remote, instant access to corporate data and easy sharing of real-time and relevant information across all company functions.
- Better decision-making: When you integrate data from multiple departments, you can generate valuable insights that can be used for future decision-making.
- Enhanced Supply Chain Management: Tools and features of an ERP provide superior demand forecasting and allow you to maintain the leanest inventory. They also decrease production bottlenecks and give transparency throughout the organization.
- Improved Business Processes: ERP systems automate manual or routine tasks and eliminate redundant data, allowing you to implement smarter workflows that maximize efficiency and minimize costs.
Along with these advantages, there are also disadvantages of ERP implementation to keep in mind.
Cons of ERP Systems
- Cost of an ERP system: Depending on the size of your organization, high initial costs are involved in purchasing, implementing, customizing and maintaining a new ERP system. Other cost factors to consider include third-party software add-ins, implementation costs, initial and continuous training and maintenance. Lastly, factor in IT support and infrastructure costs like server hardware for on-premises ERP systems.
- Data conversion is complex: Developing a solid data conversion strategy can be challenging since you have to define, examine and analyze data sources. Bad data conversion will likely cause delays and increased costs. Also, migration of data from existing systems can be a challenge (while it is a challenge, experienced ERP specialists at N41 can streamline this process and assist with completion).
- Rigorous training is needed: Thorough and rigorous training is needed to successfully teach users how to use the ERP system’s tools and features. For the best success, training sessions should be aligned with business processes and IT users trained in the technical aspects.
- Buy-in needs to happen: You need a win-win scenario when you install complex systems, and unless you have buy-in from top leadership, an ERP implementation may suffer or flop completely. Top management’s blessing will mitigate resistance from stakeholders to new technology and operations.
- Customization issues: As companies grow, they may need to buy additional add-on software and services or software as they evolve and their operational requirements expand. This is especially true if the enterprise didn’t invest in a scalable ERP system.
ERP vs. MRP Systems
When it comes to their purposes, ERP and MRP systems can seem very similar: Both are management systems that organize business data in order to improve efficiency and reduce costs. However, there are some key differences between them, so it’s important for businesses to understand these distinctions before choosing which one will work best for their needs.
- An ERP system is a type of management software that allows companies to manage all business activities in one place, while a Material Requirements Planning (MRP) system only focuses on production and manufacturing data.
- Companies can use ERPs to capture customer information as well as supplier details, but this isn’t the case with MRP systems.
- ERP systems can be used to integrate data from all departments that are involved in the production process. In contrast, MRP systems only focus on information related to manufacturing processes and materials management.
- Since their functions are dissimilar, you can see both systems being used in an organization. In fact, ERP systems that are created for manufacturers will often include an MRP system as a module inside the ERP system.
The goal of an MRP system is very different than that of an ERP too. If you’ve ever seen the Bill of Material (BOM) that comes from an MRP, you can see that it uses a very logical, easily understood approach for determining the total number of components, parts and materials that are needed to manufacture each end item. This comprehensive list of items that make up the end item provides the basis for planning the build of the item (ergo the name Material Requirements Planning).
ERP Systems and the Apparel Industry
An helps manage all aspects of your business, and the apparel industry is one of many that can benefit from implementing an ERP system. These systems allow companies to manage a wide range of business activities, including buying and selling merchandise, managing inventories and orders, keeping track of shipments as well as organizing data related to customer relationships across different departments.
N41 Can Help You Find a Solution for Your Business
If you feel like your apparel business would benefit from an ERP system, the next step is to find out what type of solution will work best for your company. There are plenty of options to choose from, so you’ll need assistance in order to make the right decision.
N41 is a leading provider of scalable apparel ERP software solutions that is appropriate to all sizes of fashion businesses. We provide our users with a suite of applications that are designed to improve their business processes through the use of innovative technologies. Contact us today at (213) 738‐1010 to learn more about how our powerful suite of apps can benefit your company. Alternatively, you can request a demo to see the system in action.
Why would you need an ERP system?
With ERP deployment, you can automate your inventory and purchasing processes while integrating other tools like CRM software for sales force automation or accounting to get a better grip on your spending habits.
Additionally, flexible reports give managers access to real-time data, making it easy to make decisions quickly and do production planning without waiting for information to come in.
Another massive benefit includes easy order processing (N41 provides the quickest order-taking App available in the market!) and receiving and automated customer service.
Not only does this save time, but it also provides you with accurate data that enables better decision-making processes, which leads to increased efficiency and improved company performance as a whole.