Every business venture that exists on this planet is run with certain objective(s). Objectives are an integral part and foundation of any business, because without them the businesses are like a passenger who does not know where to go. They are also essential because they bring in discipline and functionality at the workplace. So, even though a business can have many objectives, each business has a common single-most important objective.
But what is it? Is it achieving the highest level of productivity and performance from the employees? Is it streamlining all the operational functions of the business such as Human Resources, Payroll, Accounting, Billing, etc.? Is it growing the business by taking it beyond the regional/national boundaries? Or is it delivering the best possible satisfaction to the customers through superior products/services?
The answer is neither of them.
While all the aforementioned objectives are important and play a critical role in the success of any business, they are not the single-most important reason behind a business’ existence. The answer, in fact, is an inherent part of all the other objectives, including the ones mentioned above. It is – profitability. Yes, profitability happens to be the primary objective of all business ventures, and without it, the business most certainly won’t survive in the long run. So it is important for businesses of all sizes and types to continually measure profitability and look for ways to increase it.
This holds true for manufacturing businesses — including the process manufacturing ones — as well. Majority of them turn to a combination of technology, people, and processes in order to put their business on the path to increased profitability. This combination can be best defined as an enterprise resource planning (ERP) software, which helps process manufacturing businesses make more money and enhance their profitability in several ways. This blog lists down seven such ways through which ERP systems increase business profitability. Continue reading:
1. By standardizing business processes: In order to achieve increased profitability, you need to implement best practices across the organization, and ERP system help define and implement those best practices. However, it may not be that easy, given there are different departments and employees working on different processes. In such scenario, it becomes imperative to standardize the processes, and an ERP software does the job for you. It helps organizations standardize processes across the business operations, thus establishing a standard way of doing things like taking orders, handling finances, managing the warehouse, etc. These processes, when standardized, translate into best business practices. And an ERP software, again, helps you enforce them. Some of the benefits of standardized business processes include waste elimination, reduction in errors, tight control over expenses, etc.
2. By integrating different business functions: What ERP systems essentially do is that they bring together all the different business functions on a single platform, and then make the resultant data accessible to all the users across the organization. This way, when the employees have access to consistent, actionable, and accurate data all the time, they are less likely to waste precious work hours on maintaining redundant information in spreadsheets. This results in reduced data errors, substantial time savings, and increased focus on tasks that are significant, and eventually, increased efficiency which goes right to the bottom line.
3. By streamlining the supply chain: Having the right ERP for process manufacturing by your side ensures improved procurement, inventory, demand forecasting, shipment, traceability, etc., which in turn creates a robust supply chain. An ERP software facilitates smooth functioning of the supply chain by removing its bottlenecks. It also makes the supply chain more responsive through planning, end-to-end visibility, inventory optimization, and monitoring & assessment, and this way turns it into a source of competitive advantage, as the different stakeholders like suppliers, distributors, customers and other channel partners are happy, satisfied and thus place their trust in the business. The synergies between all these components of the supply chain lead to greater profitability.
4. By enhancing the control over operations: Every organization strives to gain complete control and visibility over its operations. The more control it gains, the better are the chances of generating revenue & profits. A good ERP for process manufacturing captures, and stores a range of information on quality, production, shipping, financial, supply chain activity and other areas of the business. This gives the organizations real-time information to work upon, and eventually better insight into what is going on in their business. Also by keeping track of the developments from close quarters, ERP systems let businesses identify problems at an early stage, and thus allow them to fix those problems before they escalate into major crises. After all, a successful and profitable business is a well-oiled machine.
5. By keeping the inventory lean: The objective of lean manufacturing is to reduce waste in order to achieve higher productivity, quality as well as profit level. And when it comes to process manufacturing businesses, keeping the inventory lean gains greater significance, as for most process industries sourcing the scarce raw materials is a difficult task. An ERP for process manufacturing comes to their rescue, as it helps businesses with planning inventory usage, replenishment, surplus, demand tracking and even turnover tracking. It also provides them with the critical data to plan and schedule the shop floor processes according to lean techniques, and capacity and availability of the machines, thus reducing the downtime and the set-up time, and ensuring the output is of top quality. By keeping the inventory lean, organizations can strike a fine balance between producing quality products, and ensuring profitability at the same time.
6. By supporting automation: ERP system also improve profitability by automating existing manual tasks and reducing overall errors. They make it possible through different features such as barcoding and data collection systems, and mobile or web-based access. This frees up the employees and creates extra time for them to focus on more productive tasks that generate value for the business. Apart from that, an ERP solution also speeds up production by automating a number of processes such as procurement & maintenance of raw materials, tracking of supplies that are purchased, the in and out of products from the warehouse, maintenance and scheduling of the machines, and calculations about sales margin, profit ratios and other such metrics. All this collectively leads to smooth functioning of the business, and subsequently reflects on the bottom-line.
7. By improving customer relations: We read how an ERP system helps put in place better business processes. This in turn helps the businesses to deliver high-quality products & services to their customers. Also as mentioned above, an ERP for process manufacturing ensures a smooth, tight, and transparent supply chain, which means that the customers can track their products, and the businesses can get them delivered to the customers on time. Besides, when integrated with customer relationship management (CRM) systems, an ERP can also help businesses not just deal with customer grievances, but also improve relationships with them through faster and accurate access to their information, history, and buying patterns. Winning over a customer for life means repeat and consistent business through him/her, which translates into more revenue and profits.
To sum up: A good ERP software is hence an integral and indispensable part of any process manufacturing business, and helps it increase its profitability manifolds. You may want to know about one such ERP, which has been offering a wide range of industry-specific as well as micro-verticalized software solutions to the process manufacturing businesses over the last 30 years.