The well-managed supply chain is one of the most vital and complex aspects of a business, especially one in the built-to-order manufacturing or industrial fabrication industry. The supply chain is instrumental in achieving business growth in today’s highly volatile market. That is why tools like enterprise resource planning (ERP) solutions are critical to the financial stability of a business’ supply chain.
ERP systems help streamline and automate processes like demand, procurement, supply, transportation, and inventory management – significantly optimizing supply chain expenses and increasing business efficiency. Having more control over your supply chain helps take waste and time delays out of the process. From ordering to warehousing to inventory control and shipping, costs are better managed with better control of the supply chain. With the right ERP system, you can:
- Improve visibility of business processes across your business.
- Reduce overstock inventory.
- Improve inventory accuracy.
- Decrease operational costs.
- Improve on-time delivery rate and reduce customer lead time.
With rising production costs threatening profitability, manufacturers and fabricators need a system that can address their concerns and needs – strengthening their supply chain. With that in mind, let’s take a look at how ERP systems help manage supply chain costs and how to measure the success of your system.
How Do ERP Systems Help Manage Supply Chain Costs?
When carefully selected and implemented, the right ERP system provides the tools and visibility needed to manage supply chain costs. Many manufacturers and distributors operating with legacy ERP systems need to assess how their current system contributes to cost reduction to determine if switching systems will benefit their operation.
Other key areas where an ERP system can help manage costs can be found below.
ERP systems connect every facet of your business under one convenient umbrella. Implementing the right system helps facilitate inter-departmental communication and eliminate information silos. This ensures communication transparency and credibility, reducing any potential confusion and delays.
ERPs are especially helpful to the supply chain management processes when it comes to the coordination between manufacturers and vendors. Suppliers that are connected to your ERP system are able to work more effectively with you to meet your goals and reduce bottlenecks that occur when certain supply inventories are low.
An ERP system’s Inventory Management feature provides complete visibility company-wide on your items, enabling you to see open orders, available product at branches, pending purchase orders, item transaction history, quantity in external fabrication, and additional inventory metrics. Additionally, there are a wide array of inventory related features that help streamline business, including:
- Vendor management
- Product tracking
- Expedited Bill of Materials (BOM) generation
- Production management
- Delivery management
With 2/3 of supply chain leaders heavily reliant on analytic data to achieve complete control over operations in order and meet tight turnaround times, ERP generated analytics will be an essential tool. An ERP solution, integrated with data-analytics, can provide essential details regarding finances, inventory constraints, and vendor risk. Real-time analytics can help stakeholders make informed and quick decisions to help manage supply chain costs.
Purchase Processing & Sales
With order entry, you can add a ticket to the quote to remind you to follow up with the customer. Plus, you can track which inquiries turn into sales, which sales were lost, and why. Additionally, ERP systems can handle multiple payments options and secure (PCI compliant) credit card processing, so you can easily create quotes, process orders, conduct returns and exchanges, and provide customers with personalized receipts.
This integration can significantly reduce payment processing administration, minimize excessive paperwork, eliminate the possibilities of invoice mix-ups and lessen associated wait times.
Measuring the Success of Cost Reduction Strategies in Supply Chain Management
To determine ROI and measure your company’s performance, you will need to understand how your ERP system, through metrics and tracking, is performing. Even before ERP implementation, it is ideal to put these metrics in place prior to implementation to have a benchmark against which progress can be measured.
Typical metrics to be used to measure success in an ERP environment include:
- Gross Margin Percentage – reflects the ability to manage pricing and COGS effectively.
- Operating Expense Ratio – measures the ratio of Operating Expense per Net Sales.
- Sales per Employee – measures sales generated per full-time employee (employee productivity).
- Inventory Turnover – measures the number of times the entire inventory stock is sold per year.
- Average A/R Collection Period (Days) – reflects accounts receivable collection practices.
- Sales Change % – from year to year.
- Profit Margin – measures profit earned as a percentage of net sales.
- Sales to Inventory Ratio – measures dollar sales generated per dollar of inventory.
- Gross Margin Return on Inventory – measures gross margin earned per dollar of inventory.
- Typical Sales Volume – identifies where your sales come from.
- Gross Margins – average of the past 12 months of sales.
By focusing on these key metrics, the cost savings can be quantified to determine what is working and what needs further improvement. In that way the team can accurately determine if it is possible for the ERP system to help track supply chain costs.
Better Manage Supply Chain Costs with TrulinX
The supply chain industry is always changing. You need an ERP that can adapt, scale, and keep your operations running efficiently. The specialized features of Tribute’s ERP software are designed to help you maximize profits and better serve your buyers.
TrulinX continues to raise the bar as an innovative solution in the supply chain industry. Through our software, we aim to provide solutions that give distributors a competitive advantage in the marketplace.
With our niche features, supplier integrations, and industry leadership, TrulinX is specifically designed for your distribution business. Ready to improve your workflow through an innovative modern ERP software? Request a Demo to see how we can help you make that change to your business.