How ERP software can cut costs in your supply chain

Effectively managing and getting the most out of your supply chain is vital, and ERP software will help you achieve this.

When you’re running your own business, it’s important to cut overheads where you can. Of course, you should always be looking to cut costs without cutting corners – and luckily, there’s a simple way to do just that.

One of the first things you should do to save money is to invest in ERP software. Yes, we’re aware that that does sound a little paradoxical, as ERP can be a large initial investment – perhaps the largest you will have made so far. By learning how to use it to its full potential though, you can massively cut costs in your supply chain.

But first, we think its important for you to understand the role of ERP in Supply Chain Management.

The integration of Supply Chain Management and ERP allows manufacturing and distribution businesses the ability to gain greater visibility into all operations while increasing speed, efficiency and overall customer satisfaction.

Here’s everything you need to know:

Defining the supply chain

A supply chain is your business’s lifeline to products and materials. To have a strong successful business, you’re going to need to have a supply chain that delivers in the best way. Therefore, your chain needs to be made up of the strongest possible links, or rather, the strongest possible businesses.

If your supply chain isn’t suiting the needs of your business, how can you turn things around? With great ERP software, of course. By incorporating ERP into everyday processes, you can negotiate better deals, improve communication with the businesses in your supply chain and effectively manage your inventory and eliminate waste.

Effective communication

One of the simplest but most effective ways an ERP software system will cut your costs is by improving communications with you and your suppliers. Being able to communicate in real-time and being able to access up to date information around the clock will allow you to keep an eye on supply and demand.

It doesn’t matter which of your suppliers you are dealing with, or the scale of your supply operations. You’ll be amazed at how much of a difference it does make once the software is up and running.

Eliminating waste

Managing your inventory properly is key to saving money. ERP will allow you to assess your inventory levels so your costs remain low. Why are these particular costs so important? Well, inventory costs make a big contribution to a company’s profit margin.

After all, the more stock you have to keep in storage, the more money you will spend on that storage. We mentioned how ERP software can aid with communication and that comes into play here too. By being able to communicate and collaborate with suppliers, you’ll be able to free up unused inventory space and negotiate better supply deals.

ERP will transform much more than your supply chain

As well as helping you to cut costs in your supply chain, ERP software can work wonders across other areas of your business too. It can greatly improve the productivity of your workforce, by freeing up time they spend on repetitive tasks, leaving them free to innovate and work on the things that matter.

ERP also allows you to conduct in-depth analysis, as well as cash flow forecasting. You can trade in multiple locations and countries with complete ease too. All of this will lead to massive financial rewards, both in the long and short term.

If the above isn’t enough to persuade you to get on top of your ERP game, then here are the different ways that ERP software can increase your business profits and efficiency while reducing costs and wastes.

Automatic Purchasing

Continually monitoring inventory levels takes up too much time. Newer ERP systems with Supply Chain Management functionality feature automate purchasing. This means that the ERP software can be programmed to automatically place orders with vendors when inventory levels drop below a certain level. A critical part of any supply chain strategy is being able to preemptively maintain inventory levels. Automatic purchasing will free up employees to concentrate on other important duties.


Process standardisation is central to the success of any supply chain strategy. Having a standardised ERP system will increase efficiency while saving time and money. Another benefit is that employees will share a standardised system of tools, which will increase accuracy, encourage teamwork and reduce miscommunication.

Increase Transparency

Waste, mistakes and even fraud are permanent supply chain strategy problems that can be fixed with the right ERP system. One of the biggest problems of inventory management is reconciling the software numbers with physical inventory count. There are always products or units that are forgotten about or simply disappear. Increasing internal Supply Chain Management transparency is critical to reducing unexplained inventory and financial losses.

Gain Data Insight

Decision making for your supply chain strategy depends on accurate and timely data and information. Having real-time reports available at all times will provide valuable insight into the supply chain health of your manufacturing business. ERP software allows both users and management to be able to instantly access inventory, purchasing and production data for critical decision-making purposes.

Real-Time Inventory Management

Traditional inventory management involves the overuse of spreadsheets and hand checked lists. However, modern ERP software offers inventory features that provide real-time visibility of exact inventory levels. In addition to this, traditional inventory management software has limited scalability, while modern ERP software has unlimited flexibility that will match your business’ growth and unique needs.

Monitor Vendor Performance

A smoothly running supply chain system depends on outstanding vendor performance. Therefore, vendor performance needs to be monitored and rated through robust metrics available through ERP systems. With a few clicks of a mouse, management can review vendor cycle times and error rates. This data is invaluable during vendor re-negotiations.

Raise Cost Awareness

There are many uncontrollable factors and variables with supply chain management. As a result, different managers along the supply chain often are unaware of each other’s expenses. Having centralised financial data pinpoints exactly when and where the organisation spends money. This will encourage cost related communication and strategies for consolidating expenses and streamlining processes.

Improve Returns Management

Every solid supply chain strategy needs an efficient returns management system. Manufacturers must be able to effectively handle returns so they can quickly re-process or re-manufacture returned products or units. Many manufacturers understandably focus on continually moving new products out the door and therefore, returns often fail to get the attention they deserve. Being able to better manage returns will reduce waste and identify consistent  product problem factors.

Streamline Accounting

ERP systems are often integrated with different business areas, such as HR, management and finances. An ERP system will reduce excessive paperwork and invoice mix-ups. In addition to this, ERP systems are integrated with Electronic Data Interchange and Electronic Funds Transfers, which will drastically reduce payment processing administration and associated wait times.

There are many success stories of implementing ERP systems to improve Supply Chain Management, and unfortunately much-hyped failures as well. However, if most projects follow some simple guidelines, companies can increase the chance of success, deliver on time, and proudly involve the relevant group of users who utilise the system to maximum gain. Some benefits to look forward to include:

  • Improved efficiencies, lower costs and improve productivity
  • Ability to provide better services to customers, and therefore increase customer retention
  • Increased ability to¬† manage resources through a streamlined process, and in some cases, an automated workflow
  • Leveraging IT to enhance the speed of tasks and increase production
  • Ability to cope with business changes in the future and to adapt to changing rules and regulations, therefore enabling the organisation to compete more effectively

When it comes to Supply Chain Management, businesses need to interact with numerous suppliers and partners in order to obtain the raw materials and resources needed to bring finished goods to market. ERP plays a vital role in combating inefficiency; reducing waste and ensuring that workers are better able to direct their efforts. The integration of both systems may pose some unique challenges. It is in your company’s best interest to ensure that you and your staff fully understand the role of ERP within the Supply Chain Management process.

If you are wanting to implement a new ERP system, or see how an ERP system can help assist your business’ needs, then contact us here, or call us on 0191 500 8150 to speak to a Business Software Consultant.

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