Mr. Rajat was shocked when his home electricity bill touched Rs. 30000 for the second time in a row. He was finding it hard to cope with the scaling costs. He had to find the reason why this was happening and to find ways of dealing with it. He looked for any electricity theft, faulty meter and looked at the consumption patterns. He scouted for best possible solutions to manage this crisis he had landed up in. He began talking to his family about switching off lights and fans when not in use. He monitored how long the air conditioner was on, how long the water motor took to fill the tank and so on. With constant monitoring, his bill was at Rs. 28000 the following cycle. That was some improvement however not what he desired. So he began looking for other options and chanced upon Solar power. He had to make a huge investment to cater to the needs of his house. He lived in a large independent house with at least 7 rooms. But he was willing to make the investment to see how things can improve. He had almost all of his electrical needs from solar power and depended very little on the power supply from the service provider. He eagerly awaited the first bill for the month after he had installed the solar power and wolla! It was a bare minimum of Rs. 149, he had never seen his bill so low. Since then, his bills have not been more than that. He was also able to share extra power generated from the solar.
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Well, what has Rajat’s story got to do with ERP and cost cutting? Let us analyse what Rajat had actually done and how his decision had helped him. His problem was escalated electricity bills, he first tried to handle it internally by making a few changes but that did not give him the desired result, therefore, he attempted to bring in a system that can solve his issue. His decision to opt for solar electrification of the house yielded the most desired outcome. While the initial investment was a huge one, he was able to beat the escalating bill costs and also generate more power that could be shared.
Business houses start looking at technical solutions when there are issues such as escalating costs in running the business, inefficiency at all stages or in more than one, gaps in communication and when profits are not as expected. When companies opt for a software based solution, they are looking for help in the areas mentioned above. When there are desirable operational improvements that help the business an ERP is always rated as a successful one.
Let us now look at some statistics that industry research provides us on ERP and its impact on efficiency. Aberdeen Group (known for its research on industries) reported that ERP reduces operation costs by 23% and Administrative costs by 22%. This is a very important observation, because the cost effectiveness of a system can help the business not just save up money but make way for expansion and growth as well. Imagine the operational costs being slashed down by 23%, that’s a huge amount of money that is available for the company to use, may be for upgradation or may be reinvestment or at the most, repaying of loans if any.
How does ERP help reduce Operation costs?
For businesses that work out of different locations and have various departments coordinating different things, one centralised ERP system can be a great way to integrate the business, have all information in one place and that is readily available especially at times of decision making. This is one of the most crucial aspects of an integrated system, it has all information ready in just one click! The entire supply chain can be mapped on the ERP and in a manner that is unique to the business needs. There does not have not have to be a one size fits all kind of solution.
Improved communication systems:
With the ERP integrating the geo locations and paving way for better communication at all stages, the entire chain of communication is enhanced. ERP is said to have enhanced easier exchange of business information, which means information flow amongst departments is transparent and effective. This plays a great role especially in industries where information from one department is important for another. The same information is available to all, this is another important factor that enhances communication, often systems fail because of either lack of communication or because of inadequate information.
Automated reminders for payments
Small businesses that depend on payments for rotation of funds and cannot employ someone exclusively to follow up on payments benefit because the system generates reminders on payments that are pending or overdue. All you have to do is to set the time frame for the reminders to appear. Once payments are made, the system recognises the payment against that particular invoice.
Getting rid of error-prone documentation
When you opt for a process automated system, manual errors get reduced to a great extent. This by itself can help businesses in containing misinformation and miscommunication. For any business to thrive, there is a need for a robust documentation system at all phases of the business, an ERP can provide that platform that can be made error free.
When all business functions are integrated and centralised, it unifies the information available thereby minimizing duplication or we may say even eliminating them altogether. So this is another way of making the system error free.
Smooth Inventory and supply chain management
Manufacturing and many other businesses that need to keep track of the inventory have a great advantage by adopting an ERP. From the stage of procurement of raw materials to the packaging of finished product to the sale of the product can be mapped in such a perfect manner. The owner of the business can look at all these stages remotely by connecting to the software. ERP raises alarm on product shortages and can indicate gaps in the supply chain. Thereby alerting the business owners on areas that need focus.
With a system that tracks every little movement in the process, it helps the business understand inventory needs, identify gaps, assess losses wherever that happens and identify wasteful expenditure if any. All processes become well documented with an effective ERP.
Strengthened Customer Relationship management
Customers are an integral part of any business especially in the B2C businesses. Data of customers is a treasure for the companies. ERP can align and keep all customer data in one place for all departments to access. Apart from that, enhanced customer relationships can elevate the experience customers have with the business organisation and thereby contribute to the customer satisfaction and loyalty.
How can GWAY help you?
GWAY specialises in tailor-made ERPs for businesses, which map your unique business needs.
With its specified business solutions, GWAY has helped its customers to move from progressing businesses to profit making enterprises. Their agile style of functioning helps connect departments in the best possible way thereby helping the business thrive. Customers have experienced their operational costs improve and have found the integrated systems to be effective as well.