What Are the Benefits of ERP Software?

by Kenneth Hamlett; Updated September 26, 2017
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Companies around the world -- large and small -- utilize enterprise resource planning systems. Because ERP systems allow a company to integrate part or all of its other data systems into one system, ERP makes more efficient use of company resources. When implemented correctly, an ERP system provides a company with numerous benefits.

Operational Benefits

As an outgrowth of MRP II, companies traditionally implemented ERP systems to enhance inventory management processes and facilitate communication between manufacturing and accounting. Proper implementation and use of an ERP system offers many operational benefits. A reduction in inventory provides a direct material cost benefit. Additionally, reduced inventories require reduced handling and manpower. Reduced inventories also reduce labor cost and equipment/material handling costs. Other operational benefits include faster processing of information and better communication across departments, divisions and geographies.

Strategic Planning Benefits

ERP systems allow companies to access data in real time. Because data is readily available, it allows a company to become more nimble and align its processes and operations with the company’s strategic goals. For example, a company has a strategic goal to reduce inventory throughout its organization. Because the company gets real time data from its ERP system, the company can capitalize on sales trends. This allows the company to move inventory where needed instead of purchasing or building new inventory to fill demand.

Data Benefits

One of the chief non-operational benefits of implementing an ERP system is its ability to streamline data. Prior to ERP systems, many companies had numerous databases created in various computer languages that managed inventory, accounting, customer service, and sales and forecasting. These databases linked to each other, and often one database relied on input from another in order to update with accurate information. ERP systems streamlined most, if not all, of the data into a central database accessible to multiple departments. This single-source data warehouse reduced data redundancies, increased information processing times, and allowed management to obtain critical information quicker and with better accuracy.

Customer Service Benefits

Many of ERP’s benefits feed its most important benefit: increased customer service levels. Customer service levels typically increase when a company has faster access to more accurate data. For example, more timely and accurate inventory information leads to lower stock-out rates and allows management to react quicker to changing market conditions. After the successful implementation of an ERP system, orders get shipped quicker and more accurately, customer service personnel have better information to provide to customers and the company can more quickly respond to changes in consumer buying patterns.

About the Author

From 2002-2006, Kenneth Hamlett was publisher and head writer for UNSIGNED Music Magazine, an online publication with over 100,000 readers. Prior to establishing UNSIGNED, Hamlett was a business solutions analyst and spent 15 years formulating and writing proposals for supply chain business solutions. He is a graduate of the New York Institute of Photography.

Photo Credits

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