ERP enterprise value

(In my previous posts, we talked about the value of working together under a common vision when implementing an ERP system, and started to look at implementation best practices, and operational benefits that can be realized with an ERP system, including 1 - Inventory Accuracy and Traceability, and 2 - Requirements Planning. Here are three more benefits.)

3. Appropriate Product Pricing

If a price changes on a purchased component do you know immediately how that will impact the cost of all saleable products for which it is a component? These are fundamental questions addressed by an ERP system. Bills Of Operation (BOOs) that define production costs and Bills Of Material (BOMs) that define the purchased and subassembly components from which it is produced, roll up to define a product’s cost. A change in either of these or a purchased component’s cost can have a ripple effect across a product line. The ability to immediately see this impact is fundamental to management’s ability to determine a products margin and their ability to make informed pricing decisions.

4. Access to Market Intelligence

The past informs the future. ERP makes available real time access to sales bookings and history that is critical to sound marketing decisions. Comprehensive and flexible analysis tools and reports that paint an complete picture of sales performance enables management to wisely invest marketing dollars, define product mix, and develop accurate forecasts that will drive the production and purchasing plans.

5. Streamlined Process Flows

How can an organization respond faster to customers and reduce cycle times? One way is visibility across departments when an action in one impacts others. This is only possible when there is an operational platform that is common to all. ERP is that common operational platform. For example, the booking of an order in the sales department can result immediately in the creation of a work order in manufacturing through a business event. Likewise, shipping also sees this event. Both can incorporate it into their work plan. Questions can be addressed immediately before a situation arises that might have a negative impact on customer service. The result is an increase in the speed at which an organization can fulfill customer requirements.

In my next post, we'll see how some actual users have realized some of these benefits.

by Michael D. Atherton Mike Atherton is the Director of Product Training for xTuple (www.xtuple.com), a leading provider of open source ERP software.