Reduction of Lead - Time
Lead time is time between placing an order and receiving the goods . It is very important for taking purchasing and inventory control . In production , optimum availability of raw material is must . If we keep inventory control with the help of safety stock and re-order level . But low reorder level and high reorder level are both harmful .
Disadvantage of low reorder level : Suppose , you need raw material for production but it is out of stock , then it will decrease the goodwill and also losing of customers .
Disadvantage of high reorder level : Suppose , there is no need raw material for production for long time but excess raw material is in stock , it will block money and increase the fixed cost of production .
With reduction of lead time we can make optimum reorder level . There are large number of raw materials in stock and knowledge of exact lead time for each and every item can reduce the cost of production
ERP is that software system which integrate all business process like purchase , production , marketing and sale and finance . Suppose , Company receives the order for supplying of 100 units of finished product . If ERP software system is activated in Company , then as soon as order detail will be written , ERP system checks whether stock is in finished inventory or not . If yes , stock is in finished inventory , after this ERP makes bill of material for this order and then checks whether all items are available in the inventory . Because all database in one system , so every thing , we can see real time . Due to ERP system uses electronic data interchange , it will surely reduce the lead time and when company needs the raw material it can get fastly .
On - Time Delivery to Customers :
ERP system is so advance and it can be used to make advance manufacturing strategy . In ERP system , we can easily integrate the CAD software of engineering drawing and all data of engineering designing can exchange with production department . With this according to the need , design of product can easily be changed and after this we can deliver goods to customers on time .
Reduction in Cycle time
We can define the cycle time as time between getting of order and delivery of same ordered goods to customers . If this time is reduced , business can get the reputation in the heart of customers . This can be possible with the help of ERP system . When any order is placed , ERP system automatically checks whether stock is nearest manufacturing plant or not after this it alerts to finance department for raising sale invoice and ensure that payment is received under the terms and conditions of finance department . All these automatic activities reduce the cycle time .
Effective utilization of resources
In ERP system maximum work is done by automatic software techniques , so it will save and energy of employees and they can perform other duties of company and So , ERP's main benefit is to use effective utilization of resources .
Satisfaction to Customers
With adopting ERP system , Company can give better services to customers and can satisfy them . Company can provide services with following way :-
- To change the layout and design of product in real time .
- To provide free service for any defects in product .
- To inform , if product in process , customer can track when will company deliver to him.
Improved supplier performance
ERP system can increased and improved supplier's performance . Supplier's performance can be measure on the satisfaction of customers . If supplier will use this software system , then supplier will enable to provide right goods at right time and at right place .
Reduced quality costs
Improved information accuracy and decision making capability