10 cost-cutting methods with an ERP system                          

Experience has proven to companies that the most effective way to withstand a declining market is to reduce costs without affecting the quality of the company's products, services and image, while maintaining a level of profitability that will allow for the continued growth of the business.

However, cost-cutting measures must meet certain conditions such as: 

  • Be sustainable , not to have negative effects on the company's future results.

  • To be effective , the results obtained are superior to investments in applying the respective measures.

  • Be realistic , that is, that company can implement them.

How does an  integrated ERP system  help you reduce costs in the best conditions?

MANAGEMENT OF INTERNAL OPERATIONS

1. Implements an integrated solution

Integrated solutions bring together people and information flows within the company, ensuring accurate and secure data management, as well as real-time access to data. ERP is a system that centralizes all information in a single platform, providing access to any type of data and facilitating coordination and communication. Choosing an integrated ERP system reduces costs for:

Information is only entered once in a single database

  • Its components can cover a wide variety of activities, such as production, management, accounting, cost centers, budgets, logistics, etc.

  • It is flexible, allowing it to be tailored to the specifics of each business

  • It is a software-oriented flow and business process and optimization

  • It is scalable, that is, with the development of the company it allows the addition of new advanced modules and the reorganization of all business flows

2. Automates and standardizes business processes

Operations made manually and in an unorganized way are not at all effective, both in terms of time and the large number of employees they require, and the high probability of errors. Standardizing and automating business processes favors developing the company's business in the best possible conditions, increasing productivity, reducing the integration time of new employees, and giving managers a clearer picture of the business. Implementing the ERP system:

You can import nomenclatures with thousands of products and customers as well as price lists or discounts from external files with minimal effort

  • Generate subsequent documents, such as order notices, invoice notifications, etc., and the details are taken from one document to another

  • You set trade policies at partner or product level, and when creating documents, prices and payment terms are calculated and automatically retrieved based on these

3. Improves the acquisition process

Communicating with suppliers is an extremely important part of your business. A faulty acquisition process will affect your business and customer relationships. Having an ERP system, you can first relate your sales to the acquisition. Thus, by analyzing the sales data available in ERP, you will be able to correctly dimension your future acquisitions.

In ERP you can generate purchase orders from sales orders through settings that establish links between specific products and their suppliers

  • The ERP system integrates EDI (Electronic Data Interchange) functionality that enables electronic document transfer in XML format. This is mainly used in the relationship with large commercial chains (IKA)

  • Through EDI technology, all purchase orders can be sent to vendors in XML format, resulting in significant time savings and reduced likelihood of errors

4. Follow the costs in detail

The ERP system allows you to set up spending budgets and track the actual costs within the desired limits. This way, you get a high control over the costs your business generates.

In ERP, first establish the desired cost center structure and then the formulas based on which the transactions will be automatically allocated to each center

  • You can structure budgets in any way you want, taking into account geographical criteria (work points), departmental (production, sales, logistics etc.), types of expenses (energy, communications, rents, wages etc)

  • Finally, you look at the projected budget versus the executed or executed budgets, thus gaining high control over the financial parameters of your business

  • Increase the speed of your response, so that if you see overtaking, you can quickly take action and avoid budget imbalances

LOGISTIC LANGUAGE MANAGEMENT

5. Optimize stocks

Excess stock is definitely an important cost. Products must be stored under certain conditions and in the case of those with limited validity, once expired, they will no longer be sold and you will lose the invested money. Implementing an integrated ERP system with a  stock optimization solution helps you considerably lower your inventory costs.

Based on the ERP sales order history, the stock optimization system predicts future demand and calculates statistically the optimal merchandise requirement to cover estimated sales

  • Then, depending on the existing stock, it proposes to purchase or transfer the products from other locations of the company, thus avoiding the risk of excess stock occurring. The system is able to handle multiple warehouses and locations, proposing the most suitable solutions so there is no under-or under-stock in any of these

  • Another benefit is that it allows you to group products according to certain features so you can check them in a shorter time, extremely useful functionality when working with stocks of thousands of items

6. Manage deposits more efficiently

Integrating the ERP system with a  WMS facilitates the transfer of information between headquarters and warehouse. In addition, the WMS allows you to optimize the available space within the warehouse, with rent, staff and administration being diminished.

  • You have access to real-time information about stock movements, any changes in WMS being visible in ERP

  • Customer orders are automatically sent from ERP to the warehouse. This translates into significant time savings because employees have activity throughout the day as orders are received, as they would have to process them all at once

WMS gives you increased visibility on the placement of goods, making it easier for pickers to access them. Thus, new employees can become productive from the first day (no need for time to accommodate the warehouse, product lists, etc.), and furthermore the risk of taking over the wrong products is considerably reduced, which can subsequently escalate into the loss of an order or even a customer

  • The system offers suggestions for arranging merchandise on the shelf, making optimal storage space

7. Controls the car park


The car park generates high costs, ranging from wages and driver records to fuel, revisions, insurances, or taxes. But besides these, the unforeseen costs, such as fines, repairs or spare parts, also occur. To control them more efficiently, you have at your disposal the AutoPlus module available in ERP:

  • It helps you easily identify any vehicle in your company

  • You can keep track of each car's activity: route, consumption, accidents, fines

  • Keep track of the lengths of unavailability of machines and identify their causes

EFFICIENCY, ANALYSIS AND CONTROL

8. Improves the sales process

Sales activity is basically revenue generating, but it also involves some costs that you can shrink through ERP, CRM, or SFA.

The CRM system is designed for customer relationship management and prospecting. It ensures the uniqueness of information about them at the company level. Having all the data in the same system, employees spend less time looking for them when interacting with them, no matter what department they are part of: marketing, sales, service & support or project management

The sales process can be personalized according to the specifics of each customer, product or seller, which allows you to intervene more quickly when something does not work properly and you can correct it to ensure a shorter sales cycle


A SFA solution for field team management will help you reduce costs such as transport costs - employees not having to travel so often to the office or communication - because they will have access to direct information in the SFA. The integrated SFA system with ERP ensures a more transparent sales process and is easier to control

Field teams record all the documents and information collected from the field directly in the SFA and then transmit them through ERP synchronization, from which the subsequent sales documents are generated.

9. Choose an online store integrated with ERP

An effective cost-cutting method is to deploy an online store. Administration costs are much lower compared to a physical store, both in terms of rent, taxes or maintenance, as well as wages, because you will need fewer employees.

The online store is integrated with the ERP , which means that all customer, product, stock, or price information is automatically transmitted between the two systems

You can offer self-service to your customers at the online store, and so you can reduce the staffing needs of the support department

10. Improves the analysis and reporting process

Choosing an integrated Business Intelligence system with ERP gives you the ability to perform advanced analyzes even if you have no technical knowledge. The system is fully interactive and visual, and the graphs and analytics available to you allow you to get an overview of the costs your business generates.

The predictability of the BI system gives you the opportunity to see how your company's costs will evolve over the next period, from historical data

Using what-if-type analyzes ,  you can find out what influence the decisions might have on the activity: what happens if you lower or raise costs or how they will evolve in comparison to income, if you choose to increase sales for a particular product, etc.?

cost-cutting methods