Six ways to reduce expenses using ERP

If your business engages in distribution, reducing costs will be an important pursuit

If your business engages in distribution, reducing costs will be an important pursuit. Increased revenues lead to increased expenses — something you’ll be keenly aware of if you experienced a Christmas bump.

While it’s too late to make big adjustments to your enterprise resource planning (ERP) and distribution systems in time for the end-of-year-spike, now is the time to take a big-picture look at your processes so you are prepared for the next seasonal peak.

Many businesses aren’t doing the basics as well as they could. Here are a few things to consider when looking to reduce your costs:

  1. Inventory is expense.

    Everything in your warehouse is incurring a cost. This year make sure that your ERP system allows you to manage your warehousing costs efficiently.

    The best way to do this is to keep inventory as low as possible by implementing systems that allow you to treat your warehouse as a node in the link between your supplier and customer, and not as a home for goods.

    You should also use your ERP system to identify slow-moving inventory and price it to reflect its higher warehousing cost.

  2. Manual processes equal added costs.

    There’s no longer an excuse for slow and mistake-prone manual systems of any kind.

    Business-wide electronic and real-time tracking will not only reduce costs by improving processes within your business, it will also make you more attractive for customers (and suppliers).

    Use your ERP system to share your data with customers and suppliers so that they know what you have stocked, what you can source, where products are and how long they’ll take to arrive. Doing so will help to move your inventory — creating revenue while reducing storage costs.

    Many of our customers also integrate business process management solutions to their ERP system to automate credit control. Their customers receive alerts of due invoices which create more proactive cash flow management.

  3. A better crystal ball.

    Your sales team’s projections aren’t the only to predict future demand.

    This year, focus on using the information generated by your ERP system as another handy predictor of future trends. In fact, go a step further by sharing information with businesses both up and down stream to improve the accuracy of your expectations.

    More and more SMBs are turning to business intelligence (BI) solutions to provide an added level of control and visibility. The need for speed in decision making is only hindered by the inundation of data sources decision-makers are forced to deal with.

    Making sure that data extracted from ERP in to spreadsheets doesn’t take a life of its own can be a challenge, and this is where BI provides its true value by offering users a single version of truth.

  4. Consolidate.

    Eliminating duplicate systems is a quick way to reduce costs. Make 2012 the year that your business consolidates into a single warehouse and a single ERP.

    Drive cost reduction by ensuring that there’s a single point of responsibility in your business for keeping a handle on excess inventory. Don’t forget the basics, such as getting rid of aging inventory.

    The payoff is not just IT cost savings, but also better business performance due to streamlined business processes.

  5. Prioritise cost reduction.

    Make reducing costs a priority by creating KPIs around expense reduction. If you don’t have one already, create a dashboard view of your expenses, report on them, and ensure that the business is aware of where its costs lie.

    It may not be as glamorous as sales, but reducing costs plays just as valuable a role in improving profit.

  6. Embrace E-commerce.

    E-commerce is the most revolutionised way of selling products in a relatively low cost way. By introducing self-service functionality for your customers, you can drive new sales opportunities by extending the hours you can trade and regions you can target.

    Providing a self-service portal for customers also frees up your customer service resources. The availability of real-time data from the ERP system onto the store front allows customers to view available inventory, latest order status, and track shipments with tracking numbers. This helps in reducing your cost of operations and improves customer experience with your store front.

    Another benefit is that all web sales information will instantly appear into your ERP system. So with the most up-to-date web sales information and inventory, the ERP user can properly plan the purchase and thus reduces the inventory cost.

Ian Whiting is CEO of CRM, ERP and POS experts Markinson Business Solutions.