7 Reasons ERP Systems Are Crucial to Automotive Industry Success
ERP system improvements can create significant ROI for an automotive industry company. This article shares 7 ways your company can benefit.
Leaders and management teams of companies in the automotive sector often need to make critical decisions on how to make operations in an organization more efficient. One such decision is the choice of whether to acquire an Enterprise Resource Planning (ERP) system.
Why Are ERP Systems Valuable?
A study by CIO Magazine published in 2008 revealed that more than 85 percent of respondents agreed and strongly agreed that ERP systems were vital to the core operations of their organizations, adding that they "could not live without them."
Nearly 10 years later, this survey result still holds true. We live in a time where seamless integration with technology and web-based applications has the power to provide a competitive advantage to almost any kind of organization. As the study found:
- 76 percent considered operational efficiency as the primary goal behind investing in an ERP.
- 12 percent were motivated by global business support
- 5 percent were motivated by growth
- 4 percent were motivated by cost reduction
ERP software products, however, can come with problems. While CIOs and IT leaders are cognizant of their importance within their respective organizations, they also know that integrating ERP systems can be a painful, not to mention expensive and unwieldy, undertaking.
ERP in the Automotive Sector
In the context of the automotive industry, ERP systems can be integrated into any organization, providing benefits that involve optimizing operations for efficiency, reducing costs, and maximizing profitability. ERP implementation, however, requires a considerable amount of time, financial resources, and cooperation between different departments in the company.
Although initiatives to integrate ERP systems into your automotive manufacturing or supply firm do not come cheap, the benefits can vastly outweigh any initial resources, time, and effort required involved in the task.
What you can do now is to learn more about the different benefits of using a software solution like an ERP, which should help you in making the right decisions when exploring options for your company.
With that in mind, let us share are seven benefits you can expect from a reliable ERP product.
1. Reduced Costs
As mentioned earlier, ERP packages don’t come cheaply, so to the casual observer, the notion that they can actually save your business money can seem like a contradiction. But this is exactly what an ERP product can do.
At their best, ERP systems will help consolidate most, if not all, of the fragments of software systems your organization already uses. An ERP solution unites all these systems into a single interface, encompassing product development, finance, supply chain management, customer relationship management (CRM), inventory management, and much more.
Uniting these different functions may not seem like a big deal, but it can make a huge difference when it comes to improving cost efficiency and optimizing your automotive manufacturing company’s business processes. Moreover, the fact that your organization now only has to deal with one software system means you can reduce costs for training employees to work with multiple software systems, not to mention save precious time doing so.
2. Enhanced Collaboration and Communication
ERP applications can have different features. Still, you can at least expect them to be capable of doing the following:
- Manipulating and sharing data in real time
- Optimizing database accessibility
- Enhancing database security
- Improving collaboration and communication
An ERP eliminates the problem of having to manually combine data from different software systems and processes. An ERP compiles, archives, and allows different teams to share information all on a single system. Above all, it does all of this accurately and in a comprehensive and secure manner.
3. Comprehensive Analytics
The right Enterprise Resource Planning solution makes it easier for different teams in your organization to produce a multitude of reports from income reports, expense statements, and key performance indicators (KPIs), to inventory status updates, and much more.
Having the ability to generate these reports in a timely manner makes your automotive organization nimbler, letting you make decisions and respond to crises quickly. In addition, a great ERP solution also reduces the need to rely on a dedicated IT staff to create and access ERP reports.
4. Increased Productivity
It’s not surprising that so many companies praise ERP systems and their ability to make your business processes more efficient. If you take the time to understand your automotive company’s business processes, you may be able to spot a number of operational redundancies that make cost your organization time and money.
Although it’s not unusual for automotive organizations, even large companies, to have a few problems with efficiency, you still want to ensure that tasks aren’t too repetitive, because that can ultimately hurt your bottom line. An effective ERP ensures that each resource, each minute, and each employee is maximized effectively to reduce wasted time and enhance profitability.
5. Improved Customer Support
For many automotive firms, the goal behind deploying ERP systems is improving internal business operations. But while it may seem that an ERP solution only improves what happens behind the scenes, it can actually have a positive effect on how you manage your customer relationships.
ERP systems that can mesh well with customer relationship management (CRM) systems allow you to improve your marketing tasks, whether it’s:
- Reaching out to a larger audience online
- Nurturing leads captured in your sales funnel
- Turning leads into sales
- Retaining customers by managing your relationships
- Communicating with your customers through all stages of the purchase process
Simply put, an ERP system improves your ability to address the needs of your customers, from the time they first inquire about your products until the final product has long been shipped to their doorstep (and even beyond).
6. Compliance with Rules and Regulations Made Easy
Automotive organizations can only continue if the company can comply with various regulations under the Sarbanes-Oxley Act and the Federal Information Security Management Act, among many other regulations. Deploying an ERP with modules specifically designed for regulatory compliance makes this obstacle less daunting, giving you the ability to generate and manage secure reports to submit to the relevant regulatory bodies.
For example, an ERP with a powerful lot tracking module lets you trace parts and components, which might seem more beneficial to inventory management. Traceability is also incredibly helpful for ensuring your company is able to comply with government regulations and standards. It lets you know what if parts are defective, if certain processes are up to spec, or if your customers experience problems after deployment of your products.
7. Optimized Production and Inventory Management
Like most automotive manufacturers and parts specialists, your organization probably relies heavily on stable inventory and production processes. Still, there are opportunities for improvement. For starters, ERP systems can help simplify the inventory process and avoid problems like holding costs, where you end up keeping excess inventory and incur unnecessary costs in the process.
Another way an ERP makes processes more efficient for automotive manufacturers is by synchronizing delivery of raw materials precisely with the start of production.
ERP systems help your organization’s operations become leaner, with every process in the inventory and production system happening for a specific reason, giving you accurate data to use instead of relying on guesswork and estimates.
The challenge of deciding whether to integrate an ERP solution with your organization’s operations is something that shouldn’t be taken lightly. Given its cost and potentially game-changing effects on your company’s profitability, it’s important to take your time when making any ERP-related decisions.
Before anything else, be sure you are able to identify specific goals before implementing any ERP system.
- Do you want to improve transparency, supply chain management, and your customer relationship management processes?
- Are you looking for efficiency specifically in your manufacturing and production processes?
- Are you looking to grow your company without incurring unnecessary costs?
A fast, flexible, and powerful ERP software product should support all of these goals. Take your time to weigh your options, or better yet consider hiring an ERP consultant to obtain a balanced and unbiased assessment of how your organization can benefit from ERP integration or upgrade.