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Unit 6: ERP Benefits

converted automatically into software programs for computerized production machines using notes
CAD/CAM systems. This automatic conversion eliminates the costly and time-consuming steps
of having a person convert design drawing into a computer program for computer-controlled
production equipment such as robots or machine tools. These systems reduce cycle times by
30-50%. Combined with this, the automation achieved in material procurement, production
planning and the efficiency achieved through the plant maintenance and production systems of
the ERP packages go a long way in reducing the cycle times.
Measurable cycle time reductions were found in three kinds of activities that support customers,
employees and suppliers.
1. Customer support activities in order fulfillment, billing, production, delivery and customer
services.

2. Employee support activities in reporting, month-end closing, purchasing, or expense
requisition, HR and payroll and business learning.
3. Supplier support activities in speed payments and combined multiple orders with discount
gained
(a) Productivity improvement. Products produced per employee or labor cost, customer
served per employee or labor cost, or mission accomplished per employee in non-
profit organization.
(b) Quality improvement. Error rate reduction, duplicates reduction, accuracy rate or
reliability rate improvement.

(c) Customer services improvement. Ease of customer data access and customer inquiries.

Task ERP system really reduces in cycle time. Take an example to describe how it’s
done.

6.3 reduction of Lead time

The elapsed time between placing an order and receiving it is known as the lead-time, it plays
a significant role in purchasing and inventory control. Most purchasing departments urge the
materials management to anticipate material demands well ahead of actual need. All inventory
systems have safety mechanisms like safety or buffer stock, re-order level and so on built into
them to avoid a situation where the material is out of stock. The non-availability of an item
that is required for production can result in several problems like missing delivery schedules,
losing customer goodwill due to the delayed delivery or even losing the customer to competition.
One can avoid this situation by requesting for the materials ell in advance to when they are
actually needed or by keeping a large buffer stock or maintaining a very high re-order level. But
all this means that larger inventories must be kept, which is money blocked. Also the practical
consequence of allowing longer allowed. Perhaps this is due to the ‘squeaky wheel principle’
buyers who expect the shortest lead-times complain the loudest when deliveries are late and
thereby receive the most attention from suppliers. So, the company should find out the minimum
lead-time and should attempt top correct suppliers’ delivery delays instead of automatically
increasing allowed lead-times.
So, in order to reduce the lead-times the organization should an efficient inventory management
system, which is integrated with the purchasing, production planning and production
departments. In this era of just-in-time manufacturing the knowledge of exact lead-times for
each and every item is of paramount importance for uninterrupted production. For a company

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