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Driving increased profitability through your ERP system

As financial woes – exacerbated by the pandemic – bite deep, businesses should leverage their ERP system to obtain the kind of big picture view that will allow them to reduce costs and boost margins.

Deirdre Fryer, Head of Solutions Engineering, SYSPRO – Africa
Deirdre Fryer, Head of Solutions Engineering, SYSPRO – Africa

The current parlous state of the economy, which has been exacerbated by the challenges created by the COVID-19 lockdown, has left many organisations struggling. Clearly then, these businesses need to focus on the various ways they can utilise existing operations, solutions and technologies to enable them to remain as profitable as possible, and potentially increase their profit margins in these times of great financial stress.

In essence, explains Deidre Fryer, Head of Solutions Engineering at Syspro – Africa, companies need to re-look at their profitability equation – the cost of producing or acquiring something, compared to the cost of selling it – in order to reshape this in a more suitable fashion. While this equation is simple in theory, in that the cheaper you can obtain it, the greater the potential profit margin, in reality it is a far more complex process.

“The fact of the matter is that for distributors, for example, the acquisition cost is only one of several price impacts in the equation. Other costs that must also be factored in include the cost of getting the product delivered, the cost of delivering it to your customers and the expenses incurred ensuring you have staff available to ensure procurement and dispatch, among others. With so many variables involved, it is clear it is about so much more than merely cost versus selling price,” she says.

“It is also worth noting that with most things being commoditised today, it is possible to go to multiple organisations to obtain the same solution. This again means the acquisition decision must take into account other factors, such as quality of service or turnaround time. This is where partnerships become critical, since a good partnership not only reduces the cost element, but also impacts directly on the end-customer delivery experience.”

Such partnerships, she adds, involve their own complexities, such as pricing, order quantities, sale agreements and much more, all of which need to be negotiated and agreed on. It is here, continues Fryer, that the enterprise resource planning (ERP) solution comes to the fore, as all this vital information should be stored in the ERP, ensuring it is readily available to all key personnel.

“The critical thing to remember with large businesses is that they never sell only one item; usually it is in the realm of hundreds or even thousands of products. Without an effective system to store this information and keep track of all these details, maximising profitability becomes virtually impossible.

“On the other hand, with a good ERP system in place, key information can easily be made visible to – and do the heavy lifting for – the organisation’s procurement teams. It provides them with all the critical data around what products the business has, what shortfalls exist, which suppliers are best to buy from and who to go to depending on specific requirements, such as urgent delivery.”

Most importantly, she continues, it is vital to have an integrated system where the procurement, inventory and sales functions all reside. After all, she says, if you have three separate systems, they all need to be able to communicate with one another. This inevitably slows the entire process down, opens up increased opportunities for errors to creep in and reduces the overall visibility across the process.

“Full visibility is essential, since sales, for example, will need to be able to see what stock is currently available and what is on its way, so that the department can manage the customer experience without accidentally over-committing. Meanwhile, the same goes for those in the warehouse, who will need to know when products ordered by procurement are going to arrive, in order to ensure storage space is available and that workers are ready to accept the delivery.

“It is these integration capabilities and the ability to cross-share information that lies at the heart of the ERP system and makes it so necessary for improving profit margins. After all, when you cross-share data, you are more easily able to view the bigger picture. And it follows that with the complete understanding of the business this delivers, it becomes easier to effectively manage the sales, procurement and inventory functions in a way that reduces costs and increases profits,” she concludes.

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