Why Manufacturing Companies Need a Centralized ERP System

by Catherine O'Toole

A company’s success largely stems from how well the different departments can exchange data with each other. Learn the difference between decentralized and centralized software systems, along with how a centralized ERP system is vital to achieving success.

Manufacturing Process Scenario

First, a customer approaches a company’s sales team about a product. The sales team then goes to the inventory department to check on the availability of the product. If the product is out of stock, the salesperson would then approach the production planning department so that the product can be manufactured.

With the salesperson’s inquiry, the production team or production planners check with the inventory department to find out the availability of the raw material needed to manufacture the product. If the raw material is not in stock, the production team or production planners buy the raw material from their vendors – and then forwards said materials to the shop floor for production.

Once the product is manufactured, the inventory department forwards the final product to the sales team to deliver to the customer. Then, the sales team updates the finance department about the sale of the product to the customer. In addition, the production planning team also updates finance about the payments that need to be made to the different vendors for the raw materials.

Manufacturing-Scenario-v1-e1581446545270-300x253 Why Manufacturing Companies Need a Centralized ERP System

>> See also: How Manufacturing Companies Drive Growth in a Digital World

Decentralized Software Systems

In the scenario above, the salesperson approaches each department individually. Therefore, the scenario is an example of a decentralized software system. A decentralized software system is when data is maintained locally in the individual departments. This means that departments do not have access to data from other departments.

Decentralized Systems and the Manufacturing Process

Numerous software systems mean that the information cannot be seamlessly shared. Therefore, lack of real-time data can lead to an unnecessary halt in an urgent order, misunderstanding of the current inventory, inconsistencies and duplication of data, and much more. For example, because the salesperson does not have access to the inventory department’s data – the salesperson must wait for someone in the inventory department to respond to know if the product the customer is interested in is in stock. This unneeded wait could lead the customer to look for another vendor for the product. Therefore, resulting in a loss of sale because the information could not be seamlessly shared.

>> See also: Solutions for Manufacturing in SAP

Centralized Software Systems

A major factor in the success of a company largely stems from how well the different departments can continuously communicate and exchange data easily between each other. Therefore, a centralized software system is the key to success because companies that maintain their data in a central location can share information easily with various departments.

ERP-Illustration Why Manufacturing Companies Need a Centralized ERP System

Why Centralized Software Systems – Like ERP – Are the Key to Success

Enterprise Resource Planning (ERP) is the name for the business process management software. It is a suite of applications to manage vital functions of a business (sales, inventory, production planning, etc.) With the integration of all a company’s departments data, information can easily flow across the enterprise, and the process becomes streamlined.

For example, if we return to the manufacturing scenario, let’s say that the same salesperson tried to find out if the product was in stock using the company’s centralized software system: ERP. With the company’s ERP system, the salesperson could check the current inventory of the product within the system. Therefore, eliminating any wait time for the customer.

Additional Benefits of ERP Systems

Below are some other benefits a manufacturing company can experience with a centralized ERP system (like SAP):

  • Eliminate data duplication, discontinuity, and redundancy
  • Share real-time information across departments
  • Control various business processes
  • Increase productivity
  • Manage inventory
  • Reduce material cost

>> See also: Document Services for Company-Owned ERP Systems and Host Printing

SAP-Monitor-300x282 Why Manufacturing Companies Need a Centralized ERP System

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One Response

  1. Manufacturing industries have a very complex process and a centralized ERP with common database is much helpful for the stable workflow. Very useful content, thank you for sharing.

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