Six ways an ERP system can reduce costs

Six ways an ERP system can reduce costs

Many businesses hope that implementing an ERP system will save them money. In short, it can but only if you know how it can save you money in the first place.

In this article I am going to share with you six ways that an ERP system can save your business money. Saving money with ERP software can apply to companies with an ERP already or those that are considering moving to an ERP system for the first time.

1. Reduce overtime

An obvious place to save money is through reducing overtime. Overtime is an unplanned cost and reduces the profit margin of your products.

Better scheduling and demand visibility of your work orders helps reduce overtime. Having a better view of your capacity and demand will also inform you when to increase or decrease resources.

Does your ERP system give you real time visibility of demand and available capacity? Good ERP systems will help you do both with less effort.

Fraction ERP helps reduce the time spent on scheduling through our unique approach


2. Minimise administration costs

Why spend more time on admin activities than you have to?

Moving to an ERP system should do precisely this; reduce the amount of time spent on admin. Many businesses experience the opposite of this. They install an ERP system poorly and then need more people to handle the admin to run production and often with bespoke spreadsheets attempting to fill the gaps!

Find the double handling of information, slow repetitive processes, and eradicate them. Most admin 'bloating' stems from not deciding how to reduce admin as you deploy your ERP system. Another benefit of integrated administration is reduction of human errors and typos that can be very costly for business.

Selecting an ERP system means you should be able to identify those spreadsheets that will no longer be needed!


3. Drive down production costs

Using the cycle time data from your ERP system is key to lowering costs.

The ERP data you can retrieve can focus your production improvement projects. Comparing the actual and planned cycle times, points you in the right direction. This analysis focuses decision making and prioritisation of improvement projects.

Another area to review is your capacity plan. Finding the bottlenecks that recur on a regular basis shine a light. Finding alternative routes to balance your production can reduce costs.

Shop-floor data capture is a feature that in real time helps you identify problems and it also helps monitor employee performance.


4. Ensure that production orders flow

Stopping and starting your work centres is a sure-fire way to waste money. Making the work flow, so that your work centres are always 'fed' is another key to saving money.

Every time a work centre 'sputters' and stops producing it costs you money. When you start it back up, often there is a ramp up. You don't produce at maximal levels right away. Not stopping is part and parcel of maintaining output.

ERP shop floor tracking tools, good capacity management and scheduling tools all help. Combine this with good communication between your production teams. Together, you have a good way to ensure work flows and save costs.


5. Save money on materials

Money saved on materials is money saved directly.

You can save money by making better buying decisions, from having better information. Using up offcuts and managing your inventory are important factors too. A good ERP system will help you achieve this.

Having good stock searching facilities and simplifying purchasing demands are essential ERP features.

Fast searching of purchase orders is easy with Fraction ERP


6. Work on strategic projects

When you remove the shackles of mundane work, you can focus your energy on high return tasks.

When you stop hunting down production, burning time with admin... you can re-direct your time. What can you do with this time?

Collaborate with your supply chain to lower costs?

Buy the new machine to lower unit costs of production?

Train your team so that they are more productive?

I'm sure that you have a list of high-return activities waiting for you right now!



Most businesses don't use their ERP to unleash their potential. It can do so more than process orders. If you can take advantage of the tools it can bring then a world of savings are ahead of you.

So, can an ERP system help you to save money for your business? Yes it can, if you use it as a tool to drive this agenda. All the points made above only happen if you use an ERP system in the right way.

Another point that we need to make here is around having easy access to your data. The decisions that you need to make for the above points requires accessible data. This means that the data is both available for you to interrogate and on a device when you need it.

That brings us back to Fraction ERP.


Fraction ERP

We built Fraction ERP because we wanted a fast, cloud based, ERP system. That is what we got.

It has fast access, from any device. It has fast searches and you can search through your data with speed. It has flexible workflows that let you work in the way that you want to work. It has effective production tracking tools and simple scheduling options.

In short, we have built an ERP system that helps manufacturing businesses to save money. Our belief in it is so great that we use it in one of our own manufacturing businesses.

Below is an overview video. If you want to find out more, then sign up for a free demo using the form below. If you like the demo, you can then join us for a free 14 day trial.

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