Business is no friend of risk.
While fortunes are won and new markets are occupied through calculated risk, firms nonetheless try to avoid it when possible. Risk represents lost revenue, disrupted partnerships, idle equipment, brand damage and a host of other belongings that aren’t typically advantageous to corporations.
So risk mitigation is important. The less risk, the better.
Beyond having a consulting firm or dedicated team assessing risk, businesses also should consider better-taking advantage of their ERP systems. Most ERP systems have many functions that can help cut down on risk and improve decision-making. If the risk is a concern and it is for every business ERP can help.
Here are seven ways that you can reduce risk with your ERP system.
Supply chain dependability is key. That’s where material requirements planning comes in. The problem is that traditional MRP was developed more than 60 years ago, and technology is much beefier now. So instead of MRP that is built around forecasting supply and demand precisely at the SKU level, businesses now can track demand and adjust in real-time. This cuts supply risk.
“Each node of a supply chain and distribution network is subject to the bullwhip effect from changes in supply variability and reliability at earlier nodes and from changes in demand variability and reliability at later nodes,”. “This effect can lead to a lot of wasted time and material. DDMRP prevents this.”
To err is human, as the saying goes. While that might be a truism, its cold comfort for businesses that want to reduce risk; human error is one of the leading causes of risk.
Thankfully, automation can help by reducing human involvement and therein the potential for human error.
Much of a business can be automated through its ERP system, including inventory, order management, the supply chain and sales transactions. Think recurring transactions, too, where only the customer’s name and quantity must be changed.
The more you automate through your ERP system, the less opportunity for human error.
A third way to mitigate business disruption is through better sharing that can lead to an improved supply chain management.
“Cloud-based ERP not only ties together the functions of you own enterprise, but also it ties together business partners,”
This can be useful, especially for keeping stock at the right levels.
“Share DDMRP buffer statuses at one node with the supply chain partners at the preceding and succeeding nodes to provide early alerts of an unusually large wave of demand or supply variability.
Compliance violations pose a significant risk for many businesses, especially those in heavily regulated industries.
ERP can help reduce the risk of compliance variance by monitoring materials and processes and making sure they conform to regulatory mandates. Businesses also can set up alerts when non-compliance takes place.
“Use ERP compliance capabilities so that you are confident that your materials and products are in compliance with local governmental regulations,”
Incomplete data leads to poor decisions. Poor decisions increase business risk. A fifth way that ERP systems can mitigate risk, therefore, is the aggregation of business data for improved decision-making.
ERP can lower risk “by providing a single source of the truth with integrated manufacturing and business performance information resulting in improved decision-making,”
By having all data tied together in one place, businesses also can leverage predictive analytics and business intelligence applications for improved forecasting and risk management,
“Business intelligence tooling can perform predictive analysis for better decision-making,”
Finally, ERP can help with risk by giving firms better insight on their supply chain and any potential disruptions.
ERP can mitigate risk by “providing analysis of supplier performance and a more seamless way to interact and negotiate with suppliers across the supply chain,”
This can take the form of analyzing supplier performance for better optimization and risk prediction, or simply through greater awareness of supplier variables and production schedules.
Risk cannot be avoided entirely, no matter a firm’s line of business. But ERP systems can significantly reduce the risk a business faces in a variety of ways, from greater insight and automated processes to improved partner coordination and compliance management.