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10 Ways ERP Benefits the Automotive Industry

Dec. 15, 2022
What exactly is automotive ERP, and does it live up to its hype?

The automotive sector is one of the largest and most multifaceted industries around. According to a Research and Markets report, the global automotive market boasted 85.32 million units in 2020 and will reach 122.83 million units by 2030.

Automotive leaders and executives always try to find ways to make their organizations more efficient and profitable. Implementing an enterprise resource planning (ERP) system is a viable option. 

What are the benefits of an automotive ERP system? Let’s delve into the matter.

Automotive ERP is mainly used by auto manufacturers and distributors. Enterprise resource planning functionality covers quality control, inventory management, bill of materials (BOM), compliance management, production planning and other business processes (such as accounting and human resources). 

Most ERP solutions are feature-rich and have various tools that provide robust functionality. How can ERP boost your manufacturing business?

10 Automotive ERP Benefits 

1.Quality control management. Products must pass multiple safety tests and comply with standard regulations to ensure appropriate quality. ERP helps in planning, controlling and constantly improving the quality of automotive products, smoothly tracing goods at various processing points, paying attention to emerging problems and troubleshooting equipment. This is how ERP in the automotive industry helps to produce and deliver high-level products to the market.

2. Smart inventory management. The automotive industry depends on constant inventory availability. The ultimate goal of an inventory management system is to ensure that sufficient resource material is available. ERP systems simplify inventory management processes and eliminate additional costs that arise from over- or understocking.

ERP solutions can send alerts when certain items are decreasing in stock to preorder and restock those positions. Based on past sales data, the system can make sales forecasts for the coming period to determine raw material requirements, plan purchasing and production, and ensure uninterrupted manufacturing.

3. Precise financial management. ERP helps track all financial transactions, including total costs, expenses, receivables and payables, gross and net income, unpaid invoices, and revenue. It consolidates the data into manageable financial statements, ensuring smooth finance and accounting operations.

Relevant transactions will be updated in the company's general ledger, added to journal entries, and processed according to the appropriate accounting system, rules and tax regimes, ensuring compliance with all legal requirements.

4. Reduced costs. ERP software integrates all financial, marketing, supply chain, inventory and CRM systems into a single interface. It helps to reduce the costs associated with the lack of integration and the resulting losses. Moreover, the ERP system helps maximize net profit margins and streamline production by ensuring on-time manufacturing and delivery to customers.

5. Improved customer service. ERP supports the company’s internal processes and improves customer service through FAQs or a page with resolved customer requests. ERP can also integrate with an existing CRM to reach a wider audience, work for potential customers entering the sales funnel, convert leads into sales, and communicate with customers through all stages of the buying process.

The ERP system improves customer understanding by analyzing their past purchases and helps to provide customized services and meet unique requirements.

7. HR management. ERP facilitates an effective human resource management process reducing the time an organization spends on administrative tasks such as onboarding, performance evaluations or employee certifications.

An ERP system helps organize all the employee-related information like contact details, performance evaluations, work hours and job roles. Thus, the solution facilitates employee grouping based on their job roles and statuses.

8. Better vendor management. An automotive ERP solution helps manage vendors and record detailed information about each supplier and products purchased from them, in addition to tracking shipped goods, pending orders, deliveries, agreed contracts and prices. This data facilitates relationships with vendors, helps to track all the transactions and adjusts them according to your needs.

Effective vendor management helps minimize risk, prevent supply disruptions, save costs, increase revenue and retain customers.

9. Detailed analytics. With an ERP system, management or team members can process and generate various reports on expenses, revenue, inventory, sales, marketing KPIs and other business metrics. Detailed analytics help in making data-driven decisions and quickly reacting to trends and critical situations.

10. Enhanced electronic document handling. An ERP system enables automotive companies to review, edit, store and manage all documents, reports, purchase and sales orders, payables and receivables, and other files on a single platform.

Anyone in the organization can track the status of inventory, orders and allocated resources. It works like a  collaborative workspace where all digital documents related to business processes and functions can be shared, eliminating communication breakdowns.

The Bottom Line

The main goal of automotive ERP software is to ensure business efficiency, reduce operating costs and maximize profits. An effective ERP system in the automotive industry helps to:

  • facilitate various supply chain processes
  • control and manage inventory
  • track product quality
  • reduce the risk of error
  • increase customer satisfaction
  • improve service quality
  • facilitate vendor relationships

When looking for an ERP solution, consult a trusted ERP implementation partner. Before starting the project, the expert will help you build a plan and suggest an implementation roadmap for an effective ERP system tailored to your needs.

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About the Author

Alexandra Datsenko

Alexandra Datsenko is a Technology Research Analyst at Itransition, a software development company headquartered in Denver. With a strong background in IT, she focuses on technologies driving innovation across industries and reshaping our daily lives.