Sustainability is becoming imperative to companies across all industries as it can play a competitive advantage in the long run and is a necessity to survive in the future.
As the world is facing major catastrophes such as the COVID-19 pandemic, it has risen to the attention of business executives that it is their priority to reduce cost, increase efficiency and optimize production to stay competitive in the market.
According to the Institute for Management Development (IMD), 62% of executives consider a sustainability strategy is necessary to be competitive today, and another 22% think it will be in the future.
As sustainability is being incorporated into business strategies for long-term viability, one way of reaching sustainability objectives is the adoption of an Enterprise Resource Planning (ERP) system which is designed to boost production efficiency, reduce cost and waste, improve supply-demand planning, and drive greater organizational effectiveness. Many governments, such as Singapore, are providing fundings and incentives for SMEs to adopt digitization and automation tools such as an ERP system as a scheme to enhance industry and enterprise performance.
Let’s dive into 6 specific areas where having an ERP system can help your company reduce waste, cut costs and achieve sustainability goals in the long run.
An ERP system helps you identify the source of waste and optimize resource consumption
Business waste can come in many forms, not all waste is physical. In fact, the optimization of resources is a way to reduce energy and material waste as well as labor costs. Whether it is general waste or manufacturing waste, resource management is an important issue for businesses in many industries, such as manufacturers, supply chains, or F&B companies that handle chemicals and materials that can expire and/or be toxic to the environment.
Paper Usage, Storage Space
One of the objectives, when companies adopt an ERP system, is to reduce the use of paper documents, which helps save paper, reduce storage space and contribute to the preservation of the environment. This holds especially for large corporations and big offices, where a large amount of business document shredding can occur to uphold confidentiality.
One direct way of going paperless while keeping your documents confidential in your workplace is using a document management system like Odoo Documents, Dropbox, or OneDrive. For instance, with Odoo Documents, you can store, share, send previously scanned documents, and generate business documents like vendor bills, invoices, contracts which can be approved and signed with electronic signatures without the need of printing any paper documents.
See a short video here on how Odoo Documents can quickly transform and digitize your document processes with AI and Optical Character Recognition engines.
Poor inventory planning and a lack of control over overstock on hand can also lead to waste. If you work in the food and beverage business, for example, a good ERP can help you track the shelf life of your products and materials. Ideally, the inventory module in the ERP software should be able to inform you how much food or materials are wasted and pinpoint whether wastage happens whether by improper storing, spoilage, leakage, or human errors. It can also tell you how much materials are not consumed, not sold, so you can identify which products are the driving force of the business and which products cost more money than they make.
Applying the right removal strategy such as FIFO (First In, First Out), LIFO (Last In, First Out), or in the case of the F&B industry, FEFO (First Expired, First Out) is key to avoid wastage by providing visibility and control over perishable products. Inventory management tools like Odoo Inventory with built-in stock removal strategy functionalities can help you seamlessly track and monitor your product movements.
Here is an example of how the FEFO strategy can be configured on certain products on the Odoo Inventory interface, which prompts the system to pick the inventory lots based on expiration dates, earliest to latest.
Another type of waste can come from overproduction which can be caused by inaccurate planning and forecasting or a lack of reporting tools.
ERP software can help you overcome this by automating sales or inventory reports that show you which products are not sold and which materials are not being used. Leveraging past sales data and trends, you can make an informed decision about demand planning: which products that you need to cut back because they are not selling well or which products whose capacity can be expanded.
To align demand with supply production and reduce unnecessary procurement, Odoo developed a Replenish-to-Order functionality that allows businesses to purchase or manufacture inputs, especially ones that have a low shelf life, only when there is demand for them.
Read more about Odoo’s Make-to-Order feature and how it can help make your procurement process more efficient here.
Streamlined Logistics and Route Optimization
A good ERP system can help you schedule deliveries, taking into account the best routes for speed and efficiency. Optimizing logistics will not only save you time and human resources but also cut down on greenhouse gas emissions.
For example, if you are a supply chain company, an ERP solution can allow you to set up, schedule, and change the stops in your delivery routes so you distribute the load in each vehicle in the most economical way. It also allows you to track the shipments and make sure you don’t unnecessarily transport goods from one place to another.
The immediate sustainability impact you make when you optimize shipping routes and delivery schedules on your ERP system is reduced fuel consumption and cost while optimizing the productivity of your drivers.
Increase Visibility and Improve Coordination
Visibility over the entire operation
An ERP system can give you clear visibility of your company’s overall performance, presented by dashboards in the interface, displaying the metrics relevant to your company‘s operation. Each department can have an overview of its activities while identifying the opportunities to cut down cost, whether in over-purchased materials or finding the most fuel-effective delivery route. Each business function can have an overview of its activities by choosing to display the metrics that are the most important to them.
Improved Coordination between Departments
Waste of time and resources can also happen when the workflows of business departments are not coordinated. Unsynchronized workflows occur when a specific department cannot make decisions because of miscommunication, misinformation, or a bottleneck happening in another department. In such situations, people have to wait for information, sign-off, approvals, and work to be completed in other departments.
A tremendous advantage of an integrated ERP is providing the interconnectedness and automation of the flow of information across departments, allowing a smoother, faster, and more transparent coordination where decisions are streamlined.
For example, in the ERP system Odoo, Odoo Purchase is connected with Odoo Accounting, among other fully integrated modules in the system, which prompts the generation of a draft journal entry when a new Purchase Order is confirmed.
Quality Control and Product Lifecycle Management
Defective products that don’t meet quality standards lead to waste of materials and delays in production. ERP modules designed for production and manufacturing such as Quality and Product Lifecycle Management PLM helps manufacturers detect, monitor, and track all data related to production.
In the Odoo Quality module, you can set up your quality control plans and trigger quality inspections to be performed at certain steps of inventory procedures or manufacturing operations.
If you are a manufacturing business, you should be able to oversee your production lines, identify the equipment and plant in place, and have control over its schedules. With the help of quality management tools and features such as automated quality alerts, you can minimize the production of defective products and provide timely attention and action to any errors if a piece of equipment fails or a product does not pass quality checks.
While defects and errors can never be eliminated, quality management tools in a fully integrated ERP such as Odoo can help minimize damage and waste caused by malfunctions promptly, thus saving your manufacturing business a lot of money and time.
Adoption of Cloud Hosting
Choosing to host your ERP on the cloud can bring extra benefits not only for your business but also for the environment.
It’s estimated that migrations of IT systems to the cloud can save up to 30 - 40% of total software ownership costs. Moving your company's ERP system to the cloud diminishes the need for on-premise hardware as well as the human, physical and financial resources required to maintain it. With the cloud, your company can gain flexibility and scalability in storage capabilities and unused capacity.
The cloud can also benefit the environment as it reduces the carbon impact on your company’s data center. Cloud providers, including Google Cloud Platform (GCP) and Amazon Web Services (AWS), have committed to making their data centers carbon neutral and twice as energy-efficient as a traditional data center.
Read more on how public clouds such as Google Cloud Platform can provide a safer, more secure, and agile server hosting solution here.
Real-time data = Agility and Better Decision Making
One of the main purposes of having an ERP system is collecting, gathering, and storing data and information about the whole company’s activity in real-time. The ERP system’s ability to provide immediate business data allows business managers to access this data, assess the effectiveness of their business strategy in real-time. Therefore they make continuous adjustments in the areas that need to be aligned or the resources that need better allocation and utilization.
The users of ERP software can configure which measurement parameters to display for each project. Whether it is for Accounting, Sales, or Inventory management, real-time data can help identify which area brings the most value or not so much profit, presenting more opportunities to drive more effective tactics and reduce excessive production or overstocking of inputs
To demonstrate how real-time data can drive a better decision-making process, let’s look at the Analytical Accounting feature in Odoo Accounting.
This feature can be used to give a clear profitability overview of different departments or specific projects and promotion periods through all Odoo modules such as Sales, Purchase, Production, Invoice by distinguishing costs that arise over time or identifying the areas that bring revenue increases. By breaking your general accounts into categories (analytical accounts) by department, project, product group, and more, it provides a customized view of your typical loss/profit balance in a more dynamic manner than your general ledger.
How Port Cities can make your business operations greener with Odoo
The best-in-class ERP technology and the right industry expertise in ERP implementation can provide you with a robust and interconnected system that delivers an unparalleled level of efficiency and synchronization in production, reporting, and demand planning.
All the areas mentioned above can help you comply with your company’s sustainability strategy and are interconnected through a well-rounded and flexible ERP software like Odoo.
Port Cities prides itself in having diversified on-hands expertise from serving clients in industries like Manufacturing, Supply Chain, and Retail all over the world. Contact Port Cities consultants today to learn more on how you can make your business operation greener.
6 Ways an ERP Can Drive Sustainability in Your Business