An ERP system's goal is to lower costs by integrating all of a company's operations.
Cost reduction is the procedure of lowering a business's expenses in order to increase profits. It entails locating and eliminating expenses that don't benefit customers in any way, as well as streamlining operations to increase productivity. Cost-cutting efforts frequently concentrate on producing quick financial gains. Closing facilities, streamlining the supply chain, downsizing to a smaller office or moving to a less expensive building or region, lowering or eliminating outside professional services, such as advertising agencies and contractors, are just a few examples of cost-cutting techniques that can be used.
Effects of Cost Cutting
Cost-cutting boosts profitability, but only if sales volumes and pricing are the same. The company can be obliged to drop pricing in order to maintain the same level of sales if cost savings lead to a decline in the quality of its products.
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