Arrow Electronics is set to save $130 million in costs this year by incorporating a new enterprise resource planning (ERP) system, the Centennial, Colorado-based distributor of electronic components said in a statement.
"Our cost reduction program reflects our thoughtful approach to improving efficiency while continuing to deliver the high levels of engineering and supply chain services our customers expect," said Chris Stansbury, Arrow's senior vice president and CFO said.
- The new ERP system is key to the cost cuts because it enabled the company to consolidate three separate systems into one and guide it through the wind-down of its computer disposition division, Stansbury told The Wall Street Journal. It also enabled the company to bring down costs in a number of back-office functions, including human resources and finance, and in its warehousing operations.
The ERP implementation is crucial for Arrow, which suffered a $549 million net loss in the second quarter of this year as it struggles with lower demand and trade uncertainty. ERP systems work by grouping a range of business processes, including finance, inventory management, supply chain and human resources management into a common data structure.
Stansbury credited the ERP implementation with Arrow’s ability to make precisely targeted cuts. “We would not have been able to do them without it,” Stansbury told the Journal.
Notably, the largest company cost for Arrow is their 20,000-plus employee population; they are looking to their ERP system to cut costs where possible in light of their recent business downturn without having to resort to layoffs.
Stansbury pointed out the cost savings enabled by their ERP would not be sufficient to fully offset the company’s lost profits.
Arrow representatives did not respond to a request for comment from CFO Dive.