According to research done recently by Aberdeen Group, over half of all SMBs (small to midsize businesses) believe they are “too small” for Enterprise Resource Planning (ERP) software. A third say they have been getting along just fine without it.
Ironically — or perhaps not — companies who do utilize an ERP system:
- Ended up with better operating margin growth over the past two years (about 20% better growth in those margins) than those who did not have ERP
- Had more accurate inventory (about 10% better) that those who did not
- Could now make faster decisions (about 80% faster) that those who did not
- Cut their cycle times from completion of service to invoicing by 33% compared to those who did not utilize ERP
- Retained more clients that non-ERP users
While those who utilized ERP the past two years reported modestly better results standardizing, streamlining and improving the efficiency of their business processes, they reported dramatically improved visibility into their business – about double that of those without ERP.
This, of course, has a direct bearing on strategic action, and those who could take advantage of their information systems proved to have a giant leg up on those who did not. Those who had ERP systems were more than twice as likely to have the ability to do demand planning and forecasting.
In the end, even those who did not implement ERP particularly well still saw improvements in inventory turns and reduction… reductions in operating and administrative costs… and improvements in on-time delivery. And those who put some real effort into their ERP implementations, i.e., those who did them well, simply saw dramatic improvements in all these areas.
There appears to be a direct correlation between firms who want to grow and those who deploy ERP – with the latter supporting the former to a very large, clear and proven degree.
ERP adopters end up being able to support the growth they seek, become easier to do business with, improve operational performance by nearly every measure gauged, and satisfy the pressures in the long run to reduce costs.
In ERP, it would appear, there are two kinds of companies: those who manage by spreadsheets, desktop applications, homegrown aps and (frequently old) accounting systems… and those who have adopted modern ERP systems.
Aberdeen’s research puts a very fine point on the improvement performances attained by the latter.