In a report released last year (and available here) Aberdeen demonstrates that, particularly in the manufacturing environment, even the least efficient ERP implementation provides more operational benefits than doing nothing.
As Aberdeen contributor and analyst Kevin Prouty [pictured] notes, “ERP touches almost every aspect of planning for a manufacturing company, from budgets and reporting, to detailed inventory and production scheduling. It becomes the foundation for growth in both operational efficiency as well as growth into new, distributed markets.”
Profitable company growth over the past couple years caused IT budgets on average to double from 2% to 4% of revenue from 2010 to 2011 according to Aberdeen’s research. Meanwhile, revenues and profits during that time grew in the 7 to 8% range.
The top four business drivers for manufacturers’ growing investments in ERP were noted as follows (each cited by between 27 and 43% of surveyed firms):
1. Must reduce costs
2. Must be easier to do business with
3. Need to manage growth expectations
4. Must improve customer response times
So… did these manufacturers’ investments in ERP yield benefits directly related to their stated goals? Here’s what they said:
The Best-in-Class firms (the top 20% as judged by a range of success criteria) showed an average 22% reduction in inventory levels… 97% inventory accuracy… took only half-a-week to close the month… had 96% manufacturing schedule compliance… and 98% on-time shipments.
For cutting costs and improving customer service, the answer to whether their ERP investments were worth it – was a resounding YES!
In our second (of two) posts in this series (on 7/19) we’ll take a quick look at the top strategic actions related to ERP. Stay tuned…