In our previous two posts here and here we looked at some of the very real “hard” costs, or tangible benefits, that are typically derived from a successful ERP implementation. We even put a few numbers to them. In today’s concluding post, we’ll look at a few intangible benefits. These may not result in hard dollar savings, but they are beneficial and often important nonetheless.
As noted earlier, the basis for many of our comments are from a report prepared by Compare Business Products.com. Based on their research, previous industry research results, and our own experiences over more than twenty years, we feel confident that anyone who applies ERP correctly will receive benefits in line with those cited in our previous posts, and with our comments today.
Improvement in Process Design and Production Since ERP provides a single, company-wide, unified silo of information about products, orders, customers, etc., it stands to reason that a company will have better control over process design and production. Changes to products/orders can be managed in real time. Everyone can be in the same information loop. Production agility is improved, along with response times and overall visibility. Additionally, ERP can often support ‘rules’ of configuration, thus improving the speed and flexibility of order building, BOM changes, and product customizations unique to customers. Your entire team – and possibly even your customers with some additional work – can see for themselves what changes are or are not possible, and often, track their order status as well. The end result is tighter supply chain integration between factory, customer and supplier. But perhaps the real end result is improved customer loyalty and retention, and typically, sales too.
Improvement in Accounting Procedures Here again, the common silo of information means less duplication, in this case, of accounting files and data. A lot of paper can be eliminated with ERP through electronic document archival. Accuracy is improved when there is only one set of data to work from. Order and product costing can be faster and more flexible. Work in process (WIP) can now be tracked, financial statements are automated and simplified, with greater accuracy, and most reporting can now be done more quickly. Overall accuracy and timeliness of reporting is improved. Best of all, a lot of redundant data entry is eliminated, thus saving wasted and unproductive labor.
Improved IT (or “MIS”) Functionality With information in one place, under one software system, management information systems are improved when it’s no longer required to collate information from different sources. With today’s newer systems, dashboards can be built to monitor key performance benchmarks, and users can usually drill-down to the source data they need on an ad hoc query basis.
In conclusion… add up all the costs we’ve noted, hard as well as your own estimate of the value of soft cost savings. Even a fairly small manufacturing concern is going to see very real, six-figure annual cost savings once deployed. And that’s a reduction in costs that goes on year after year. And the more you grow, the greater the ratio of savings created by your ERP investment. No matter how you slice it, when you do the math, the old adage is true of ERP: It doesn’t cost, it pays.