As we begin a brand new year it seems appropriate that a blog devoted to business, tech and ERP should “start with the end in mind” as we often say around here (stealing from Steven Covey). When it comes to ERP, the key business question to ask of course is: Why? And the answer should be: Money. As in money saved, leveraged or otherwise brought to the advantage of the implementing firm.
So today we’ll take a look at some comments we came across lately in an article here entitled “When Will I See a Return on My Investment in ERP?” by Matt Lind of Archer Point. We’ll highlight of a few of the areas where Matt believe companies can extract value and ROI from their ERP investment.
To begin with, Lind notes, pay attention during the early process of business analysis and workflow mapping. During that process, companies frequently discover ways to improve inventory management. While the goal during this time may be mapping your processes, Lind says that “scrutinizing procurement and warehousing can improve planning and control of inventory levels to reduce costs even before roll-out day.”
Sometime during rollout, or perhaps sooner, you should have a feel for how labor allocation is working within your organization. This can help with labor forecasting, and in finding ways to reallocate or eliminate overtime, sometimes in the front office, sometimes in production. For example, he notes that in manufacturing, it’s typical that indirect labor produces nearly half the cost savings because companies frequently don’t know how much indirect labor goes into their production.
A lot of features that are necessary but were previously expensive add-ons are now available immediately with today’s more modern ERP systems – another potential cost-saving source. Web access, enhanced security, ad hoc inquiries and dashboards for making informed decisions (i.e., real-time data analysis) are fixtures of today’s systems that once would have added significantly to ERP costs.
Virtually always, companies find that the process of ERP implementation eliminates a lot of redundancy, repetitive entries and other forms of what we would call ‘administrative waste.’ Another area of potential savings can be in the reduced labor required for compliance efforts. A CRM system integrated with your ERP will help manage pipelines, help with close ratios, increase salespeople’s efficiencies and improve your overall sales management – all leading to increasing top line opportunities.
With the more agile and extensive capabilities of today’s ERP systems, companies become more agile and less rigidly structured than what was required with previous, less robust systems. As well, reduction of errors is a nearly universal benefit, along with the general sense of having more time to devote to the more important tasks, while the system manages the tedium that used to require more human input.
Lind also notes that Panorama Consulting recently estimated that the typical payback time for Microsoft Dynamics NAV is around two and a half years. (SAP and Oracle tended to the 3+ year range.) As Lind finally concludes in his article: “The large investment to purchase and implement an ERP system may seem daunting, but it is small compared to the return on investment that it will produce for years to come.”
And that, we find after 25 years of doing this, is why we continue to find new customers every year.