Calculating the actual ROI (Return On Investment) of ERP (Enterprise Resource Planning) implementation in advance is a somewhat challenging proposition. The problem is that no two ERP strategies are exactly alike, therefore both the initial cost and the ongoing maintenance fees are changeable. On the other end, there are both tangible and intangible benefits that are difficult to measure by any standard means. Panorama Consulting has collected data surrounding ERP satisfaction over the last six years, with their 2015 report stating that only 58% of companies considered their ERP implementation a success, while the remainder were either unsure or considered their projects a failure. In most cases, failure or indifference toward the ERP indicates that the companies did not allocate enough time to determining the types of benefits they needed to see. Nevertheless, 81% of companies surveyed acknowledged that they did see measurable improvements after transitioning to ERP.
Availability of Real Time Information
The primary benefit that new ERP users reported is the increased availability of information company wide. 14% of businesses stated that they had more information available to them for analysis and research, and that that information was more reliable than it had been previously because it was standardized. This information became a crucial part of major decision making for 8% of the companies surveyed.
Better Integration of Teams & Processes
The second most beneficial element that ERP provides is better integration of standard business processes, as well as more productive interaction among teams within the company. This leads to higher mind share, more effective problem solving across departments, and simply a better customer experience overall.
Panorama Consulting reported that 11% of companies saw measurable improvements in efficiency and productivity while another 8% reported less duplication of efforts. These two categories seem to go hand in hand as there is less wasted time and more focus being put on actually resolving problems in the first instance.
Inventory management seems to be a major hang up for many companies as they are relying on their vendors to get them what they need, and trying to maintain positive lead times for their sales team to work with. 7% of companies reported increased lead times and better inventory management, and another 5% noted improved interactions with vendors. This means less time spent rushing to keep up with demands and more reliable ongoing sales opportunities.
The final benefit of ROI from ERP is in the direct reduction of operating and labor costs. As all elements of the business structure are able to tighten up and reduce waste, the company as a whole sees far less money spent on materials and wages.
A successful transition to ERP allows companies to begin seeing a sustainable ROI in as little as six months. However, this requires buy in and trust from all levels of management. The best way to achieve this is through careful consulting with a third party ERP specialist who can show you the areas where you are most likely to see measurable improvement.
AlfaPeople specializes in ERP implementation, driven by careful consideration of their customer’s needs. For more information about how ERP can help your company improve productivity and reduce operating costs, contact AlfaPeople today.