Cost versus benefit
ERP implementation projects require significant investment in terms of both time and resource. This blog lists some of the benefits commonly cited by organisations when contemplating an ERP implementation project. In addition to financial benefits, we discuss some of the other benefits that may be realised.
The cost of a new ERP system needs to be balanced against the positive financial impact that the new ERP system is expected to deliver. Whilst every implementation is different, the fiscal benefits could include:
- Increased revenue – for example, improved planning tools can lead to an increase in product/service availability. Additional functionality may also be the sales team be more effective e.g. use of CRM, improved ability to cross-sell
- Reduced costs – your existing ERP may be expensive to maintain in a robust manner; there may be the opportunity for the elimination/automation of non-value-added tasks within the organisation translating into a direct cost saving in labour; you may be able to better control spend on materials
- Reduction in working capital – improved visibility of supply/demand may allow the business to reduce the amount of cash tied up in inventory; better functionality for managing credit status can improve cash collection processes and reduce debtor days
Whilst it’s tempting to set aggressive targets for these gains to show the project in a favourable light, it is important to ensure that these expectations are realistic – these will be the measures on which the overall success of the project is determined. A clear understanding of benefits can also help manage the business change that will come about because of the ERP implementation.
ERP implementation presents the opportunity to realise gains that may not be measurable financially such as:
- Standardised business processes – using the same processes across several locations enables reporting like-with-like. ‘Good practice’ can also be shared across the organisation.
- Improved customer response – an enhanced ability to access information from within the new ERP system will provide a better service to both internal and external customers
- Aligned to the strategic plans for the business – you can ensure that your processes are “future proof” and able to support the long term aims of the business.
- Improved organisational transparency – removing ambiguity from processes about role and responsibility can drive accountability across the organisation
By combining these benefits with the expected financial benefits, the organisation is well placed to judge whether the investment in the ERP implementation project is justified.
If you are in the market for a new ERP or currently thinking about replacing your ERP solution, attend the next ERP HEADtoHEAD™ event taking place on March 24/25 Milton Keynes, UK and see 12 leading ERP systems in action.