How to Measure your Return on an ERP Investment
Considering how large an investment in implementing or upgrading an ERP system can be, it makes sense that you will want to see a return on this type of spend as soon as possible. Without seeing benefits, how can you justify the expenditure? Expecting to see a tangible return on investment (ROI) on day one with a new (or upgraded) ERP system is much like a new homeowner expecting to have all their boxes unpacked, and everything put away with the house completely decorated the day they get the keys to the house. It just is not realistic. ERP software may be a big investment, but in terms of improved efficiencies, increased productivity, and accelerated growth potential, the return on investment is worth it. Some benefits can be seen right way, some over time, and still others before you even go live with the software.
During the pre-implementation/requirements process, your company may uncover ways to improve business processes. While the goal of this stage is to map current processes to the new system, by analyzing financial systems and workflow processes, you may uncover ways to improve planning and control of inventory levels and methods to reduce costs. This is not a guarantee, but a definite possibility.
Ongoing Benefits of ERP Investment
After going live with your ERP, you should have a better overall sense of how your organization works including how you have allocated and budgeted for labor. This insight will allow for better forecasting of wages and can help reduce overtime as well for workers directly involved in production. For example, in most manufacturing ERP installations, indirect labor expenditures produce nearly half of the total cost savings because many companies have no idea how much indirect labor goes into their production process.
New ERP implementations and upgrades leverage the latest technologies, giving your business access to features and services that might not have been available before. For example, when upgrading to Microsoft Dynamics NAV 2017, you can take advantage of new features, platform, and fixes to previous versions. The latest version of Dynamics NAV ERP provides breakthrough innovations in the functional and technical aspects of the software, in deployment options (Mobile Client, Web Client, SharePoint client, etc.), Azure deployment (you may never have to buy a server again), refined Role Tailored capabilities, secure web service calls, bank integration, Office 365 integration, Business Intelligence and Reporting, and much more. Many of the additional features and functionality that are standard in new ERP versions eliminate the need for customizations or integrations with third-party software, and the costs associated with both.
A new ERP system will also likely decrease administrative time working on calculating regulatory compliance costs. If deployed properly it will reduce errors and increase data accuracy, allowing for more strategic decision-making. The current generation of ERP systems have become more agile and less rigidly structured than older business solutions, so organizational components can operate cohesively. This will allow your business to become more fluid and adaptable to your ever-changing business environment.
A new ERP system will make a real difference in your company’s future, both in terms of dollars spent and the benefits gained from the insights into how the business operates. 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.