Have you ever been on a health-kick, taken a big bite into a protein bar, then looked at the label and realised how much sugar, saturated fats and calories are packed in there? If you’re considering ERP business software, you want to know it’s going to give you maximum benefit and the best return on your investment. Getting informed means fewer surprises when you’re ready to bite into that ERP implementation.
Our article ERP Is Brining Profitable Returns talks about some of the reasons to invest in ERP and wins to be expected. But it’s also important to know where to be looking for, and measuring, the return on your investment. Here’s a few of our top considerations for seeing a healthy ROI on your ERP.
When you’re looking at calculating ROI, you’ll be looking at net costs versus financial benefits gained. The main objective for any business is seeing an improved cash flow. While an ERP implementation certainly provides this (including the ways that will be covered in this article), a major cost that can often be overlooked is time.
When employees, managers, and owners spend their time performing manual, repetitive tasks, running or waiting on reporting, and digging through different systems to bring information together, this all comes at a cost.
Look at the manual processes which could either be automated or eliminated by a single-source ERP system, work out the time value and then place a dollar value according to the hourly rate of the resource that would be performing the work. For more ideas on time savings, also have a read of our article 7 ERP Time-Savers to Save Money.
Having excess inventory, incorrect inventory or obsolete inventory represents cash the business has invested but not seeing a return on. Getting your inventory management operating at a more efficient level means having more cash to invest in revenue-producing activities, such as additional sales efforts and resources or marketing campaigns to promote your business and products. For tips on seeing increased profitability through more efficient inventory management, see our article Why Profitability Needs Inventory Management Reporting.
When evaluating an ERP, look at aspects such as real-time visibility and reporting on stock demand and fluctuations as well as scheduling and automation of those reports. Investigate whether it provides you with advanced alerts and notifications for minimum and maximum stock levels to keep re-ordering happening when it’s needed and slow it down when it’s not.
As part of an ERP implementation, many organisations also move from a periodic inventory system involving regular, manual stock counts, to a perpetual inventory system. This can be a massive time-saver and significantly boost inventory accuracy.
Customer Service Benefits
Customer service is an area that can be difficult to measure, so it’s advisable to set up regular customer satisfaction surveys or a means of collecting NPS (Net Promoter Score) ratings to get a clear picture of the current customer satisfaction before implementing an ERP. You’ll then be able to compare this with results post-implementation.
Your customer retention metrics are an easier measurement, but will almost certainly be impacted by customer satisfaction – so it’s a good idea to look at both of them.
Working with an ERP can enable you to quickly and accurately respond to customers. Many of our customers have sped up the order to pick process dramatically, providing a faster, more convenient service - as seen in our Kleenmaid case study. Gaining a consistent, centralised view of all customer activity also ensures all touchpoints between the customer and your company return consistent messaging – whether it’s stock availability, pricing or just having an awareness of each customers’ history, it all contributes to building trust and providing a better experience that increases customer retention.
Reduced operating expenses isn’t just about reducing manual processing time and manual workload. It’s also about increasing capacity. If your staff can reduce 50% of their workload, it means they can process 50% more orders, make 50% more sales or produce 50% more marketing material with the same number of staff. The return on your operational labour costs then becomes much greater.
With inventory receiving, as one example, many businesses see bottlenecks happening due to time-consuming manual processes and trying to track inventory using spreadsheets or multiple different systems. ERP can make the receiving process much more efficient, reduce the manual workload and increase the capacity for stock receiving.
Are you seeing time wasted in other areas of the business with fixing manual errors, waiting for reports, and checking and re-checking information? These are issues when taking ROI of an ERP implementation into account and opportunities to see a better return.
What About the Costs?
All the reductions, savings and benefits discussed so far are only one part of the ROI equation. There’s also the costs to consider, which will differ depending on the type of ERP solution you decide on. Our whitepaper The Real Costs of ERP – On-Premise & Cloud Compared talks about this more detail. But as a general outline, you’ll want to think about the following costs:
- Software licensing
- Hardware and equipment (unless looking at a cloud ERP solution)
- The time & involvement of staff during the implementation
- Ongoing support
- Dedicated testing for system upgrades & new releases (unless looking at a cloud ERP solution)
- Future requirements / scalability
While this is not an exhaustive list of all the ROI considerations, it’s a good starting point to get you thinking about what your business can prioritise. And knowing what you’re about to bite into can ensure you see a healthier return on your investment.
If you’d like to know more about how a cloud-based ERP system can help you sell more faster, reduce operating costs and boost overall profitability, get in touch to start a conversation.