COST VERSUS BENEFIT
ERP implementation projects require significant investment in terms of
both time and resources. Here we list some of the benefits commonly cited by
organizations when contemplating an ERP implementation project. In addition to
financial benefits, we discuss some of the other benefits that may be realized.
FINANCIAL BENEFITS
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 organization
translating into a direct cost saving in labor; you may be able to better
control spends 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 favorable 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.
OTHER BENEFITS
ERP implementation presents the opportunity to realize gains that may
not be measurable financially such as:
Standardized
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
organizational transparency
Removing ambiguity from processes
about role and responsibility can drive accountability across the organization
By combining these benefits with the expected financial benefits, the organization is well placed to judge whether the investment in the ERP the implementation project is justified.
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