If you’re looking into investing in an ERP system, you’ve read about all of the benefits that they bring to organizations. One of those benefits is higher productivity.
Productivity gains are considered a hidden source of ROI because they’re harder to quantify. However, they’re no less important than other advantages that ERP systems bring to companies. Read on to learn how you can harness the power of increased productivity thanks to an ERP implementation.
To understand how ERP implementations make firms more efficient, it’s important to understand how they work.
An ERP system has a centralized database that stores vital information about the company’s operations. The database isn’t static; it consumes information from other digital repositories within the firm. Whenever one of those sources is updated, the information in the ERP system is automatically updated, too.
How does this boost productivity? Employees no longer have to spend time maintaining disparate sources of information such as spreadsheets. We’ll use an example to illustrate.
Let’s say that employees at a manufacturer must manually enter every single order they receive. This is a time-consuming process because it’s paper-based. Now, let’s say that company implements an ERP system. Employees no longer need to manually enter order information on paper. All they have to do is type in the order and they’re done.
When you spend less time on administrative tasks such as entering orders, you can devote more time to getting your job done. In the case of employees on the manufacturing floor, perhaps that’s creating more of the product or focusing on maintaining equipment so there are fewer breakdowns. You’ve streamlined your processes to make your firm more efficient.
There have been a number of studies that measure the impact of ERP implementations upon a company’s efficiency and productivity levels.
In 2001, a study carried out by Robin Poston and Severin Grabski showed that after ERP implementations, the companies they researched were able to achieve higher revenues with fewer employees. In addition, it cost less money for those businesses to produce their goods after the implementation.
A 2006 study performed by German researcher Benjamin Engelstatter showed that companies which had implemented ERP systems had above-average productivity. Conversely, companies that hadn’t implemented ERP systems had below-average productivity.
Productivity is strongly linked to revenue. When you invest in technology that makes your employees more productive, you’re investing in your firm’s future profits. You’re making formerly time-consuming, possibly labor-intensive processes faster and easier than ever before so that employees have more time to get the work done that makes money for their businesses.
Productivity is a hidden source of ROI for ERP implementations. Every company wants to be more productive, yet it’s difficult to quantify how much this type of technology can help your firm. By understanding where hidden sources of ROI are, you can get the most out of your ERP implementation.