During his or her pitch, your ERP salesperson most likely highlighted statistics about how much you can save – “you’ll see a 20% reduction in this cost” or “you’ll see a 40% saving in this area.” That tends to be an effective sales approach and gets results, because everyone wants to achieve these goals.
However, it’s also important to think more broadly about other areas of ROI for ERP systems, because you can get a better idea of what the software is capable. Read on to learn how lower operating costs are a less obvious, though no less important, source of ROI.
How efficient are your current processes? At many companies without ERP systems, the answer is, “not very.”
There tend to be many duplicate processes in place. More than one person could be keeping records on the same thing (for example, sales numbers or inventory figures). Not only does such duplication take up time and effort, it can lead to problems in which people don’t know whose numbers are “the truth.”
As part of an ERP implementation, information is compiled and stored in a central source. The ERP then draws from that central source of information.
As a result, there are no more multiple versions of the truth. There’s one definitive version of facts. Moreover, no one has to spend time manually entering data, because the ERP system automatically updates itself when new information is added to the system.
Moreover, it takes time to look for data, especially if it’s stored in disparate data sources. That’s even more true when you don’t know where those disparate sources are located. As everyone knows, in business, time is money, and when you waste time, you waste money, too.
You might be reading this and say, “Well, all of that is nice, but how does it lower my costs?” ERP systems lower costs because they make processes more efficient.
When processes are more efficient, employees spend less time on administrative tasks and more time on work that adds value to the company. And when you spend less time doing work that doesn’t add value, you lower your costs.
While there are plenty of anecdotes about how ERP implementations lowered operating costs because companies became more efficient, it’s always better to deal in cold, hard facts. A report from the Aberdeen Group showed that firms which implemented ERP systems saw a 20% reduction in operating costs.
When the ERP system salesperson starts talking about hard numbers, pay attention – those are important facts to know. That being said, don’t be afraid to ask about hidden sources of ROI for your ERP implementation. Knowing the less obvious benefits of your ERP implementation help you maximize its value so you can run a more efficient, cost-effective, and profitable organization.