What would you like your business to achieve in the next 12 months? Perhaps you know what you want to achieve, but simply don’t know how to get there.
If you’re a manufacturer who wants to centralise data, drive efficiencies and ultimately improve business performance in 2018, the answer could lie in your manufacturing ERP software. Through reviewing Panorama’s recent report on ERP Systems and Enterprise Software, we’ll demonstrate how effective the right ERP system can be in overcoming your operational challenges:
Reasons for ERP Deployment
The report found that the most common reason for implementing ERP software was to improve business performance (17%). In joint second place was making employee jobs easier and ensuring reporting and regulatory compliance, both with 14%.
Interestingly, there was an 8% increase in the number of organisations that wanted to better integrate systems across locations against the previous year’s results. This suggests that manufacturers have woken up to the value that can be delivered by their ERP system and are prepared to invest more into its roll out.
The ideal level of customisation for an ERP system is between 10 to 20%. Problems can arise outside of this boundary.
For example, 5% of manufacturers said they have a significant to extreme level of customisation on their software. However, this sets alarm bells ringing — if a system needs such a high level of alteration, it’s possible that it wasn’t the most suitable choice for your needs. In addition, such significant customisation essentially overrides the functionality an ERP provider has researched and developed to deliver the greatest success.
It’s a similar story at the other end of the scale. Each business is different so it’s unlikely that an out-the-box solution will fully meet your needs, although it may be suitable for the majority. Interestingly, 12% of those surveyed in the report had no customisation, while a further 13% cited minor customisation (between 1% and 10%).
While this could suggest that these respondents have thoroughly researched and chosen the right ERP solution to the point where no customisation is required, it could potentially be that there is room for further efficiencies within their chosen solution.
However, it is pleasing to see that the majority of organisations maintained within the desired threshold, with 70% of respondents reporting between 11% and 25% customisation rates.
Organisational Change Management
The implementation of ERP software can have a huge impact on how your business operates. Organisational Change Management is a process to manage this impact, streamlining the rollout of the software solution to ensure it is as stress-free as possible for employees.
The vast majority of respondents (84%) said they had a moderate or intense focus on change management, compared to the 16% who said they had very little or no focus. For this 16%, they could be putting their business at risk — to fully understand the impact this risk can have, take a look at how change management issues resulted in Under Armour’s 4.5% dip in sales.
The Importance of an Implementation Plan
Budget overruns are not uncommon for manufacturers implementing ERP software, although they can be avoided or minimised. According to the report, the most common cause of budget overruns was unanticipated technical or organisational issues (27%). With 22%, additional technology requirements were the second most common cause, while 20% cited an expanded project scope as the reason why they overspent on their implementation project.
It’s unsurprising then that expanded scope was the most common reason for project timings overrunning (19%). However, despite this, the average implementation duration decreased by 19% year-on-year, standing at 16.9 months from start to finish.
Of course, circumstances can change over the course of your ERP project. However, disruption can be minimised by creating an in-depth implementation plan that thoroughly considers what you want to achieve and when you want to achieve it by. For more information on how to successfully do so, view our recent post about where to start when planning a new ERP project.
Nearly half (48%) of respondents saw benefits to their business within six months of their ERP project going live. Of these benefits, the most common experienced were increased interaction and integration (13%), greater availability of information (12%) and improved productivity and efficiency (12%).
Likewise, over the 12-month period, there was an 11% decrease in organisations that had not yet recouped the costs of their investment.
The benefits of ERP software are numerous and while highlighting some challenges, the report only works to underline this importance. If you haven’t already considered doing so, it’s time to take ERP implementation seriously.