• LinkedIn
  • Youtube
Industry Insights

What’s the real ROI from your manufacturing ERP system?

What's the real ROI from your ERP system?

An investment in a manufacturing ERP system isn’t something to be undertaken lightly. Because, fairly obviously, manufacturing ERP systems are costly, requiring significant resource inputs in the form of cash, IT infrastructure, and training. So naturally, you’ll want to make sure that the ROI from manufacturing ERP meets your expectations. 

That said, in our view many manufacturing businesses have expectations of an ROI from manufacturing ERP that is far too low.

Some businesses, in fact, have no real expectations of an ROI from manufacturing ERP at all, particularly when migrating from one vendor’s offering to another, or installing a newer and upgraded version of their existing system.

At Kerridge Commercial Systems, we think that’s a mistake. In our view, there should always be an ROI from manufacturing ERP—and moreover, manufacturing businesses should always assess themselves against that targeted ROI, taking steps to correct matters if the achieved ROI is off-target.

In short, a stance which argues there’s no point looking for a ROI from manufacturing ERP, because such systems are universal, with every manufacturer having one, significantly misses the point. Because your manufacturing business is investing hard-earned cash—and is entitled to see a return on that cash.

 

ROI from manufacturing ERP: look, and you’ll find

A lot of the difficulty comes about because most of the ROI from manufacturing ERP is fairly diffuse. In other words, the gains come from lots of incremental improvements, rather than one or two ‘Big Bang’ benefits.

But—to repeat—that doesn’t mean that such gains shouldn’t be targeted, and, post-implementation, shouldn’t be measured and validated. So where do these incremental gains arise? Efficiency improvements, for one thing: less re keying of information from system to system, far less time spent correcting the inevitable errors, and far less time hunting for data. Plus, of course, the gains from faster, slicker business processes, and improved workflow. Manufacturing and supply chain improvements, for another. Better inventory control and reordering systems.

Greater visibility into supplier performance. Greater visibility into procurement spend, and so on. Again, there’s a concrete ROI, if you look for it: shorter lead times, reduced inventory levels, fewer stockouts, and less time spent processing sudden rush orders, for instance. Moreover, a new manufacturing ERP system opens the door to new technologies.

Analytics, for instance. Mobile. End-to-end barcoding. Improved integration with third-party ‘best of breed’ systems, perhaps located in the Cloud. And each, in its own way, offers a greater ROI from manufacturing ERP. The question: how to capture this ROI—and make sure that it is sustained over the longer term?

 

ROI from manufacturing ERP: get what you pay for

At Kerridge Commercial Systems, we believe that it’s important for manufacturing businesses not to lose sight of the potential ROI from manufacturing ERP. Yes, it might be diffuse, arising in multiple ways from multiple sources.

But that, in itself, is no reason to take the soft option, and assume that it won’t be delivered. So yes: it’s a viewpoint that is a little hard-nosed. But if a department or function within the business can operate more efficiently, then the management of that department or function should be accountable for those efficiency gains. Likewise, if the supply chain—or the factory floor—can operate more effectively, then those gains should be targeted, and steps taken to ensure that the gains are duly delivered by the managers in question.

Because, left to their own devices, that might not happen. For who isn’t a little more comfortable with a few extra staff, a little extra inventory, and lead times that are slightly longer than they need to be?

 

ROI from manufacturing ERP: how a ‘health check’ can help

How to make this happen? One option is to talk to us. For our existing customers, we offer ‘health checks’ that help them to see if they are on track for the ROI from manufacturing ERP that they originally anticipated.

And if not, why not? For manufacturing businesses who aren’t customers at present, we can help them to think to through what their ROI from manufacturing ERP might be, again through deploying our ‘health check’ methodology. So if the ROI from manufacturing ERP is of interest, why not contact us? You've nothing to lose.

 

 

 

Categories: Manufacturing, ROI

Subscribe to the Industry Insights Blog