How Enterprises can gauge the ROI on an ERP Implementation?
Whenever an ERP implementation doesn’t hit the bulls-eye, it is perceived that an enterprisehas completely failed to achieve the expected Return on Investment (ROI). Except in the case of complete ERP implementation failure, this perception that a good ROI has not been achieved, has got to do more with a company’s inability to “quantify” the benefits achieved from ERP.
Measuring the quantifiable benefits of ERP might not be an easy puzzle to crack for a company. Companies have to be adequately equipped when it comes to identifying the ROI, not just before the start of an ERP project but throughout the implementation process, to help them get to the right numbers.
So if you want to get a new ERP System in place or want to quantify the benefits of an existing ERP, then following are some of the measurable benefits/parameters that will help you arrive at a right ROI for your ERP investment.
- Reduction in man-hours because of the correct and quick generation of documents – say correct documents related to shipping receipt can save you large amount of money you spend on demur rages. Even one day saved per shipment can easily translate to US$ 50,000 in a year
- Reduction in man-hours spent in documents preparation time (say one person could do 40 vouchers in a day. With the copy/template feature of ERP and quick availability of data, one person is able to do 70 vouchers a day.)
- Impact of better landed cost computation, which helps to take decisions on Product Costing elements with an increase in profits.
- With quick and detailed information available on receivables ageing, your team can chase the receivables better. Say a reduction in receivables ageing by 15 days can tremendously reduce your working capital requirements. It will also let you get more cash by improved collection and reduced bad debts.
- Better control over Sales Returns, Incoming Material Rejection would lead to healthier bottom-lines as well as increased business with more satisfied customers.
- Saving on man-hours spent on Data Consolidation and Reconciliation of Branch Data.
- Import Cycle cut down by 20 days helped reduced Time to Delivery to end-customer and helped increased the customer orders by 50%.
- Reduction in man-hours that go into the calculation of payroll – 400 man-hours every month.
- Saving in man-hours by Centralized/Decentralized Purchasing/Invoicing can be calculated by usage of one system across all locations accessible over the web.