In one of my previous blogs, “The Importance of Building a Business Case for ERP,” we looked at the significance of strategic planning and creating a solid business case before embarking on an Enterprise Resource Planning (ERP) implementation journey. Building your business case gives you an incredible opportunity to examine your existing operations very closely. It’s like shining a spotlight on every corner of your business to identify pain points and challenges that are holding your business back.
By quantifying inefficiencies, you can paint a clear picture of where your precious time, resources and productivity might be slipping away. It helps you not only create a compelling case for investing in an ERP system but also sets the stage for determining the potential ROI of that investment.
I often get asked about where to start looking so here are the six key areas where, by quantifying the impact of inefficiencies, you will be able to demonstrate an ROI on your ERP investment:
- Disjointed and Inefficient Processes:
I come across so many manufacturers where their sales team enters customer data into one system, the inventory team tracks stock levels in another and the production team relies on yet another system. This fragmented approach leads to redundant data entry, lack of coordination and inefficiencies that consume valuable time and resources. Often deadlines get missed as the production teams are unaware that an order came through despite the salesperson entering the information into their system. There is no way for the production or inventory teams to stay on top of deadlines, materials required and production schedules.
With an ERP, all departments are looking at the same data. Sales can see inventory quantities and production jobs. Inventory managers can plan replenishment to satisfy demand from sales and production. Production can see sales demand and plan accordingly. Everyone is more efficient, proactive, and there are far fewer errors.
- Lack of Real-Time Visibility:
Manufacturers often struggle to obtain a real-time view of their operations, hindering their ability to make informed decisions. They rely on outdated reports from disparate systems and scattered spreadsheets to gather information. Without real-time visibility, they struggle to identify bottlenecks, optimize resource allocation and respond swiftly to changing market demands.
An ERP system lets you see manufacturing data accurately and in real-time. It can help you monitor crucial metrics such as production schedules, job statuses and job costs at any given moment and promptly adjust to market demands.
- Poor Inventory Management:
Does your business face frequent stockouts, resulting in delayed orders and lost sales? To compensate, do you maintain excess inventory which ties up valuable cash and increases your carrying costs? This is a trend that I see time and again across manufacturing businesses of all sizes and across industries.
Once you implement an ERP system, you’ll have real-time visibility into inventory levels. It goes beyond basic inventory tracking and offers automated replenishment processes. By analyzing supply and demand data such as sales orders, inventory levels, purchase orders, and more, an ERP system helps you optimize stock levels, ensuring you have the right amount of inventory at the right time so that you can minimize your inventory carrying costs and never lose sales due to operational disruptions.
- Manual and Error-Prone Financial Reporting:
Many organizations still rely on manual processes for financial reporting, which are time-consuming, prone to errors and difficult to audit. If this sounds familiar, you are not alone. Businesses manually collect data from disparate and independent systems like inventory management, sales and purchasing for reporting. Finance teams then spend hours manually reconciling all that information which compromises accuracy and consistency.
Implementing an ERP system automates this process, enabling accurate and timely generation of financial statements and reports. With built-in compliance features, such as standardized accounting practices and automated reconciliation, you can improve financial accuracy, facilitate auditing processes, and ensure compliance with accounting standards.
- Limited Customer Insights:
Gaining a comprehensive view of customers is essential for providing personalized and efficient service. However, manufacturers often struggle to consolidate customer data from various sources which makes it difficult for them to offer personalized solutions. The CRM captures quotes and customer interactions and the sales order system captures orders and values, but neither system has a complete view of the customer. This can lead to missed revenue opportunities and customer churn.
An ERP system aggregates and centralizes customer information for you, including purchase history, preferences and communication records to provide you a 360-degree view of your customers. With this unified data, you gain valuable insights into their behaviour, preferences, and interactions which can help you deliver personalized experiences, tailor your offerings, reduce churn and cultivate stronger customer relationships.
- Regulatory Compliance Issues:
Regulatory compliance requirements for data privacy laws such as GDPR, HIPAA, and SOX, impose specific obligations on manufacturers to protect sensitive data, ensure data privacy, and maintain accurate financial reporting. While these regulations aim to safeguard your customers’ data, protect sensitive information and promote transparency in business operations, it can be a complex task for manufacturers to remain compliant as data is often scattered across multiple systems. Due to manual processes, maintaining an accurate audit trail is often challenging as well. Non-compliance carries the risk of fines, penalties and legal action.
You can effectively and easily manage your compliance requirements with an ERP system which consolidates data from various sources into a centralized platform. By automating compliance processes, your business can reduce the risk of errors, improve data security, and demonstrate a commitment to regulatory compliance.
Quantifying inefficiencies in manufacturing is essential for identifying areas of improvement and realizing ROI. An ERP system addresses many challenges related to disjointed processes, lack of real-time visibility, poor inventory management, manual financial reporting, limited customer insights and regulatory compliance issues. By streamlining operations, automating tasks and providing comprehensive data analysis, an ERP system empowers manufacturers to achieve operational excellence, enhance customer satisfaction and drive financial success. If you would like to learn more about how SYSPRO can help, you can reach out to us here
