For many businesses, measuring the return on investment of enterprise resource planning software means calculating how long it takes for time and cost savings to pay for the system, in essence. This is an important aspect of the overall ERP experience and shouldn't be overlooked. After all, a system that can't eventually pay for itself can't truly be considered a success. However, companies also need to determine the wide variety of immediately measurable and less-quantifiable benefits that an ERP system brings to the table. It can be hard to objectively measure advantages such as increased visibility or better collaboration and assign a cost value to them, but these kind of advantages can't be overlooked.
For manufacturing and warehousing businesses, the need to measure all kinds of return on investment for ERP is especially important. Because these organizations have so many different areas of operation that can be helped by ERP – from stocking and inventory to finances and production – there are more areas where "soft" advantages, which are harder to measure with concrete dollar figures, can appear. TechTarget pointed out the need to measure organizational change as well. If a business has to drastically alter operations to use an ERP system, then the ROI suffers. Oh the other hand, positive change at a business can boost ROI.
Improve ROI from the start
Manufacturing website Reliable Plant highlighted two critical factors that enable ERP to pay for itself more quickly: Adoption needs to be motivated by major business needs that can be improved by such a system, and implementation needs to be quick and free from complications. By reducing possible drains on ERP effectiveness, companies can begin to pay for a platform sooner and realize the benefits for a longer time.
One way that manufacturers and warehousing operations can make these positive changes and get more out of ERP is to go modular with a component-based program such as Microsoft Dynamics NAV. Organizations can optimize their ERP systems by selecting modules that provide desired functionality without having to spend on unnecessary features or engaging in lengthy and costly customization efforts. Companies can bring down the ROI timeline and better quantify the benefit of each module by using such an approach.
Learn how to define your ERP strategy by downloading the white paper entitled "ERP in Manufacturing: Defining the ERP Strategy" from the DMS website today.