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Take costs of ERP implementation into account to avoid surprise

Take costs of ERP implementation into account to avoid surprise

Creating a plan for understanding the costs and advantages of an enterprise resource planning system before the ERP implementation process begins should be a priority for companies considering using such software.

ERP software involves a significant commitment of resources, both in terms of time spent researching systems and educating employees, as well as financial obligations. When properly implemented, the continuing return on investment from these systems – including cost reduction and increased operational efficiency – significantly outpaces the associated price.

However, when businesses don't take organizational needs and desires for their ERP into account, it can lead to "sticker shock" when the final costs are presented, along with long-term dissatisfaction due to incomplete or insufficient training efforts. There are plenty of ways for companies to avoid these ERP pitfalls, including careful vendor selection, the establishment of implementation teams and pre-purchase research.

Understand where the cost savings come from
SearchManufacturingERP points out that businesses will realize their return on investment in different ways, depending on current organizational structure and systems presently in place.

For example, companies that already have significant automated practices in place may not find significant savings coming from the automation aids that come with ERP use. However, there may be appreciable cost reductions offered by data integration features that were previously lacking. Organizations need to take stock of their operational structure and understand where the pain points are along their supply chain, inventory, financial and other management and reporting structures to get the most out of ERP.

One area that may be lacking in efficiency for manufacturing and warehousing businesses is the sharing of information across separate physical locations. Aberdeen Group reports that, according to a survey of manufacturers, 30 percent have significant issues with sharing information and operational standards, while 38 percent want to deal with future growth.

Modular solutions allow resource focusing
Businesses that want to limit total spend on ERP should consider the use of modular software like Microsoft Dynamics NAV to better meet their needs. Companies can choose specific add-ons to target unique operational needs without having to commit money for features that aren't particularly effective. This kind of setup can present other advantages as well. Training and education efforts can be focused on the specific modules being installed, increasing operational knowledge in areas where it is most needed.

Posted in: ERP Solutions

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