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Let us start this post by saying that the Enterprise Resource Planning (ERP) market remains to be strong. With reference to last years’ Gartner’s global market report, the market grew by 3.8%. Meanwhile, the result of Gartner’s 2014 analysis of ERP market players and its prediction of the industry in the years to come seems to be showing positive signs of growth too.
[pullquote]Why ERP software is essential for your business?[/pullquote]Here is our best answer on that: ERP can decrease your annual operating expenses and overhead costs. For instance, in a manufacturing setup, ERP systems aid manufacturers in process improvement, thus, enabling them to use their fixed assets more efficiently and at the same time lower their productions costs. For wholesalers and distributors, reducing your inventory stock level by as much as 20% and improving your order fulfilment by 20% is achievable if an ERP system is in place. For independently working professionals, you can improve your billing and invoicing methods (of your billable hours) by as much as 40%.
What is our ultimate basis for this answer? It’s ROI. Calculating the Return on Investment (ROI) in an ERP system will tell you the right (if not the exact) figures. Yes it’s true ROI can be simply interpreted as dividing your gross profit or revenue (return) with the amount you invested (cost) on the ERP solution, but ROI still depends on how you are going to define and manage your process improvement objectives. Since some improvements can be common across all businesses and it can also be unique to a specific organisation, calculating ROI can be more of a simple arithmetic. What we’re just trying to point out here is that sufficient knowledge on calculating ROI will help you determine how essential ERP software really is for your business.
As far as ERP benefits go, there are absolutely a lot of them regardless of whatever software brand it is tied in. Here’s ITQlick’s shortlist of these benefits – which we believe are the top benefits every business is looking to have these days.
- Improving your reporting and analytics functions by improving the quality of your business data.
- Lowering your cost of operations by introducing innovations in managing your resources.
- Strengthening your relationship with your customers and stakeholders as a result of improving your business processes.
- Overall improvement of your supply chain operations (souring, procurement, forecasting, logistics, etc.), strengthen your compliance with regulations (trades, financial, environmental, etc.), and reduce the complexity of your human resource chain all because of a neatly designed system of workflows.
- Further improve the overall quality and efficiency of your business because of informed decision making.
Let’s drill down a bit more on ERP’s essentiality. All these ROI facts and list of benefits cannot happen without the proper implementation of an ERP system. It’s typically common, most of these software providers will share with you their customers’ success stories relative to ERP – but not the failed stories of a few. The reason why we brought this up is because this is actually one of the most important things to talk about beyond the software matter – how to manage ERP implementation properly and avoid failures.
So in relation to that, here are then our brief but helpful tips on ERP implementation.
1. Understand in-depth these four costs involved in running a complete ERP implementation project:
- Software Cost
- Maintenance Cost
- Hardware Cost
- Implementation Services Cost
2. In order to avoid budget constraints, be mindful of these implementation services and device plans so you can
- manage and execute them properly.
- Requirements Analysis
- Data Migration
- Project Management
3. This is not the exact ratio but this is the closest estimation (by experts) relative to budget. The ideal ratio of software to implementation services is 1:1. It can eventually climb up to 1:1.5. With this ratio in mind, you and your team’s “should-be goal” is to find ways you can be able to reduce your expenses relative to implementation services,
and make your budget work.
Finally, here’s our conclusive thought. ERP software is essential for your business especially if it is properly implemented. For this reason, we therefore recommend that you read this post on the Top 5 ERP Software for Large Businesses.