Before your company embarks on an Enterprise Resource Planning (ERP) implementation journey, it’s crucial to build a business case to calculate the potential ERP ROI (Return on Investment), Taking this step will shine a light into all the corners of the business to reveal the challenges and pain points that are holding the 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 to not only create a compelling case for investing in an ERP system but also sets the stage for determining the potential ROI for that investment.

Are you wondering where to start looking? Here are key six areas where, by quantifying the impact of inefficiencies, you will be able to calculate ERP ROI on your investment:

1. Unorganized and Inefficient Processes

In many circumstances, manufacturers’ sales teams will enter a customers’ data into one system, the inventory team tracks stock levels in another, and the production team uses a third system. This type of fragmented approach results in 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 was received, 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 deadlines.

ERP software allows all departments to view the same data. Sales can view inventory quantities and production jobs. Inventory managers can plan replenishment to satisfy demands from sales and production. Production can see sales demand and plan accordingly. All departments are more efficient and proactive, and there are fewer errors.

2. No Real-time Visibility

Manufacturers struggle to get a real-time view of their operations, which hinders their ability to make informed decisions. They are forced to rely on reports from outdated spreadsheets and systems to gather information. Without any real-time visibility, the manufacturer struggles to identify bottlenecks, optimize resource allocation, and respond quickly to changing market conditions.

An ERP system lets you see manufacturing data accurately in real-time. The ERP also monitors crucial metrics, such as production schedules, job statuses, and job costs at any given moment and adjusts promptly to market demands.

3. Lack of Inventory Management

Does your business encounter frequent stock-outs, resulting in delayed orders and lost sales? Do you maintain excess inventory to compensate, which results in tying up valuable cash and increases your carrying costs? This is a common trend that occurs often across manufacturing businesses of various sizes and all industries.

Once you deploy an ERP system, you get real-time visibility in your inventory levels. It moves beyond basic inventory tracking and provides automated replenishment processes. By analyzing supply and demand data such as sales orders, inventory levels, purchase orders, and more, an ERP system helps your business optimize stock levels. Taking this step ensures 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.

4. Manually Generated Financial Reports

Many companies continue to rely on manual processes for generating their financial reports. These are time-consuming and prone to errors, as well as difficult to audit. Businesses manually collect data from various systems like inventory management, sales and purchasing for reporting purposes. Finance teams then spend hours manually reconciling all the data, which compromises accuracy and consistency.

Implementing an ERP system automates this process, allowing for timely and accurate generation of financial statements and reports. With built-in compliance features like standardized accounting practices and automated reconciliation, you can improve financial accuracy, facilitate auditing processes, and ensure compliance with accounting compliance.

5. Narrow Customer Information

Gaining a comprehensive view of customers is critical to provide personalized and efficient service. Manufacturers often find it challenging to consolidate customer data from various sources which makes it difficult for them to offer personalized solutions. The CRM captures quotes and values; neither system has a complete view of the customer. This situation can often lead to missed revenue opportunities and customer churn.

An ERP system aggregates and centralizes customer information. It includes purchase history, preferences, and communication records to give you a 360-degree view of your customers. This unified data gives you valuable insights into their behavior, preferences, and interactions which can help you deliver personalized experiences, tailor your offerings, reduce churn, and cultivate stronger customer relationships.

5. Issues with Regulatory Compliance

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 prove complex for manufacturers to remain compliant: 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. It consolidates data from multiple sources into a centralized platform. Automating compliance processes means your business can reduce the risk of errors, improve data security, and show a commitment to regulatory compliance.

Quantifying inefficiencies in manufacturing is required for identifying areas of improvement and realizing ERP ROI. An ERP system is essential for addressing multiple challenges, such as:

• Issues with regulatory compliance
• Lack of inventory management
• Manually generated financial reports
• Narrow customer information
• Unorganized and inefficient processes

Automating operations, streamlining tasks, and providing a comprehensive data analysis to customers with an ERP means that manufacturers can achieve manufacturing excellence. The ERP also opens the door to financial success and higher levels of customer satisfaction. For more information about ERP ROI, contact us today to speak to a systems expert.

Robert Baran

Robert Baran is the founder and President of PositiveVision. He has worked in a variety of positions including system analyst, computer consultant and programmer, project manager, and division manager.