Just for argument’s sake, let’s say you’ve decided there is room for improvement. Whether you are looking to reduce cost, improve efficiency, enable growth or better serve your customers, it may be time to take a serious look at solutions, which help you to improve. The very definition of ERP as an integrated suite of modules may motivate those who struggle with a myriad of disconnected desktop or departmental applications to rethink their enterprise solution strategies.
Making the leap to ERP for Process Manufacturers (Part 2)
So let’s assume you know you need to do something. In all likelihood you have already considered the special functionality that process manufacturers require. Perhaps you have even found the solution that best fits your needs all around. But do you have the budget? How do you build a business case for the actual investment?
Regardless of where you sit in the organizational structure and hierarchy, you need to justify the effort and the expense. You may be leading a selection committee which must make your case to the Chief Financial Officer (CFO) or the Chief Executive Officer (CEO). Or you might be the CEO presenting to your Board of Directors, investors or the owner(s) of the company. Often times in these decisions, the bottom line is just that – the bottom line. How is this investment going to pay for itself? Will these be tangible, quantifiable results that are easily monetized? Or will you produce efficiencies and improved productivity that could indirectly save money or help you produce more revenue?
The seven primary goals of ERP implementations mentioned most often by companies embarking on that journey include:
§ Gain internal efficiencies
§ Reduce costs
§ Enable growth
§ Standardize business processes
§ Improve the customer experience
§ Improve interoperability between sites
§ Improve customer response time
Every ERP implementation, for process manufacturers or in any industry, benefits from a projected a timeline for ROI. Such goals are based on actual bottom line improvements that contribute to the ROI. It’s a mistake to be too optimistic in this pursuit. For example, few companies will achieve payback in a year or less. However, historically, about half the companies implementing ERP hit their ROI target in less than two years.
So where do these projected returns come from? Specific cost savings and efficiency gains will vary quite significantly from company to company and the potential is reflective of both current state and goals set. Some of the possible sources of savings are in inventory costs, as well as operating and administrative costs.
A world class ERP implementation will achieve across a broad group of key performance indicators, which should measure results since ERP as implemented, progress against goals and current performance. Typically, process manufacturers will want to measure and see significant improvement in five main areas.
§ Increase in Production Output
§ Reduced Operating Costs
§ Reduced Administrative Costs
§ Reduced Inventory Costs
§ Reduction in Cycle Time
Continued in Part 3