With a hat tip to the folks at Panorama Consulting, we’ll use some of their thoughts and some of our own to provide a little guidance this issue to understanding the return on investment (ROI) of your business management (or Enterprise Resource Planning) system.

ERP systems aren’t cheap, in terms of both labor and effort, so it’s important that companies realize a tangible and lasting return on their investment.  Since, simply put, ROI can be defined as…

• The cost of software licenses – these can be for ‘full’ users, ‘lite’ users, ‘machine’ users or some other variant.  But taken together they represent the initial cost of base software.  Don’t forget to add in additional users and other functionality you may add later.
• Hardware – If you’re implementing on-site, add up all those hardware, networking and infrastructure costs.  If you’re using the cloud, it will consist of monthly usage fees mostly, and be a lot less at least on a monthly basis.
• Implementation costs – These represent the not insubstantial cost for the consultants, trainers and programmers responsible for implementing your system all the way up through the day you go live (and perhaps a few days after).
• Change Management – These are the (mostly) training costs associated with revamping the way you do things and learning how to most effectively use your new system.

The more subjective part of the equation is the “Value” of the investment.  There are many ways to do so and they vary from business to business.  But the following value recaptures are common:

• Reduced operating expenses – These include most notably…
  • Labor – Tasks that formerly required skilled labor and are now automated.
  • Logistics – The benefits of storing all data in a single repository, and thus the elimination of (usually) an enormous amount of excess labor and duplicate entry, combined with improved scheduling, better delivery and logistics, and so on.
  • Utility costs – from reduced costs for physical plant, servers, networking equipment, and lowered electric costs overall.  Seems like a small thing, but it all adds up.
• Shorter sales cycles – ERP usually produces reduced lead-to-sales times, not to mention improvements in delivery capabilities.  CRM (Customer Relationship Management) components of ERP improve customer and prospect visibility, follow-up rates, contact management regularity and pipeline reckoning — all of which serve to improve sales.  So don’t just look at shorter sales times… look also at increased sales overall.
• Streamlined supply chains and lower cost of goods – Examples include purchasing efficiencies gained by consolidated ordering that results from better visibility of pipelines and purchasing/sales trends.  Reduced expenditures on personnel from having all the information in the hands of everyone, all coming from a single repository, can also add up fast.  Streamlined supply chains benefit from the data and reporting inside your ERP system as they improve your overall sales, customer, costing and workflow visibility.  These are just a few examples — you’ll find many more when you do your own internal analysis

Then: Do the math!  From the formula stated above, you can begin to calculate your ROI.  The mere exercise of the thinking will get you to drill even more deeply into the real cost savings, as you explore more carefully the subtle, and often not-so-subtle, cost reductions (or sales improvement) available within your own firm, your customer base and your supply chain.

Companies don’t buy ERP systems because they are fun or expensive.  They buy them because they pay for themselves in improved productivity.  It’s a strategic investment.  And once those costs have been recouped, they continue to pay benefits year after year after year.

So go ahead… do your own math.  Use your own numbers, factors and key considerations.  If you’re honest with yourself and complete in your analysis, you’ll probably end up with only one question: Why didn’t we do this sooner?

Questions about your system needs, or about moving to the cloud? We urge you to contact PSSI directly at 877.273.2444. We’re here to help!

PSSI has been implementing ALERE manufacturing software for over 25 years, and we still think it’s one of the best-priced, best-functioning software products you can buy anywhere.  Users appreciate ALERE’s flexibility over many other systems. 

Trial packages, as pointed out in a recent article from the publishers of ALERE software, can be a powerful incentive.  But they also require a dose of reality.

As TIW Technology President Rod Hatcher wisely points out: “By its nature, an ERP package is a large and complex software program and, without guidance and training, a client can become easily frustrated with ALERE.”  He reminds dealers that it behooves us to set the expectations for the Trial Package.

Rod continues… “What are those expectations? Prospects can experience firsthand the ribbon menus, how smoothly they operate, and the user environment using Fetch, screen-on-screen, and browsers. They can acquaint themselves with where the basic functions of ALERE reside, the ease of access, and view the range of reports.

“Since a sample company is installed with ALERE, the prospect can try basic processes such as processing a simple sales order or editing a bill of material. There is also sufficient data to run most reports and view the different output methods.”

But Rod also notes the limitations.  While some more complex functions can indeed be experienced in a trial package, entering data beyond a pretty simple level is often best avoided, since it can quickly become  challenging trying to use options and processes that require training to understand.  In other words, know your limits.

That’s why WE exist.  As resellers for TIW, we bridge the gap between simple sample-data and demos to fully understanding how a full ERP system is best implemented for your unique needs. 

• Want to Learn More About ALERE?

TIW has a 7 minute “Manufacturing Overview Video“ on YouTube that gives a concise summary of what manufacturing software can do for you.  Click the link below to see why ALERE may be a great fit for your manufacturing operations.

• Interested in a trial version for your organization?

PSSI can work with you to understand better what a manufacturing software system can do for you.  For information on obtaining a trial version, contact Larry Lukasik at the number below.

To learn more, call us any time at 877.273.2444, or visit us on the web.