8 years ago we first published a series of posts entitled “Software That Matters.” It was an ERP implementer’s point of view, culled from long experience, on why and how to purchase a business management software system. Later, we turned Software That Matters into a popular white paper that has since been viewed hundreds of times.
Now eight years later, we thought it was time for an update, to reflect lessons learned since then. (We also did a 2015 update three years ago.) Much of what we wrote then remains every bit as true today. But we decided again to carefully retrace our steps, re-edit our paper, add some comments and present it as a series of blog posts that will carry us through November, 2018. We think that’s timely, as many companies at this time of year tend to reconsider the software they use to run their business — and how they might do better.
In our series we will again try to convey what’s important, what to measure, how to buy, what works, what it costs… and the many other business considerations required of this strategic investment, in what is probably the most important (and expensive) software a company will ever buy. In other words, the Software That Matters.
To a manufacturer, few things are more important than knowing your costs. So our third success story involves a Midwestern manufacturer and distributor of paints, who proudly noted how after implementing their ERP system they were able to capture the true costs for every single transaction associated with a production item. The result was a gross margin improvement within a little over a year of one to two percent – yielding a near-term bottom line improvement of over $200,000 each year over prior best performance. Why? Because for the first time they knew, tracked and could therefore manage and control their production costs, and thus regulate their selling prices more profitably.
The fact that this firm’s CFO could also get a snapshot within seconds of what the month’s overall performance looked like, at any time, was simply icing on the cake.
ERP is a tool, as much as anything else. Smart managers use it to modulate and control production and performance. ERP allows a company to know its costs and associated details, so that it can simply make better decisions, armed as it is now with better information.
After all, the point is not better data, or more data, or even better information (information being the byproduct of data). The point is to convert that data and information into more informed decisions. And that’s what ERP is built to do. That’s why companies use ERP as a key growth strategy. They use ERP’s reporting capabilities to drive better decision-making, pure and simple. Our paint manufacturer did just that, and it led to long-term gross margin improvement, thus returning their initial investment many times over.
One final example from our Case Studies merits mentioning.
This manufacturer of construction products to a variety of markets including manufactured housing, marine, roofing and housing has locations across the U.S. The discipline driven by their use of ERP has given them the flexibility to expand markets both geographically and functionally. In turn, their increased sales drove a demand for better warehousing and the ability to accurately, rapidly and easily ship more products to more customers in more places than previously possible.
Using handheld barcode scanners in the warehouse, staff was quickly and easily trained to pick orders accurately, the first time, every time. This dramatically improved accuracy of fill-rates and sped up shipping. Mistakes were caught before they happened. This resulted in fewer customer returns and complaints, even as they improved ship rates by over 25% (the customer’s own numbers). Without the software, this client noted, they could never have kept up with their increase in orders. Even the auditors were impressed by their year-end inventory accuracy and improved turns, they told us.
These are just two more examples of the overriding principle: that a strategic investment in improving your automation results in dramatically improved bottom line results – in multiple areas, on a continuously improving basis. Real world results, from real world clients, applying the principles and technology of ERP.
In our next post we’ll look at “who benefits,” and how. Stay tuned…