Juicing your business with a new ERP system

As a business leader responsible for making decisions in a competitive market, you’re constantly challenged to improve or even transform your business. While you may have heard that an enterprise resource planning (ERP) system can help achieve that goal, is the effort really worth the investment?

Selecting and implementing an ERP can be both exciting and transformative, but the exercise brings risks that must be navigated. How can you maximize the return on investment (ROI) if you decide to boost your business and up your ERP game?

ERP explained

An ERP system is a software application that integrates a variety of functions, such as accounting, inventory, human resources, sales and customer service, to help you manage your business better. A properly selected and implemented ERP can help streamline operations, improve efficiency and ultimately increase your organization’s profitability. Implementing a new ERP system, however, is neither cheap nor simple.

Rather, it’s a complex endeavor that involves changing business processes, training and reskilling staff, integrating systems and migrating data — all while minimizing risk and disruption to your current daily operations, oftentimes with employees who, while they may hate their current system, know it well.

Yes, change is difficult.

Before deciding to invest money and time in a new ERP system, it’s critical to define and document a clear understanding of the project’s benefits and costs. Additional critical success factors include establishing quantifiable and measurable outcomes that demonstrate the value of the effort.

Calculating the potential ROI of a new ERP system is imperative — it helps determine whether the outcomes are greater than the effort (i.e., “the juice is worth the squeeze”). That’s a question other members of your leadership team will ask often.

Benefits and key drivers

Here are some of the benefits and key drivers of investing in a new ERP system and maximizing your organization’s ROI.

• Cost savings: Automating manual tasks, eliminating errors and duplication, and optimizing how your resources work can result in a significant reduction of operational costs and dramatic improvement in efficiency.
  • Labor costs are substantially decreased by minimizing data entry and manual reconciliation. According to a study by Aberdeen Group, companies that have successfully implemented a new ERP system experience a 25% reduction in data entry errors and a 30% reduction in data entry time — allowing team members to spend more time analyzing the business and looking for opportunities to improve operations. 
  • Organizations that have leveraged an ERP system’s built in “best practices” in areas like demand forecasting and inventory management have decreased inventory costs dramatically while improving visibility of the products they have. In our experience, we’ve seen companies reduce inventory levels by 20%, carrying costs by 15% and stockouts by 17%.
  • Furthermore, many companies are able to reduce their IT costs by consolidating software applications and reducing maintenance and overall IT support expenses. Research has shown that companies' IT staff were reduced by over 25% and IT spending by a similar percentage after stabilizing on a new ERP system.

• Revenue growth: ERP systems can also help increase revenue by enhancing customer service, expanding market reach and creating new opportunities. For example:
  • New ERP systems and the improved processes that accompany them can improve customer satisfaction and retention by providing faster and more accurate service. Nucleus Research has found that companies with an ERP system increased their baseline customer satisfaction by 11%, customer retention by 9% and customer referrals by 8%.
  • Expanding market reach can also be achieved by integrating with e-commerce platforms or other third-party applications. In a study by IDC, companies with ERP systems increased their online sales by 19%, cross-selling opportunities by 18% and international sales by 17%.
  • Offering personalized and customized products or services can also open the door to new opportunities. We’ve seen companies that successfully implemented an ERP system increase their product innovation by 22%, product customization by 21% and product quality by 20%.

 Is an ERP system right for your organization?

Here are tips to consider when selecting the best ERP solution for your business:

• Define your goals: Before the ERP solution research and selection begins, it’s critical to have a clear vision of what you want to achieve with a new system. What are your current pain points or challenges you need to resolve? What are the key performance indicators (KPIs) required for improvement? How will you measure the project’s success?
• Assess your needs: Once goals have been defined, it’s essential to understand your current environment to identify specific needs and requirements. What are the existing business processes that need to be optimized or changed? What are the functional and technical capabilities needed from a potential ERP solution?
• Evaluate your options: Upon completing a thorough business needs assessment and software selection, you’re now ready to evaluate the different options available in the market. Using a variety of criteria for comparison will enable you to identify an ERP solution that best meets your needs; the criteria include features, functionality, scalability, flexibility, compatibility, security, reliability, usability, support, initial cost and total cost of ownership. Asking for references or testimonials from other customers who’ve used the same or similar solutions will help support (or challenge) your decision on the “best fit” solution for you. 
• Choose your provider: The most successful ERP implementations include your team, the software vendor (or systems integrator) that configures the solution to your desired design, and a third party that serves as an extension of your team to help keep the project on time and on budget, brings design experience and helps lead the organization through the change. This “three-legged stool” provides the most stable structure to take on the challenges of an ERP implementation. 

Ready to boost your business with a new ERP system?

Our subject matter specialists can be your guides to support every step of the process — from planning and design, testing and deployment, to user training and adoption — to help ensure a successful implementation that achieves your ERP goals.

Contact Mazars for a free consultation, and let’s discuss how we can help assess your organization’s needs and help select the right ERP solution for you.

The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.