The benefits of these implementation costs are a bit vague, nebulous and can be harder to quantify. This makes the task of confidently investing in a new ERP system somewhat challenging.
This is a phenomenon we observe for many of our clients. The downside of not reconciling the costs and benefits of a new ERP system is that you are more likely to wait until it’s too late to implement a new system – or, at the very least, wait until you have no choice but to replace your system.
How can you accurately weigh implementation costs versus the cost of waiting and continuing to experience inefficiencies?
1. Quantify the costs of inefficiency. Your current processes are likely broken, inefficient and ripe of opportunities for improvement. Those costs are very real and very tangible, even though they may not seem as concrete as the known line items on your implementation budget. Your employees, customers and executives are all feeling these costs, so it’s your job to quantify them. These costs will become even more real once you define how much time is being wasted on current activities and how much time automating some of those processes could save. Apply these time savings to decreased labor costs and other process benefits and you will be able to paint a picture of the measurable costs that will be saved by implementing a new system.
2. Have a clear vision of what your ERP implementation can and should do for your organization. In order to complete #1, you’ll need to have a clear vision of where your organization is headed and what you expect to get out of your ERP system. If you’re like most clients we work with, you may not have any doubt that a new ERP system is right for you simply because your legacy system is so outdated. However, this isn’t a good enough reason to implement ERP. You must define what exactly you want to get out of your system – increased inventory turns, increased sales, reduced process cycle times, less labor costs or whatever specific benefits you expect to achieve. Only when you have done this can you quantify the costs of inefficiency.
3. Define how your organization will achieve those benefits. Numbers in a business case are meaningless without clear and tangible steps for how to achieve them. Your team should outline the steps and assign ownership. For example, which specific software modules and business process changes will be required to achieve the benefit of increased inventory turns? How exactly will processes be changed to reduce your process cycle times? Answering questions such as these will ensure that you realize expected business benefits rather than creating a business case that collects dust. It will also provide a strong foundation for downstream organizational change management, training and employee communication activities.
Unfortunately, there is never a good time to start an enterprise software initiative, but it’s something that most organizations need in order to remove inefficiencies, scale for growth, increase revenue and improve delivery to their customers.