We hope you have enjoyed our summer article series on reducing manufacturing costs and have taken full advantage of our whitepaper offers. As we highlighted in our first article of the series, an ERP system can reduce manufacturing costs up to 20%, help you achieve inventory reduction and improve your overall efficiency. However, despite these proven benefits, many manufacturing companies have yet to adopt ERP systems. What these companies fail to realize is that ERP systems not only reduce manufacturing costs, but they also have an overall positive impact on the organization.
In addition, newer ERP systems help manufacturing companies reduce manufacturing costs by 30%. While it is true that companies employing ERP systems derive significant operational benefits to help manage their businesses, the age of the ERP system can have a continuing impact on the benefits that companies can achieve. The largest cost and inventory reductions are seen within the first two years of an ERP system’s life, while systems that are more than seven years old lack the customization and easy upgrades necessary for an ERP system to operate at its full capacity. For this reason, manufacturing companies should consider reevaluating their ERP systems once they hit the seven year mark to obtain full benefits.
While having a newer ERP system is crucial to cost-savings, CEOs and CFOs of manufacturing companies must also develop a strong ERP strategy. ERP is not a “one-size-fits-all” type of business management system. Every manufacturing company comes with its own unique set of needs and standards, and a strong ERP strategy should meet the unique needs of each company. In fact, the on-going success of an ERP system is dependent upon the overall ERP strategy (not just the ERP implementation). Companies must take the time to set guidelines for how they define, monitor, support and apply their ERP system. Companies that maintain their ERP strategy and align that strategy with their overall business strategy, internal capabilities and business needs, see a significant reduction in costs and improvement in overall business growth.
Finally, while it is important to monitor the total cost of ERP ownership, companies must take the return in investment (ROI) into consideration, in addition to TCO. In order to fully justify the continued investment and maximized benefits of ERP, manufacturing companies need to continue measuring the progress long after implementation and the initial goals have been achieved. The continued measurement of ERP expands upon the continued value of the system.
Learn more about the benefits of ERP by catching up on any articles you may have missed in this series at https://bautomation.com/articles/.