Does anyone really need a new smartphone every other year? Perhaps not, but smartphone features continue to improve, and new phones are constantly coming into the market and making it hard to resist. After all, who doesn’t want a 3D camera, OLED screen, and 5G?
For your business, however, the stakes are higher. You do not have the luxury of chasing new ERP technology just because it is new. Better features and functions are not enough to justify a business case. Business leaders require compelling business benefits and ROI before investing in next-generation ERP – intelligent ERP – can be considered.
Ringing in a new decade should be enough inspiration to consider whether your current ERP will get you to 2030 and beyond. In “Is Your Legacy ERP Holding Your Business Back?” I wrote about a leading company in the U.S. dairy industry that filed for bankruptcy. Even though I found nothing in the news articles that blamed their ERP, my guess is that their ERP was older and not equipped to support the rapid change they needed to address changing consumer tastes.
I encourage companies that are running older ERP systems to start thinking about modernization. “How to Lead the Modernization of Your Business” features expert advice and perspectives on the potential of intelligent ERP.
But it’s important to do more than talk about the potential for increased efficiency, automating processes, and discovering new business models. Consider what actual businesses, right now, are achieving with intelligent ERP.
Whether you’re considering business model innovation or rapid simplification and consolidation, the following data points will give you substance and a starting point to build your business case. Consider these recent cross-industry surveys from Forrester and IDC:
Forrester surveyed over 100 SAP customers for its report, released last September, “The Total Economic Impact of SAP S/4HANA.” The survey showed consistent positive ROI regardless of business size or industry:
- An overall 5.8% increase in revenue
- A 4.1% reduction in customer turnover
- An overall ROI of 134% with a 13-month payback
Here is how the benefits break down:
One VP of IT applications summed it up this way:
“We have a complex supply chain that includes multiple levels of manufacturing and processing. In other words, we buy raw materials, process it into something different, and then ship that product to another factory that processes it into a higher-level product that we sell to customers. We needed technology that blended our manufacturing with finance so that we could optimize inventory flows across this entire supply chain.”
This newly published IDC InfoBrief, sponsored by SAP and Opportunity for IT, shows significant increases in productivity and reductions in cost for the 300 customers surveyed. In addition, many companies reported dramatic improvements as a result of a modern ERP. All told, companies reported $53.1 million in benefits.
The research underscores the benefits and the ROI, but I love to share specific customer success stories, and here are a couple of my favorites.
29% annual ROI
Centria Servicios Administrativos is a professional services company based in Lima, Peru, that is focused on information technology, finance, logistics, business risk, legal, and comptroller services. The organization was running on three instances of legacy ERP, which led to a fragmented user experience, labor-intensive reporting, and difficulty consolidating data for reporting. After evaluating multiple options, Centria found that intelligent ERP offered the most robust, most cost-effective solution.
By consolidating and modernizing its ERP system, Centria was able to simplify its accounting processes, automate manual procedures, and offer mobile solutions to its global workforce. In addition, the company succeeded in simplifying its infrastructure and reducing data storage for further savings.
With these benefits combined with indirect benefits from increased productivity, Centria estimates a 29% annual ROI with a three-year payback.
$450K in savings annually
A joint venture between House of Habib in Pakistan and Toyota Motor Corporation, Indus Motor Company, oversees the manufacture, assembly, and marketing of Toyota and Daihatsu vehicles.
The company’s legacy ERP contributed to multiple inefficiencies in the manufacturing process and financial operations:
- Materials requirements planning (MRP) took four hours and required all operations to be suspended.
- Manual tracking of quality management required frequent stopping of the production line, costing $10,000 a minute in lost production.
- Closing of the books at the end of a financial period took eight full days and led to delayed publication of monthly and quarterly reports.
Once Indus modernized its ERP system, the company saw substantial improvements across the organization:
- The MRP process now takes 12 minutes instead of four hours, and the business can continue normal operations during that runtime.
- Automated, real-time quality management keeps the production line up and running.
- Financial closing takes three days rather than eight, reducing the labor costs and promoting on-time reporting.
In all, Indus estimates its new financial closing process saves $200,000 in employee time per year, and the recovered lost production from the MRP process saves an additional $250,000.
Is your business ready?
As you can see, companies of every size, in virtually every industry, are seeing remarkable benefits from a modern ERP. It is far more than a cosmetic change or an incremental improvement. As we embark into a new decade, consider your current ERP. Is it really the ERP that will support your business into the 2020s and beyond?
Learn more about how to lead the modernization of your business with our latest guide.