How to evaluate and quantify returns from your ERPs

As a fast growing business, you either already have product management systems and ERPs, or are seriously considering investing in one. If you already have these systems, you are struggling to understand and quantify if you are getting returns from your investment. Or, if you are on the cusp of investing in one, you are in desperate need of qualitative and quantitative guidelines on how to choose the best supply chain system and ERP for your manufacturing business.

This blog will attempt to serve as such a guideline for assessment –
If you are a $10M company running your supply chain on excel, or a $1B company with multiple product systems and ERPs, the problem statement is the same. What changes is the volume of data and complexity of system connections. In either scenario, the ability to reduce operating expenses and cost of goods sold (COGS), improve margins and grow revenue is restricted because people, data and workflows are disconnected. Qualitatively what you are looking for from your systems is for them to serve as digital connective tissue across the supply chain, solving your problems of systems and data chaos and margin suppression. And qualitatively you are looking for a system that can provide this connective tissue through simple, enjoyable-to-use interfaces –as Apple said and practiced, “simplicity is the ultimate sophistication.”

How do you find quantifiable measures to know if your current ERPs or ERPs you are considering purchasing are reducing OpEX and COGS? These three vectors should serve as guidelines to quantify impact and returns.

Vector number 1:
When creating a new product, or issuing a purchase order to a vendor, or when tracking production, there are quite literally a thousand steps that team members are running on excel sheets, email, and phone calls. ERPs should serve as intuitive and powerful collaboration networks. From within your product, supplier, purchasing, shipment, inventory records you want the ability to communicate, manage tasks and projects, timelines and assignments, dependencies, approvals, and exceptions. If you are able to take all the millions of micro tasks that are run manually across the team and digitize with clicks of a button, the savings in team members’ time and de-commissioning of excel sheets and phone calls is a tangible and quantifiable reduction in Cost of Goods Sold and Operating Expenses.

Vector number 2:
If your current technology stack is disconnected, it means your company is suffering from data inconsistencies and errors. For example, you have team members entering product information in a PLM. Another team has a different ID for the same product or SKU coming in through the retail sales order connections. A third team now has a third version of ID for the same SKU when issuing a purchase order to the vendor. WOW! And not in a good way.
The ERP you need connects people, data, and workflows to deliver a single source of digital truth across your supply chain. One connected ID for your master records and data. No more errors, or inconsistencies. One version of the truth leads to tangible and quantifiable reduction in Cost of Goods Sold and Operating Expenses.

Vector No 3:
With connected data sets, one version of the truth, and inconsistencies eliminated, your systems enable a structured data bed across the length of the supply chain. You should have the ability to micro-analyze specific actions, while aggregating millions of records for global intelligence. You should be able to run adhoc reports based on specific filters, while also logging in to visually powerful dashboards to alert you to your priorities for the day. Having this data bed equips you to drive the decisions that power your business forward and leads to tangible and quantifiable reduction in Cost of Goods Sold and Operating Expenses.

Metrics to track and measure to know if you are driving returns from your ERP

  • Manual tasks converted to digital automated clicks = savings in team members’ time = scale with systems versus adding people
    Metric to track – reduction in payroll expenses/OpEx or Growth in revenue higher than growth in payroll expenses/OpEx
  • Ability to track supplier performance = elimination of poor performing suppliers, better costs, and lead times
    Metric to track – reduction in COGS
  • Ability to connect and track unique identifiers and digitize tasks across product, supplier, orders, and inventory = faster time to market for new products and purchase orders
    Metric to track – increase in revenue.
  • Ability to use system or ERP as an intuitive working dashboard and collaboration network

Metric to track – reduction in technology expenses in legacy systems, and elimination of costs for systems that can be phased out


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