Erp Implementation

ERP implementation is a significant undertaking that can last anywhere from 6 to 18 months. Calculating ERP Implementation ROI can be challenge. Companies that wish to establish roi figures need to differentiate between qualitative and quantitative improvements. Using only a quantitative approach will only scope and bound a small portion of the true effects. To more accurately gauge the cost and benefits to the organization a company needs to consider the value derived from process improvements as well as capital costs.

The benefits of ERP implementation are the process improvements that result to the organization. The immediate effects of process improvements take time to manifest. Business unit integration, organizational change and staff training all create lags between implementation time and the manifestation of change improvement. Management who want to calculate the true enterprise resource planning ROI need to create a value benefits matrix. Prior to the selection of an ERP vendor, a business should be able to define the 'real business' benefits that the organization expects the solution to provide. Productivity improvements, the reduction in working capital to maintain inventory and the redeployment of capital have opportunity costs. When a company saves money by reducing capital allocations to idle inventory, the redeployment of capital to other more productive areas or growth opportunities can provide a return on investment that exceeds the raw value of the initial reduced inventory cost. A true reflection of erp system ROI needs to establish a framework for the quantification of opportunity cost considerations within the context of the key performance indicators the erp solution is expected to provide.

Implementation costs can also affect ERP roi. Companies that undertake ERP implementation factor deployment costs into the project plan. This includes developers to integrate the project and staff training costs. As a general rule, the longer the project the higher the likely attrition rate of developers. Allowance needs to be made for this and the subsequent retraining costs that may be associated with new project staff.

Productivity improvements and a reduction of costs have an ongoing assigned value. Industry statistics indicate that companies can expect roi to be within the vicinity of 100 to 500 percent. In reality, the true erp application roi is often directly proportional to how well a company, evaluates, plans and manages the implementation process. The project management framework, is, in this regard, very important. When the project plan is aligned with business goals and objectives and the implementation is seamless, companies are much more likely to reap a higher return on capital outlay.

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