Economic efficiency from the implementation of ERP-system
How to calculate the economic efficiency of the implementation of the ERP-system. This question is asked very many. I will state my point of view.
Not so long ago I was at a conference on the Theory of Constraints . There, among others, spoke the Irishman, who spoke about the boss of a large company. He told about his approach to making decisions on the implementation of various projects. I do not remember what kind of company, but it does not matter.
"Let's inject something, let's inject it." Proposals to introduce something sound for him regularly. It is understandable. The initiative, so to speak. However, very soon he taught everyone that the first question that an employee would hear in response to his proposal to introduce something would be: “How much will the company earn more or how much less will it spend if we do it?”
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This is a surprisingly simple method, which undoubtedly needs to be adopted. The purpose of a business is to make money. Why in the business to do something that does not increase the company's profits or reduce its costs?
The implementation of the ERP-system can also be and should be considered in the same way, if you, of course, are not going to introduce it in order to "measure with the boys in the bath the size of ... the budget spent on the ERP system."
The effectiveness of implementation should be measurable.
There are several indicators that can be measured fairly accurately. And there are indicators that can not be accurately measured. I will dwell in more detail at first. You know about the latter without me. Of course, the assessment should be carried out in a pessimistic way.
For example, you are offered to pay for the introduction of conditional 1000r. Your reserves are equal to the conditional 10 000r. If after the introduction of your reserves will be 8000r, then everything was a success. The introduction of ERP-system brought a very specific effect, the company released a very specific 2000r. working capital.
Of course, before the start of the implementation, it is worth wondering at the expense of what and why the reserves will decrease and how much? What exactly the applied methods, algorithms, know-how or what else is there.
Potential to reduce inventory can be calculated. This is pure mathematics and it is calculated in a week (considering all the bureaucracy), if you know how. Well, and, of course, people implementing ERP-systems know how. I hope.
Well, in short, then:
How many percent of orders are being fulfilled in due time? 50? 60? Do not be surprised at these figures, I do not embellish anything. These are figures from real life, when, for example, we are talking about the production or implementation of projects.
But people working on the Theory of Constraints say about 90%, some even about 99%. Here is another measurable indicator.
For late delivery may be charged penalties. It is clear that usually do not charge. But even if they don’t charge them, they are definitely threatening your image.
Just in time - the best way to protect yourself not only from penalties, but also from a more serious problem. This is the best way for customers not to leave. The client, in any case, would prefer to receive the order “just in time” than to get penalties from you.
It does not matter that they do not charge more often, it is still necessary to count. Because for this amount, at least, your image has suffered (the other image losses are difficult to calculate). Take all overdue orders and count the penalties on them. And then just count the size of the penalty that you save if you raise this figure by a pessimistic amount of interest. How many customers left you because of overdue deliveries? Any manager knows such customers by name. Take their average turnover for the last year and add on too.
Yes, again, do not forget to ask the implementers, at the expense of which methods this indicator will be raised.
If the above indicators cover the cost of system implementation, then the answer to the question “to implement or not” is obvious.
People introducing ERP-systems should not “moo” in response to the question “at the expense of which we will increase our efficiency?”, But give distinct and clear answers. Because such algorithms must be incorporated into their solutions. How else? And if they are not laid, then why should the situation change after implementation?
I will not write about them in detail, because, as a matter of fact, they sound everywhere and traditionally as an answer to the question about the economic efficiency of implementing an ERP system.
Not so long ago I was at a conference on the Theory of Constraints . There, among others, spoke the Irishman, who spoke about the boss of a large company. He told about his approach to making decisions on the implementation of various projects. I do not remember what kind of company, but it does not matter.
"Let's inject something, let's inject it." Proposals to introduce something sound for him regularly. It is understandable. The initiative, so to speak. However, very soon he taught everyone that the first question that an employee would hear in response to his proposal to introduce something would be: “How much will the company earn more or how much less will it spend if we do it?”
')
This is a surprisingly simple method, which undoubtedly needs to be adopted. The purpose of a business is to make money. Why in the business to do something that does not increase the company's profits or reduce its costs?
The implementation of the ERP-system can also be and should be considered in the same way, if you, of course, are not going to introduce it in order to "measure with the boys in the bath the size of ... the budget spent on the ERP system."
The effectiveness of implementation should be measurable.
There are several indicators that can be measured fairly accurately. And there are indicators that can not be accurately measured. I will dwell in more detail at first. You know about the latter without me. Of course, the assessment should be carried out in a pessimistic way.
Measurable indicators
Stocks
For example, you are offered to pay for the introduction of conditional 1000r. Your reserves are equal to the conditional 10 000r. If after the introduction of your reserves will be 8000r, then everything was a success. The introduction of ERP-system brought a very specific effect, the company released a very specific 2000r. working capital.
Of course, before the start of the implementation, it is worth wondering at the expense of what and why the reserves will decrease and how much? What exactly the applied methods, algorithms, know-how or what else is there.
Potential to reduce inventory can be calculated. This is pure mathematics and it is calculated in a week (considering all the bureaucracy), if you know how. Well, and, of course, people implementing ERP-systems know how. I hope.
Well, in short, then:
- Current stocks are known? Known.
- are the delivery and production dates known? Known.
- are the procurement and production management systems known? Known.
Deliveries on time
How many percent of orders are being fulfilled in due time? 50? 60? Do not be surprised at these figures, I do not embellish anything. These are figures from real life, when, for example, we are talking about the production or implementation of projects.
But people working on the Theory of Constraints say about 90%, some even about 99%. Here is another measurable indicator.
For late delivery may be charged penalties. It is clear that usually do not charge. But even if they don’t charge them, they are definitely threatening your image.
Just in time - the best way to protect yourself not only from penalties, but also from a more serious problem. This is the best way for customers not to leave. The client, in any case, would prefer to receive the order “just in time” than to get penalties from you.
It does not matter that they do not charge more often, it is still necessary to count. Because for this amount, at least, your image has suffered (the other image losses are difficult to calculate). Take all overdue orders and count the penalties on them. And then just count the size of the penalty that you save if you raise this figure by a pessimistic amount of interest. How many customers left you because of overdue deliveries? Any manager knows such customers by name. Take their average turnover for the last year and add on too.
Yes, again, do not forget to ask the implementers, at the expense of which methods this indicator will be raised.
If the above indicators cover the cost of system implementation, then the answer to the question “to implement or not” is obvious.
People introducing ERP-systems should not “moo” in response to the question “at the expense of which we will increase our efficiency?”, But give distinct and clear answers. Because such algorithms must be incorporated into their solutions. How else? And if they are not laid, then why should the situation change after implementation?
Immeasurable indicators.
I will not write about them in detail, because, as a matter of fact, they sound everywhere and traditionally as an answer to the question about the economic efficiency of implementing an ERP system.
- business transparency
- image
- less mistakes
- transaction speed
Source: https://habr.com/ru/post/169175/
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