What Does ERP Software System Exactly Do To Improve ROI?

By: Auscause Barrymore


ERP software system can improve any companyís ROI by changing its working condition. The implementation of enterprise resource planning software can increase the efficiency of company which is essential for improving ROI. Enterprise resource planning is not simple software. Its main feature is to replace different systems working in each department with a module of its own. The effect of this change is that, it approximates features of old systems. In addition, it integrates all the modules, so that there is a seamless flow of information across entire company. Higher ROI can be achieved only when company systems are efficient. And, with the help of ERP software system accurate information can be availed to authorized person in real time, which in turn improves the performance of company working, which results in higher ROI.

However, enterprise resource planning software does not directly help in generating new business for the company, but it improves companyís ROI by making it fitter for getting more and more customers, hence increase business.

It is easier for company to calculate the expenditure on implementation of enterprise resource planning but, it is harder to determine the gain. It can be calculated by dividing monetary gain by amount spent. Nevertheless, it is hard to determine the gain from enterprise resource planning system, because some gains from the project are intangible while others are not quantifiable. ROI simply means payback period, which means that length of time taken for expenditure equals cost of investment. As mentioned before, there are many tangible and intangible benefits of ERP software system to improve ROI. So, some of the intangible benefits are mentioned below.

1. Reduction in level of inventory, which includes raw material, finished goods, and work in progress. Reduction in inventory is only possible through improved planning and control with the help of effectual enterprise resource planning software.

2. Reduction in material cost. It is only possible when there is an improved procurement and account payable practice. Enterprise resource planning also improves ROI by lessening obsolescence and wastage of materials.

3. It improves ROI by reducing labor cost. ERP software system helps in better allocation and reduction of overtime workmen who are directly involved with production units, for example technicians and skilled workers.

4. It improves production of materials. Enterprise resource planning software helps in better scheduling of critical equipments and sub contracting operations, and hence minimizes shortages, rework, and interruption.

5. It reduces the cost of after sales services to improve ROI.

The tangible benefits of ERP software system are mentioned below.

1. ERP software system improves ROI by integrating the information, which results in efficiency, transparency, and effectual MIS.

2. It minimizes error and improves accuracy of inventory record.

3. It helps in improving customer service. Also, it helps in on time shipment; and shortens order to shipment cycle.

4. ERP software system establishes standard procedures to improve ROI.

5. It improves accounting control.

6. It also shortens sales to cash cycle.

7. It helps in legal and regulatory abidance.

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Read about ERP Software for Telecom Industry. Also know Tally 9 Features and Advantages. Read about Roles and Responsibilities of ERP Consultants.

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