The ERP management system governs all operational and business transformation processes and promotes the growth of know how and information assets over time.
For these reasons, the ERP system is a strategic resource for the development and continuity of business activity and as such must be constantly adapted to operational needs.
The ERP system plays the central role of the entire company information system and as such must:
In the information age, accumulating a technological lag in the corporate information and telecommunication infrastructure may lead to a loss of overall efficiency of the company that is difficult to recover.
To avoid this risk, it is necessary to periodically renew the management system and proceed with a physiological update of the operating procedures which become slow and inadequate over time.
The change of the ERP system implies the management of a complex project with important qualitative and quantitative objectives to be achieved.
Among the qualitative ones we find the simplification of operational and transformation processes that increase the company efficiency and competitiveness by reducing manual and repetitive activities replaced by those with high added value.
These important results immediately turn out in improved working climate and professional growth of staff, but the complexity and breadth of these processes allows us to measure the lower costs for the organisation only in the medium - to long term.
Therefore it is also necessary to set a quantitative objective that is measurable in the short term and, to give a concrete example, let's take the final balance of a successfully implemented ERP system:
| Total cost of licensing, implementation and customisations | -800k€ |
| Subsidised contributions to the project | +240k€ |
| Specific cost of the project | -560k€ |
| Tax savings 30% | +170k€ |
| Net cost of the project | -390k€ |
| Annual savings expected for logistical efficiency | +105k€ |
| Return period on investment (390/105) years | 3,7 |
The choice of the quantitative objective must focus on the most significant cost items of the profit and loss account, which in this specific case were the variable costs of logistic distribution.
Specifically, this project started with a challenge linked to the total revision of the cost center structure of the cost management accounting, still based on a completely different production model from the one that the company had adopted to fulfill changed market conditions.
This anomaly unfitness required a significant update such as the streamlining of the structure itself.
This customization of the ERP system required more time than expected and therefore higher costs which, while extending the payback time, a satisfactory result of 3.7 years was achieved.
From 2015/2018 the mid of the past decade, the economic and financial commitment required to a SME for an investment in the ERP system reduced considerably, but this aspect has not diminished the importance of following the project management concepts indicated above.
Another aspect related to the ERP project is the choice of the supplier, a complex process that requires interpersonal skills and technical knowledge.
It is important to verify to which extent the organisational skills of the process analysts can assist the company in implementing the application, and if the technical specifications of the system are well suited to the characteristics of the company.
Kenning Consulting, for the experience acquired in the world of SMEs, suggests to these companies to entrust the task to smaller software houses which among their strengths highlight the knowledge and organizational skills of their process analysts compared to instead of the technical characteristics of the ERP product proposed.
Another aspect related to the complexity of the ICT system is the coexistence of various environments and applications that are renewed at different times.
This is a delicate process to manage which requires both technical skills and integration expertise of the main partner which has the role of coordinating the other suppliers, and generally, in a SME this role is played by the ERP supplier.
The importance of this aspect suggests involving this partner in every project or change management, both for the introduction of a new application or the replacement of the hardware. so that it can By doing so this partner can assist the company and ensure the perfect integration and running of the information system as a whole.
Kenning Consulting undertakes to sign a non-disclosure agreement agreement to protect the confidentiality of the company’s data and informations of which it will come to know during the consultancy.
If your company is planning to replace the management system, please contact us via email at info@kenningconsulting.eu for more details on how Kenning Consulting can contribute to the success of the project and obtain a quote.
Find out more about our projects for management improvement and you will see they can be useful for your company!