Benefits with ERP

Contents
ERP Beneficiaries Justifying ERP investments ERP ROI Tangible/ intangible benefits of ERP Impact of ERP on stakeholders I f k h ld Cause studies of Sun Microsystems/ Microsoft with SAP ERP

ERP Beneficiaries
1.

Jeri Dunn of Nestle in a CIO interview said its annual savings are approximately $ 325 million with ERP in 2003 ($200 million contract with SAP in 2000 2000, additional$80 million for consulting and maintenance), when the implementation was not complete. Diana Near from The Principal Financial Group reported to CNN.com, that it is saving $ 165,000 alone in salary for reduced staff requirements with ERP. Ultimately, Ultimately the goal of ERP is to change current ineffective business processes. Despite all of the wellpublicized failures, companies are still spending money in this environment. Why?
Companies that perform better, know their business better, and react more effectively are in a better position to survive.
Courtesy: http://www.ambriana.com/C298_website/Nestles_ERP_CIO.pdf, http://www.hill.com/resources/whitepapers/enterprise_apps.pdf

ERP Synergy Effect

ERP systems comprises software business processes, software, processes users and hardware. An ERP system is more than sum of its parts or components. Those components interact together to achieve a common goal-to streamline and improve organizations' bus ess p ocesses. business processes. This is the synergy effect of ERP.

Justifying ERP Investments

Justifying ERP Investments

ROI analysis is becoming an important factor in influencing the organizations d i i to i fl i h i i decision acquire ERP packages. A demonstrable return on investment (ROI) is (ROI), becoming a must for customers to invest scarce capital and human resources in ERP packages. ROI models fall short in their ability to accurately measure the total value of an enterprise software investment as they are focused only on quantifiable (tangible) measures of return.

ERP Implementation and ROI

The payback that an enterprise software can offer to a company must take into account both the tangible and intangible benefits of the ERP systems. Intangible benefits include new business opportunities, improved customer and customer goodwill, better relationships with g , p partners, suppliers and other business associates, improved time to market, etc. These intangible benefits contribute significantly to the success of a company's ERP implementation and use.

Payback Parameters
The overall payback that enterprise software can offer to a company gives a complete analysis of return return. The major key payback parameters are:
Faster time to market Improved business processes Improved customer support p p pp Rapid capitalization of new business opportunities Lower implementation costs

The sum of the parameters described by enterprise paybacktangible as well as intangibleoffers a much more complete picture of the value of the software and services provided by a given vendor.

Benefits of ERP
Installing an ERP system has many advantagesboth direct and indirect. The direct advantages include improved efficiency, information
integration for better decision- making, faster response time to customer queries, etc. The indirect benefits include better corporate image, improved customer goodwill, customer satisfaction and so on. d ill if i d

Some of the benefits are quantitative (tangible) while many others are qualitative (intangible).

Tangible Benefits of ERP

Inventory reduction Inventory carrying cost reduction Reduction of lead-time Personnel reduction Cycle time reduction Productivity improvements Other management improvements Other Financial close cycle reduction IT cost reduction Procurement cost reduction Cash management improvements Revenue/profit improvements Reduced quality costs Improved resource utilization p oved esou ce u a o Transportation/logistics cost reduction Maintenance reduction On-time delivery improvements

Intangible Benefits of ERP

Information visibility New and improved business processes New Customer responsiveness Improved supplier performance Better customer satisfaction Integration of b f business functions f Information integration Better analysis and planning capabilities Improved information accuracy p y Improved decision-making capability Standardization of business processes Flexibility and business agility Globalization f the Gl b li ti of th organization i ti Better business performance Supply chain integration Use of latest technology

Deloitte Consulting Survey: Tangible Benefits B f

The respondents who participated in the survey were asked to check the tangible benefits of the ERP systems from a set of benefits. Most respondents felt that inventory reduction was the main benefit, followed by personnel reduction and l d ti d productivity improvements.

Deloitte Consulting Survey: Intangible Benefits B f

The respondents who participated in the survey were asked to check the intangible benefits of the ERP systems from a set of benefits. Most respondents felt that information visibility or better information availability was the i benefit followed b th main b fit f ll d by improved business processes and improved customer responsiveness. responsiveness

The Advantages and Disadvantages of ERP: a Study f ERP S d

The foremost advantage of an ERP system is bringing down the costs and saving the valuable time which would have
otherwise been wasted in procedural maneuvers and unwanted delays. Different software programs maintained in the departments were proving to be a great hurdle. Since ERP is a uniform platform it ensures th t there in no di that th i discrepancy i th i f in the information th t i ti that is processed. The advantage and disadvantage of ERP is best understood by studying g them under different categories. Industry wise advantages Manufacturing Sector: Speeding up the whole process. g g Distribution and retail Stores: Accessing the status of the goods Transport Sector: Transmit commodities through online transactions. Project Service industry: Fastens the compilation of reports.

Advantages in a Corporate Entity

The accounts department personnel can act independently. They don't have to be behind the technical persons every time to record the financial transactions. Ensures quicker processing of information and reduces the burden of paperwork. Serving the customers efficiently by way of prompt response and follow up. Disposing queries immediately and facilitating the payments from customers with ease and well ahead of the sti lated deadline. ith ell f stipulated deadline It helps in having a say over your competitor and adapting to the whims and fancies of the market and business fluctuations. The swift movement of goods to rural areas and in lesser known places has now become a reality with the use of ERP ERP. The database not only becomes user friendly but also helps to do away with unwanted ambiguity. ERP is suitable for global operations as it encompasses all the domestic jargons, currency conversions, di j i diverse accounting standards, and multilingual i d d d l ili l facilities .

In short it is the perfect commercial and scientific epitome of the verse p p "Think Local. Act Global".

ERP S ERP'S Impact on its Stakeholders

Impact of ERP on the role of managers or organization or stakeholders can b best i i k h ld be b studied and understood if the subject is analyzed right from the implementation stage. Nevertheless it has a strong influence on the business process itself as soon as it is gripped and decides major issues for employees, customers and other stake holders.

Impact during the Implementation Process

ERP has a significant impact right from the time it is conceived in the organization.
Firstly it facilitates the members in the organization to arrive at a consensus though after a detailed and deliberate discussion. It paves way for restructuring which would not have otherwise happened in organizations sticking to traditional and conventional values. ERP is an eye-opener for such organizations because they get to realize y p g yg the nuances and edge involved in modifying the business process. This would not have happened but for the intervention of ERP. Organizations disclose vital information in the public domain which was otherwise considered confidential and not meant for dissemination.

Impact on Departments
It brings about interactions and tends to nurture healthy relationships among departments in organizations which would have otherwise remained isolated. The problems of coordination faced by each department are made known to the company. They can arrive at a better means of doing things on such group discussions.

Impact on Employment
It h I throws job opportunities to many individuals, whom b d d l h the organizations hire at the implementation process. They even realize the need to retain them on y permanent rolls once ERP goes full-fledged in the organization. The good news is that it gives another room of employment for the existing IT professionals in the country. They were able to update themselves on ERP modules and continue serving the organization in terms of enhancing user interface with ERP applications.

Impact on the nature of Job and information access f

ERP has directly and indirectly helped to redefine functions in the organization organization. Anything that people wanted to know about the company was available by a click of the mouse. There was no more relying on the department of internal communications even for single information. Outsiders don't have the hassle of obtaining permission don t and following stringent procedures to access information.

Impact on the individual employees

ERP provided more freedom authority and responsibility to the freedom, individual employees which were mutually beneficial to the management. Each employee became more aware of his/her function while ERP has given the confidence to execute it individually and successfully Above all it resulted in transparency and accountability. The tasks of employees became totally independent as ERP succeeded in doing away the need of exclusive interdepartmental dependence in order to elicit information. This has resulted in easing the process of handling and answering customer queries and undertaking clientele orders.

Impact on the organization as a whole

The ERP consultant will able to identify y the flaws and guide the organization in devising better procedures. g p It helps organizations to adapt and adjust to change right from the implementation g g p process. A one phrase explanation for the impact of ERP would be "Simplifying Complex Process Process".

Case Studies of ERP Success

Case Study: Oracle ERP Consolidation

Oracle consolidates 70 database instances into one, runs on Sun and saves $2 billion The combination of the Oracle 9i RAC database and the Sun Cluster Software has enabled us to deliver highly d li a hi hl available, consolidated system t run il bl lid t d t to our global organization. Marwan Eways,Vice President,, Global Systems Architecture,, Oracle y Corporation

Success Story: Oracle

The Situation
For years, Sun Microsystems and Oracle have been two of the leading advocates of enterprise consolidation. Theyve been touting the benefits to customers large and smallclaiming th t consolidation of servers, storage systems, ll l i i that lid ti f t t applications, and databases can help companies cut cost and complexity, increase service levels, improve IT productivity, and p free up valuable real estate in the data center. Customers have been intrigued by the possibilities. But they all have the same two-word request, PROVE IT.

Success Story: Oracle Oracle

Key Challenges y g
Difficult to get the big picture of financial and personnel issues across the company Long reporting cycles Complex IT environment Inefficient use of IT assets g pp High support and administration costs

Success Story: Oracle Oracle

Solution S l ti
Consolidated, clustered database environment achieved with
Sun Fire 12K servers Sun Cluster software Oracle O l 9i RAC software f SunSM Services consulting services

Success Story: Oracle Oracle

Business Results
$2 billion cost savings Reduced reporting cyclesweeks to days Reduced risk and complexity Clustering for extremely high availability Unified i U ifi d view of global i f f l b l information ti Improved disaster recovery capabilities Ability to scale up quickly at a low cost Showcase for Oracle and Sun technologies

Case Study: US $20 Million Saved by Microsoft Mi f

A preview of the case study that describes how i f h d h d ib h Microsoft saved US $20million by using SAP. Microsoft Profile
As the worldwide leader in business and personal computing software, the vision of Microsoft software Corporation is to empower people through great software-any time, any place and on any device. Employing more than 55 000 people, Microsoft had 55,000 people revenues exceeding $ 25 billion for the year ending June 2001.

US $20 Million Saved by Microsoft .

Situation
Microsoft's major problem was too many systems and too little integration. Microsoft's tremendous growth rate was straining its operations, finance and human resource support systems. Microsoft needed an effective ERP solution to increase efficiency and reduce operating costs. i ffi i d d i

US $20 Million Saved by Microsoft

Solution
Executives at Microsoft wanted to implement an integrated ERP solution. , , SAP R/3, a scalable, three-tier client/ server infrastructure that offered broad, integrated business functions was implemented by the executives at Microsoft.

US $20 Million Saved by Microsoft

Benefits
Provides accurate, global, real-time information to enable managers to make faster and better informed decisions better-informed decisions. Consistent month-end closings in four to five days, instead of a waiting time of four weeks Savings of over $ 20 million per year in reduced procurement costs. Provides for highly efficient communications between servers and client systems around the world world.

Summary
ERP costs ERP Beneficiaries Justifying ERP investments ERP ROI Tangible/ intangible b fi of ERP T ibl / i ibl benefits f Impact of ERP on stakeholders Case studies