Is Your ERP an Asset?

I was having a discussion with a client recently. We were discussing the importance and value of getting a broad range of people, views and experiences involved in the software design sessions we were running at the time. He expressed some reservations about having so many people involved, and subsequently out of the business, at one time. I explained the reasoning and the benefits to him this way…

I understand that when you see the number of people sitting in the boardroom discussing how the business currently operates and where improvements could be found, you do the quick calculation of their salaries multiplied by the number of people and by the number of hours we have them engaged in the discussion. I understand this can be a large number. I also understand that not everyone contributes to the discussion as deeply as some others. After doing the quick maths, you are wondering where is the value in incurring all this expense?

So I suggested the following story. When he purchases a new piece of equipment and deploys it in his business, he can quickly see, touch and feel this shiny new asset he has bought. He can quickly see how this asset is contributing to his revenue because there is a tangible link between something he can feel and see and the revenue he sees on his P&L.

However, unlike buying a new piece of equipment, when implementing a new software system appreciating the value is not quite so easy, particularly in the early stages of a software project. You certainly cannot touch and feel it as you can a piece of equipment. The ability of the people using the software system is not seen as such a benefit as seeing a driver sitting in the cabin of the machine when they are operating it. However, just because you cannot touch it, does not make the value of the asset you are building any less valuable to the business. In fact, done correctly, I would argue the asset can be more valuable than that piece of equipment.

The process of building this asset (your new ERP system) can make it more valuable because:

  • the large range of people from different areas of the business all get to see and fully understand the other parts of the business. Something that is often missing from a business operation. When sitting in workshops there is often a realisation of: 
    • what work others actually do.
    • how things actually connect. (You would think the staff of the business actually does know this – however, I am constantly surprised how little some areas of a business understand what other areas do.)
    • the impact of a job half done in one area has one another down the chain.
  • People genuinely see the end-to-end of the business and better understand what role they play in the customer experience.
  • The software often determines the business process you follow and therefore its use has a direct impact on the customer experience.
  • Your individual use of the system and the way in which you have it configured can provide you with a key element of your competitive advantage. Something that often stands the test of time, continues to bring benefits to the business in the long-term and does not depreciate like a piece of machinery does.

The real value of this asset is in a competitive advantage it creates for you through the deep understanding and skill of utilising the asset. Just like a more skilful driver can extract more from the performance of a piece of machinery than another. Essentially it is the same asset but a different skillset using it. So by applying this higher skill level to your software creates the true improvement in the value of your business. As a result of your competitive advantage, you can then often justify higher margins than your competitors.

So the more time you take to allow your staff to learn the working of this new tool, the deeper will be their understanding of the tool and the greater the reward when it is finally deployed and is running your business. Yes it is an investment and yes it can be expensive but when invested wisely, just like any other investment it can generate substantial rewards for your company.

In order to be able to ensure your investment is well placed, the addition of an experienced independent advisor is likewise a well-placed investment. As I noted in a LinkedIn post recently, my best clients are often those who have tried and failed to implement an ERP before or who have been involved in such a project. I have discovered that they fully appreciate the value I bring. Wouldn’t it be nice if those doing it for the first time wouldn’t make the same mistake first?

If you or anyone you know is looking –

  • to improve the way their business operates 
  • to improve the way they leverage their current ERP system
  • to replace their current ERP system

then give me a call for a confidential discussion on the best way to achieve this.

© David Ogilvie

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About David
Experienced independent business consultant with a speciality in ERP to manufacturing, warehousing and distribution businesses in Australia, New Zealand and the United States, with a turnover of $20 million+.
Services
  • Business Strategy Facilitation
  • ERP, WMS & CRM System Evaluation & Selection
  • System Implementation Support
  • Supply Chain & Inventory Optimisation
  • Process Enhancement
  • Project Governance & Advice

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