Implementing a resource planning system can help your company drive significant return on investment (ROI). In this article, we’ll explain the key strategies that can help you do this. By following these strategies, your company can unlock the full potential of your resource planning systems and realise substantial ROI.
We’ll also explain the benefits of resource planning software in general, and how you can accurately calculate your ROI using a particular formula.
How Resource Planning Impacts ROI
Implementing a resource planning system can help your company drive significant return on investment (ROI). In this article, we’ll explain the key strategies that can help you do this, including. By following these strategies, your company can unlock the full potential of your resource planning systems and realise substantial ROI.
We’ll also explain the benefits of resource planning software in general, and how you can accurately calculate your ROI using a particular formula.
How ERP impact businesses
There are many ways that ERP impact the everyday functions of your business, including:
Workflow automation
Enterprise resource planning (ERP) systems automate manual and repetitive tasks, streamlining business processes and reducing the time and effort required to complete them. This automation improves operational efficiency, minimises errors, and frees up employees' time to focus on more value-added activities, leading to cost savings and increased productivity.
Data integration
ERP systems also integrate various departments and functions within your business, enabling seamless flow and sharing of data. This integration provides real-time visibility into key metrics, performance indicators, and business insights. With accurate and up-to-date information readily available, your company can make informed decisions, identify inefficiencies, and optimise processes, resulting in improved productivity and better financial outcomes.
Resource allocation
Crucially, these systems help your company optimise the allocation of resources, including materials, equipment, and human capital. By providing insights into demand patterns, inventory levels, and production schedules, ERP systems enable businesses to allocate resources more effectively, reduce waste, and minimise costs associated with overstocking or stockouts.
Enhanced customer relationship management
ERP systems often include customer relationship management (CRM) functionality, enabling your business to manage and track customer interactions, sales processes, and customer support activities. This integrated CRM tool usually helps to improve customer satisfaction, retention, and overall sales performance, contributing to increased revenue and customer loyalty.
Regulatory compliance and risk management
ERP systems can help your business to ensure regulatory compliance by automating and standardising processes related to financial reporting, tax calculations, and other regulatory requirements. By minimising the risk of non-compliance and associated penalties, your business can protect its reputation and avoid financial losses.
How to calculate resource planning ROI
To make your life easier, we’ll show you the resource planning formula you need to accurately calculate your ROI, helping you understand how your resource planning can boost your efforts.
ROI = (total value of investment - total cost of investment) / total cost of investment x 100%
ERP ROI represents the percentage comparison between the gains achieved from an ERP investment and the total cost of ownership (TCO). TCO includes the initial investment and any anticipated expenses over the system's lifespan.
While traditionally calculated for on-premises ERP, the TCO equivalent for cloud-based systems encompasses recurring licensing fees. A higher gains-to-TCO ratio indicates a greater return on investment.
Let's say a consumer goods manufacturer that implemented a cloud-based ERP with an upfront cost of £50,000 and yearly fees of £100,000. After three years, the cloud-equivalent TCO amounts to £350,000. It's important to note that the example provided is simplified, and additional costs like employee training, implementation partner fees, and others may be included in the manufacturer's total cost, depending on their specific use case and ERP deployment model.
Benefits of resource planning software
There are many benefits of using ERP systems, helping to drive your ROI, including:
Increased Collaboration between Departments
ERP systems integrate various departments within your company, facilitating seamless collaboration and information sharing. With shared access to real-time data and insights, departments can work together more effectively, align their efforts, and make wiser choices based on a holistic view of operations. This collaboration leads to improved communication, coordination, and overall organisational efficiency.
Improved efficiency
They can also optimise production processes by providing visibility into the entire supply chain, from raw materials to finished goods. This visibility enables better planning, forecasting, and inventory management, ensuring that production schedules are aligned with demand. With streamlined workflows, reduced bottlenecks, and improved resource allocation, your business can enhance production efficiency, minimise lead times, and optimise your manufacturing operations.
Accurate job costing
You can benefit from accurate job costing by tracking and allocating costs associated with specific projects or jobs. This includes tracking working hours, materials, and other expenses, ensuring that costs are accurately accounted for and attributed to the respective projects. Accurate job costing helps your brand assess profitability, make accurate suggestions on pricing, and identify areas for cost optimisation, leading to improved financial performance.
Smarter cash flow management
With real-time visibility into financial data, including accounts receivable, accounts payable, and cash flow, your business can effectively manage its cash flow, optimise working capital, and make better decisions about expenses, investments, and revenue generation. Improved cash flow management enhances financial stability, reduces borrowing costs, and supports overall business growth.
5 tips to increase the ROI of your resource planning software
To increase the ROI of your resource planning software, we recommend that you follow these tips:
Employee training
Invest in comprehensive training programs to ensure that your employees are proficient in using the resource planning software. Well-trained users can maximise the system's capabilities, leading to improved efficiency and productivity. You should also provide regular training updates to keep users up to date with new features and functions.
Executive buy-in
You should try and secure buy-in from top executives and stakeholders within your company. When executives understand the benefits and value of the resource planning software, they’re more likely to support its implementation and allocate necessary resources. Executive support also helps drive user adoption and ensures that the software is aligned with your company’s strategic goals.
Constant evaluation
Regularly assess whether the software is meeting your company’s requirements, identifying areas for improvement, and addressing any issues or bottlenecks. This evaluation process allows for timely adjustments and optimisation of the software's configuration to better align with changing business needs.
Accurate measurement
Establish key performance indicators (KPIs) to measure the impact and success of the resource planning software. Set measurable goals that align with your company’s objectives, such as improved productivity, cost reduction, or inventory management. Regularly track and analyse these metrics to assess the software's ROI and identify opportunities for further optimisation.
Avoiding common pitfalls
Be aware of common pitfalls and challenges that can hinder the ROI of resource planning software. Some common pitfalls include inadequate data quality, poor system integration, insufficient change management, and underestimating the effort required for implementation. By proactively addressing these pitfalls and implementing strategies to mitigate them, such as data cleansing, robust integration planning, and effective change management, you can reduce risks and maximise the ROI of the software.
Looking for more? Check out our complete guide to resource planning.
This comprehensive guide covers:
- Symptoms of poor resource planning (and how to cure them!)
- The formula for resource planning success
- Steps to future-proof your approach
- How a legacy system costs you money
Resource planning ROI FAQs
How long does it take to see a return on cloud ERP investment?
The timeframe can vary, but you can typically start experiencing the benefits within a few months of implementation. For immediate returns, your business should focus on employee training to help improve productivity, while lowering operational costs.
How do I maximise my resource planning ROI?
There are many ways you can maximise ROI, including ensuring proper implementation, providing comprehensive employee training, continuously evaluating and optimising processes, plus integrating and automating workflows. You can also measure key performance indicators (KPIs), while staying updated with support and software updates.
