How ERP brings tangible return-on-investment to the manufacturing and distribution CEO
By Jaco Maritz, Chief Operating Officer, SYSPROGeneral Manufacturing
As the world continues to shift, manufacturers and distributors have had to contend with new complexities of doing business. Driven by emerging customer preferences and immediate supplier needs, the industry has had to adapt quickly in order to thrive.
Customers have become increasingly drawn to eCommerce platforms as global lockdowns opened the opportunity for new digital channels. And while supply chain disruptions impacted business operations, it also opened up the door for a new competitive market underpinned by the expansion of product ranges, and the rise of techniques such as additive manufacturing and 3D printing technologies. As a result, CEOs have had to think about new routes to market, new products and even new processes altogether.
Manufacturing and distribution leaders still have three crucial business priorities top of mind:
- Reducing costs while remaining globally competitive,
- Improving organizational efficiency, and
- Reducing ongoing business risks
Many businesses have looked at the benefits of digitalization in addressing these priorities. ERP in particular has been shown to improve operational efficiency, productivity, and time to value, but there ae still businesses that remain hesitant in making the investment. The key is to understand what sort of ROI ERP brings to the business.
Using ERP to gain competitive advantage
A 2020 SYSPRO research revealed that 29% of organizations felt that their business systems did not provide them with the availability and accessibility to manage the changes that the pandemic introduced. Many businesses still relied heavily on manual processes and spreadsheets. Those who had real time access to data could connect directly with customers and suppliers and address immediate needs and build their business.
Real-time access to data is a central factor for manufacturing and distribution businesses to remain competitive. The right information provides the ability to assess current operations, as well as the capability to make the required tactical, operational and strategic business decisions. Here the ability for an ERP system to integrate with other technologies such as IoT devices on the factory floor or within the warehouse is critical.
Ruprecht a SYSPRO customer, has been able to tackle market disruptions effectively and remain competitive by having access to a single source of data through their ERP system. Their business, which focuses on ready-to-eat and ready-to-cook protein products in the foodservice and retail sectors in the US, was able to maintain a stable source of supply and a healthy inventory level with the help of SYSPRO’s AI and a predictive modelling guidance. Ruprecht also set up a data warehouse structure with the ability to pull data from their warehouse to SYSPRO. This allowed the business to speed up the decision-making process – a critical requirement during the pandemic. Ruprecht also expects significant ROI from its ERP investment. Frank Patton, CFO of Ruprecht, spoke about the ROI that Ruprecht expects to see in coming months. “We expect the cost benefits generated by the scheduling and labor modelling components alone to realize improved operating expenditure of around $1.5 million to $2 million each year.”
In addition to real-time decision making, central access to data has also allowed the industry to take advantage of the eCommerce trend as well as explore new routes to market. To leverage digital platforms, inventory levels needs to be carefully managed and controlled and stock locations need to be available to respond quickly to customer demand, minimize transport costs and reduce warehousing and storage costs.
Leveraging ERP to improve internal organizational efficiencies
For many businesses, the pandemic saw the rise of the remote workforce. There was a sudden need to integrate systems, as well as have the ability to view inventory in real-time. The transition to online, however, was difficult for many. The 2020 SYSPRO research study showed that 37% of companies were unable to provide the remote work capabilities to employees that were required. Many realized that the automation of processes would become a necessity. The ability to automatically generate invoices or even seamlessly move an order from the procurement department to the warehouse is of course a necessity in today’s digital world.
Another SYSPRO customer, Moto Quip automated processes to improve operational efficiency. Their business often receives large orders from major retailers. A typical batch order from one retailer can consist of 600 – 800 invoices. With automation, these 600 – 800 invoices are processed in just three minutes, improving productivity of their two sales people and saving time.
Reducing operational risks with ERP
Manufacturing and distribution businesses need to be agile enough to reduce the impact of business risk due to a variety of factors – from cybercrime to global pandemics. The volatile nature of any supply chain requires a level of flexibility. A good example was seen within Africa, where a recent lockdown resulted in a number of organizational risks for alcoholic beverage manufacturers. One such manufacturer that usually dispatched big bulk orders, suddenly only received smaller orders. The manufacturer was left with no choice but to scale down business operations until the lockdown was lifted. Here ERP assisted their business to have the right level of input materials as well the ability to maintain operational efficiency on the factory floor. The business could easily scale up orders once again, once the lockdown was lifted.
Ultimately, ERP can support manufacturers and distributors to digitalize by providing the systems and platforms to resolve the biggest areas of impact, all while providing tangible ROI. When embarking on this journey, CEOs should be clear on the business objectives and plan for effective change management. While adopting new technology, the CEO should also assess the change in skills required to run their business efficiently. The return on investment will be significant if the business objectives are set up front and the operationalization is reviewed against these objectives.