As an Enterprise Resource Planning system (ERP) streamlines and automates business processes like accounting, inventory management, manufacturing management, MRP, finance, and more, implementing it becomes a vital undertaking that demands time and resources to achieve success.
If your organisation is considering an ERP solution, it’s crucial to create a comprehensive ERP business case that goes beyond just tackling pain points. Instead, it should focus on your overall business growth plan. Our ERP business case guide will give more in-depth information about the costs, benefits, opportunities, and risks associated with the implementation, aiming to assist you throughout this process.
In this article, we’ll give you a quick overview of the seven crucial steps to crafting an ERP business case.
1. Uncover and analyse the challenges your business faces
Begin by measuring the impact of challenges faced by your business. Some common issues you may encounter include:
- Costly inefficiencies in processes
- Hindrances to growth
- Inability to meet customer expectations
- Lack of real-time data for decision-making
- Cost of existing systems
By tackling these challenges directly, your organisation can create opportunities for improved efficiency, growth, customer satisfaction, and well-informed decision-making.
2. Explore the benefits of an ERP system
Moving forward, it would be beneficial for your organisation to begin developing a list of achievable objectives for implementing an ERP system.
In your list, make sure to address the main challenges that were identified in the previous step. Take a closer look at each challenge to analyse how the ERP system can effectively resolve the issue and establish practical and realistic goals.
ERP goals should be specific, measurable, achievable, realistic, and time-based, known as “SMART.”
Related benefits of an ERP system could include one or multiple of the examples below:
Enhanced efficiency and productivity
Organisations can automate manual steps and eliminate the need for manual data entry, resulting in significant time savings.
Optimised inventory levels
Businesses can get a comprehensive view of their supply chain, enabling more accurate demand forecasting and efficient inventory management.
Improved cash flow
Streamlining the invoicing process can help expedite payment, ensuring that companies have more readily available cash instead of tied-up funds in receivables.
Enhanced customer service
With improved visibility into customer information and orders, organisations can respond more promptly to customer requests and resolve issues more efficiently.
Increased employee retention
By automating various processes, employees can experience simplified workflows, leading to higher job satisfaction and an increased likelihood of remaining with the company.
Managers gain access to comprehensive real-time data from various business areas, such as sales, finance, and inventory. Executives can leverage this information to make more informed decisions and capitalise on new opportunities.
Revenue and profitability
Increased productivity, accelerated processes and better relations with customers drive revenue and profitability.
3. Evaluate ERP options to find the perfect fit for your business
By evaluating your current challenges and desired benefits you will gain a better understanding of the ERP modules and specific features that your organisation needs. Start by clearly defining your goals and expectations and involve key stakeholders in the process. Once you have assembled your ERP implementation team, it’s time to explore the different options available that align best with your business needs.
See our ERP selection checklist for an in-depth guide and due diligence checklist for selecting an ERP system.
4. Get a clear picture of project costs to plan your budget
To build a strong business case, it is essential to accurately estimate the expenses associated with implementing the new ERP system. There are several factors to take into consideration when assessing the costs, such as software licensing, deployment method, and the need for external services.
It’s crucial to consider the costs both within and outside the organisation that come with implementing the new system. These costs include:
1. Software configuration and deployment
2. Process redesign
3. Report writing
5. Change management
5. Calculate the Return on Investment (ROI) to justify your ERP investment
When considering moving forward, it’s important to compare the expected business advantages with the associated costs. This analysis should cover both tangible benefits like cost reduction and revenue growth, as well as intangible benefits such as customer satisfaction. The ROI analysis will involve comparing the cost of the ERP software and its implementation with the operational costs, including any associated expenses like maintaining legacy hardware, of the systems it will replace.
6. Identify and mitigate implementation risks to ensure a smooth transition
Any major transformation in an organisation comes with risks. That’s why it’s so important to have a well-crafted business plan that addresses these risks, including the possibility of implementation failure. By carefully planning the implementation of an ERP system, you can effectively minimise these risks.
One great way to ensure the ERP system is successfully adopted is to involve all relevant departments and stakeholders, including representatives from the leadership team, right from the design phase. This collaborative effort will greatly improve system acceptance and adoption, ensuring that users fully utilise the system’s capabilities once it’s deployed. This will maximise your organisation’s ability to reap the anticipated benefits.
The choice of implementation strategy will depend on an organisation’s risk tolerance and desired timeframe for seeing the rewards of the new system. While a gradual rollout may be less risky than a comprehensive “big bang” approach, it might result in a longer payback period.
7. Craft an ERP implementation plan for success
The business case should provide a high-level strategic plan for implementation, giving a general understanding of how the project will progress, the resources needed, and the expected timeline for achieving results.