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4 Tips for Calculating ERP Implementation Costs
Many manufacturing companies likely understand the benefits of implementing an enterprise resource planning solution into their operations. More efficient shop floor processes, supply chain improvements and a higher level of customer satisfaction are just a few reasons why an organization would consider installing an ERP system.
Of course, before moving forward with such a massive project that has to be completed in multiple stages before being fully operational, there are a number of considerations to be made. First, a company will need to assess its current information technology infrastructure to determine if the current system can support ERP software. In some cases, many organizations will need to make IT upgrades in order to ensure that the system will work properly for all users after being brought online.
From there, decision-makers will need to conduct a fair amount of due diligence in researching the wide array of ERP vendors that currently exist in the marketplace. Some of these software manufacturers specialize in developing systems that can be used for large organizations, while others create options that would be beneficial for small to midsized operations. Making an incorrect choice here can be detrimental to operations and, more importantly, to financial stability and business success.
Lastly, there is the process of determining the actual cost of an implementation. This can be a hang-up for many companies because it is often difficult to assess how much a company will need to spend in order to install a system that meets all of its operational needs.
Thankfully, there are ways to develop a rough estimate of how much an organization will need to spend to install an ERP solution. While this is not an exact science, it can be helpful in giving a company a general idea of the financial investment that will need to be made:
- Determine the number of users: According to The Mark of Canes blog, some ERP vendors require companies to have a minimum number of users who will require access to the system. In most cases, this typically amounts to at least five people. However, generally speaking, the fewer staff members who will engage with an ERP platform on a daily basis means that completing the installation becomes more expensive. As a general rule of thumb, the more staff that will have access to the system, the better.
- Calculate the cost of process changes: In many cases, companies will need to make operational adjustments according to the ERP software being installed. Although many organizations that are used to doing things a certain way will balk at this suggestion, the ERP Software Blog wrote that being flexible in this area can result in significant cost savings both on the front and back ends. Simply stated, rigidity can be expensive.
- Assess the amount of data that will need to be migrated: The Mark of Canes blog wrote that the transfer of information from an existing system into an ERP solution accounts for a significant portion of the time spent on an implementation. Companies can save themselves significantly by only importing data that is used on a consistent basis as opposed to doing a complete migration of an entire database. In this instance, less is more.
- Establish how much training users will need: Some organizations will have staff members who are tech-savvy and pick things up quickly. However, there will always be those who require more attention than other when it comes to learning a new system. The ERP Software blog stated that companies can save themselves a great deal of money training those who are experienced in the use of technology and who have some level of familiarity with ERP platforms. However, for those who are uncomfortable learning new things or just simply set in their ways, training can be costly.