ERP during an economic downturn

Being caught in one of the most significant economic downturns since the Great Depression poses both opportunities and hazards. Is the market at the bottom? What investments should you be making on a personal level?
What investments are most prudent in the workplace?

Enterprise Resource Planning (ERP) is the subject of many articles right now, and many are asking: Is an economic downturn the right time to implement ERP? Some say “yes” and certainly others say “no.” Building an ERP infrastructure takes time and resources; it will, however, allow a company to plan and prepare for growth. An ERP can help streamline internal and external processes, thereby allowing a company to gain efficiencies today and create a foundation for the future.

This article outlines some facts to ponder, along with thoughts about key benefits of embarking on an ERP implementation during the downturn.

Reasons to implement ERP during the economic downturn

Supply and demand – Many ERP vendors have supply but a reduced amount of demand, and as a net result, you as the buyer will be able to strike a great deal yielding less cost up front with a better return on investment.

Cost reduction using internal resource availability – It is never easy to implement ERP. During busy periods, organizations often have limited internal resources, requiring them to use more costly external resources. Maintaining internal resources during a downturn may be more cost effective for implementing an ERP, as it requires less payment of overtime, less chance of burnout for key employees, no loss of intellectual capital on process flow, freedom to continue quality customer care and the ability to focus on testing, documenting and training in the new system.

Best practice – The right ERP for your industry will let you employ “best practice,” netting an improved process with better efficiency.

Improved productivity – ERP allows for the automation of many manual processes, and that results in higher productivity: more work with fewer people.

Improved sales management – Most ERPs come with a Customer Relationship Management (CRM) suite.  If you do not have CRM today, how well do you manage suspects, prospects and leads?  What happens if you close 5% more sales?  You win!

Scalable – How many times have you seen or heard of an organization solving a problem with sheer brute force?  “We just add more people and spend more money to get the job done.”  Is this the right answer?  No!  If you invest now, and are prepared to invest in the appropriate resources when the upside arrives, this should eliminate the need to throw people and money at the problem.

Reduced inventory, transportation and warehousing costs - ERP, when implemented correctly, allows you to better match supply and demand.  This results in improved inventory turns, thus freeing up cash.  As inventory is more tightly and accurately managed, warehousing storage costs, transportation costs and obsolete and unused inventory should all decrease.  Having the ability to plan purchasing of inventory and meet minimum order quantities, as well as see price breaks, should assist in reducing inventory costs, with the effect of increasing the profit margin on the sale of inventory.

Single repository – Great opportunity to eliminate disparate systems and move to a single database, application and information technology skill set.  With all departments working with one data set, your company can have consistent information and reporting.

Remove duplicate data entry – Seize the opportunity to eliminate duplicate data entry by letting the system move the data.

Reduce paper and storage – File cabinets are expensive to fill and maintain; eliminate wasteful paper reports.  Do you want to be better positioned coming out of the downturn?  If your answer is yes, then you should consider upgrading or replacing your current ERP solution. Many companies are asking themselves, “Why not implement ERP now?”  Considering an economic downturn a good time to implement an ERP system certainly does not eliminate the risk. As always, it is paramount to be savvy, and do your research to improve the odds of achieving your goals and ultimate success.  Other things to consider when selecting and implementing ERP:

• Check for independent return on investment results to benchmark and set expectations, as an example see: www.nucleusresearch.com.
• Be wary of vendors who frequently answer questions with, “no problem.”
• Always meet some of the vendor’s implementation team prior to making a vendor selection.
• Do not try to eat the elephant in one sitting. Manage the scope.
• Buy an ERP that is less than 60% of the way through its planned life cycle; this is better for risk management.
• Does the vendor’s solution fit at least 85% of your criteria?  If not, don’t spend time with the vendor; find a better fit.
• Be diligent on vendor financials.  Will they be around long-term?

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