Did You Get the ROI You Anticipated?

By Sean Elliffe December 7, 2015 by Kelly Kuhlman

by Sean Elliffe

 

Your SAP implementation is behind you, and you are up and running. Transactions all are working, and the system is collecting and building data that is rich in content for analysis and improved decision-making. All the same, a question more often posed than not is “Did you get the ROI you anticipated?”

Expectations, or The Promise 

In talking to companies across our client base and beyond, we hear of many anticipated expectations, most of which were key in influencing the cost-benefit decision. Some of these include:

• 31% reduced direct and indirect shop labor costs
• 22% improved profits from better practices, better inventory, increased turns and streamlined purchasing
• 16% reduced office and shop indirect hours
• 14% increased sales through exceptional customer service, higher quality and reduced expediting
• 10% improved quality-driven metrics
• 7% improved accuracy of pricing and forecasting
• Improved labor cost reduction: 25% shorter delivery times and improved quality
• Smarter automated purchasing: 5% expense reduction per item purchased
• Inventory control: time and money reducing manual counts, improved accuracy, automated inventory management
• Reduction in inventory averages that result in a 10% increase in turns
• Better cost accounting: accurate efficient real-time cost measurement that improve bids and enable go to market growth

The promise of these returns is / was an attractive proposition. However, only a small percentage of companies seem to really believe that they actually received the full anticipated return from the investment made.

Strategic Requirements

Strategically, we know that the enterprise resource planning (ERP) system provides:

1. A platform to support growth
2. Built-in best practices
3. Ability to harness increased visibility
4. Collaboration and integration capabilities
5. Potential for improved decision-making support
6. Ability to manage compliance and governance opportunities

to name but a few. To get a sense of whether we are truly getting the ROI, we need to focus on key measures that can corroborate the facts and give us an indication of success. With this in mind, we also need to minimize the level of customization so that we are able to make use of the standard best practices built into the system and from which sound measures can be taken to report on.

What Questions Could Guide Measures to Focus On for ROI?

In developing good measures, consider three dimensions for any measure deemed important for the company:

• How do I know?
• How much did I realize?
• When did I see it / did it happen?

I would suggest the following considerations as baseline measures to be used in this regard:

• Improved customer satisfaction?
• Increased market share?
• Helped decrease operating expenses?
• Helped increase revenue?
• Decreased inventory investment?
• Shortened our order-to-delivery cycle time?
• Helped us keep pace with or surpass our competitors?
• Shortened our time to market?
• Reduced our material costs through improved supply base management?
• Increased of turns ratio?

With these, ensure:

• Appropriately defined responsibility and accountability for these business performance improvements?
• Metrics for measuring performance improvement focus in both tactical and strategic areas?

Best of luck getting your measures to start working for you — GO GET THAT ROI!

Tags: return on investment, ROI, SAP implementation