“By 2024, most businesses will be forced to accelerate cloud migration and digital transformation plans to survive in the competitive post-pandemic world.” –
The world is hurtling towards a digitized environment, making it necessary for businesses to keep up with technology. Unfortunately, using legacy systems in this cloud-dominated world has become a burden; you must maintain old hardware, buy licenses every time you add a new user, manage business system integration issues, and more.
We have entered a new period where upgrading to a current cloud solution from a legacy system is critical. The cloud ERP system delivers immense value by integrating core business functions such as inventory management, project management, finance, sales, human resources, and manufacturing operations in a unified platform. With increased visibility into these areas, businesses can reduce costs, increase efficiency, and unlock many new growth opportunities.
What Is Cloud ERP?
A recent survey by IDG indicated that 81% of companies had migrated their existing applications to the cloud. Cloud ERP allows businesses to access business-critical applications at any time, anywhere. Cloud ERP is a SaaS (Software as a Service) based application allowing users to access ERP software online.
Cloud ERP solutions benefit small and midsize businesses as they can leverage the benefits of ERP software without expensive infrastructure and resources. Modern companies need cloud ERP software, yet the cost of implementation is often a concern. Therefore, it is essential to calculate the Return On Investment (ROI) of the ERP system to determine whether it is worth the spend. ROI analysis clarifies the efficiency and benefits of ERP systems for businesses in the short and long run to justify the investment.
How Do Small and Midsize Manufacturers Gain an ROI from Cloud ERP?
ERP helps small and midsize manufacturing companies manage the entire manufacturing process, handle resources, streamline operations, schedule tasks, access real-time data, and create reports from a centralized platform. A research report by Nucleus indicated that cloud solution deployments deliver 4.01 times the return on investment compared to on-premise deployments. The report also found that more than 50% of SMBs have reported a 150% hike in ROI. Here is how cloud ERP can help manufacturing businesses gain substantial ROI:
- Faster Implementation
While legacy ERP systems require a lot of planning, time, and disruption of business operations to set up and maintain the software, cloud ERP deployment is quick and easy with minimum downtime. In addition, licensed vendors manage the deployment of cloud ERP solutions to ensure a seamless experience.
- Improve Supply Chain Productivity
The supply chain is the backbone of the manufacturing industry as it bridges the gap between production units and warehouses. The supply chain handles everything from raw material procurement to the delivery of finished goods. Cloud ERP can enhance supply chain operations by centralized control over various activities.
- Reduce Upfront Costs
When cloud ERP is deployed, SMBs only need to pay for the services and features rather than the entire product. In addition, the cloud solution reduces hardware, human resources, and maintenance costs as it can be accessed through the internet. Vendors also manage the upgrades and maintenance and do not require additional in-house IT staff.
- Real-Time Data Access
Cloud ERP development provides centralized data access through remote servers. When the data can be accessed quickly and easily, it enables better integration capabilities, data synchronization, quick response to customer requests, and more. In addition, the data is accessible only to authorized users via secure authentication mechanisms.
- Eliminate Data Silos and Gain a 360-Degree Visibility of Business Operations
Gathering data from disparate systems is often timely, time-consuming, and error-prone. Investing in ERP can save millions of dollars and countless hours. It helps consolidate information across departments and allows manufacturers to make informed business decisions using customized tools, personalized workflows, KPIs, and centralized dashboards. Cloud ERP also enables you to manage shop floor tasks, track inventory, and create critical business reports.
- Streamlined Warehouse Operations
Cloud ERP software helps streamline the warehouse. It provides greater efficiency by automating routine tasks and facilitates a more organized warehouse space. In addition, the warehouse management module prevents stockouts or overstocking and maintains optimum inventory levels.
- Excellent Customer Satisfaction
A successful business keeps customers satisfied. So a suitable ERP solution should enhance the customer experience. It assists in understanding customer requirements and managing customer support to improve business success. And with fast access to customer information, staff can better help customers in less time.
- Increase Data Security
It is often mistaken that the on-premise server is more secure than cloud servers. But in fact, cloud ERP offers multiple encryption layers to ensure safe data storage. As a result, employees can safely access data from anywhere with an internet connection.
- Simplify Complexity
With cloud ERP, it is easier to streamline business processes. Employees can access valuable user data based on their job role from anywhere. In addition, simplified business operations allow employees more time to focus on their tasks.
- Improved Scalability
Cloud ERP offers a growth platform for small and mid-sized businesses that need to manage the growing complexity of business operations. As a result, items can be manufactured more efficiently and without inventory errors or delays.
How Do You Calculate the ROI of Cloud ERP?
Return on investment can be determined by estimating the cost of the ERP system and comparing it with the expected benefits of implementing the ERP solution. It can be calculated by adding the expected returns (direct and indirect savings) and dividing the resulting amount by the total cost of ownership (TCO). The result is the ROI of the ERP system. The larger the resulting quotient, the better it is for your business. Below is the formula to calculate the ROI of ERP investment:
ROI = Returns of ERP (Benefits – Investment) / Investment
For example, if the benefits of implementing ERP are evaluated to $2,000,000 and the investment in the same period is $575,000, the ROI would be ($2,000,000 – $575,000) / $ 575,000 = 2.479. The ratio of returns on investment can be rounded to 2.5. This ratio can be multiplied by 100 to get the ROI percentage. In the given an example, the ratio of 2.5 represents an ROI of 250%.
Make The Most of Cloud ERP
ERP systems are very complex as they touch every aspect of the manufacturing business, from the supply chain and finance to customer service. As a result, it is challenging to evaluate the impact of ERP across all business operations. Still, a successfully implemented ERP can open endless opportunities to drive revenue while saving valuable time, increasing productivity, and cutting costs. This is where the true ROI of a cloud ERP solution can be realized. So, choosing the best ERP implementation partner is essential to ensure the best return on investment. If you are a small or midsize manufacturing firm and have yet to explore the dynamic world of cloud ERP, now is the time to leverage the benefits for your business.