What return can a company expect from its ERP investment?

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The financial benefits provided by an ERP system can be difficult to calculate because sometimes ERP increases revenue and decreases expenses in intangible ways that are difficult to measure. Also, some changes take place over such a long period of time that they are difficult to track. Finally, the old information system may not be able to provide good data on the performance of the company before the ERP implementation, making comparison difficult. Still, the return on an ERP investment can be measured and interpreted in many ways:

Because ERP eliminates redundant effort and duplicated data, it can generate savings in operations expense. Because an ERP system can help produce goods and services more quickly, more sales can be generated every month.

In some instances, a company that doesn't implement an ERP system might be forced out of business by competitors that have an ERP systemhow do you calculate the monetary advantage of remaining in business?

A smoothly running ERP system can save a company's personnel, suppliers, distributors, and customers much frustrationa benefit that is real, but difficult to quantify.

Because both cost savings and increased revenues occur over many years, it is difficult to put an exact dollar figure to the amount accrued from the original ERP investment.

Because ERP implementations take time, there may be other business factors affecting the company's costs and profitability, making it difficult to isolate the impact of the ERP system alone.

ERP systems provide real-time data, allowing companies to improve external customer communications. Better communication can improve customer relationships and increase sal