Two Ways That ERP Creates Business Value

What is Business Value?

Photo by John Schnobrich on Unsplash

At SYTE, we use the term business value quite a bit. We often say that we help companies create business value and grow.

“In management, business value is an informal term that includes all forms of value that determine the health and well-being of the firm in the long run. Business value expands [the] concept of value . . . beyond economic value . . . to include other forms of value such as employee value, customer value, supplier value, channel partner value, alliance partner value, managerial value, and societal value. Many of these forms of value are not directly measured in monetary terms.” ~Wikipedia

In short, business value are those things which we know add value to our business but can sometimes be difficult to quantify.

Enterprise Resource Planning (ERP) systems create business value in many ways, both tangible and intangible. We will focus on the two most important ways ERP systems create business value.

Fast and Accurate Data

Business data is of the utmost value to CFOs and other executive managers in an organization. The more accurate, timely and reliable the data, the more valuable it is. “The right data” allows a leadership team to make decisions that allow a business to compete and differentiate itself in the marketplace.

For our client, NuScale Power, a developer of small modular reactors (SMRs) designed to bring nuclear power to hard-to-reach locations, fast and accurate data wasn’t just competitive need, it was a federally mandated necessity. SYTE had to ensure that NuScale’s ERP solution would enable them to comply with government audit requirements. NuScale’s ERP solution provided fast, accurate data and put controls in place to track project spending so that they would continue to be eligible for grant funding for additional product development. One year after implementation, NuScale was awarded U.S. Department of Energy funding for its SMR Technology.

Frictionless Transactions

List all of the transactions that happen between you and your customers and vendors on a daily basis and think about all of the transactions that happen within your business. Every day orders and pick lists are generated, invoices and packing slips are created and sent, accounts payable and receivable are debited and credited, inventory is received or shipped or adjusted . . . business happens through a long series of interrelated, and often complex, transactions.

ERP systems can reduce the amount of friction involved in completing a given transaction. For example, ask yourself how many discrete steps it takes to create and send an invoice. Does it take more than one person to do? Does it require looking in more than one place? Is the invoice manually generated, or can your system create it for you? If the invoice is incorrect, how many steps does it take to correct it? ERP systems reduce friction, the amount of time and effort it takes to create an invoice in this example, by reducing or even eliminating the number of steps involved in the process. This almost always results in freeing up your staff to do more value-added tasks.

We’ve already introduced you to Umpqua Dairy, and we’ve described in another post how manually labor intensive their processes were. Networking their computer system and installing ERP and route accounting solutions shifted them from a paper-based operation to an electronic one. The same number of order takers can now process more orders with fewer mistakes, allowing Umpqua to grow at scale without adding personnel.

Action Items

Ask yourself the following questions; we recommend writing down the answers:

1. Do I have the data I need to make sound business decisions quickly? Is the data that have reliable? Is the data easily accessible?
2. Are our business processes and technology up-to-date? Will they scale as we grow, or will they hold us back?
3. How many steps does it take to generate an invoice? List them. (If you’re not sure, ask the person responsible for generating invoices how many steps it takes. While you’ve got them, ask them what they need to do to correct a mistake on an invoice.)

Did any of the answers to the questions above surprise or alarm you? If not, your current ERP system may be serving your needs just fine. If, however, you were alarmed by some of the answers, something may need to change.

We’d be happy to jump on a call to learn more, offer our best insights and advice to help you get headed in the right direction.  A conversation now could save wasted time and money down the road.  Don’t worry, you won’t get a sales pitch!

Not ready to talk?  No problem.  We have lots of free resources available to assist you, here.