This is a short story about a wonderful return on investment. Everyone loves a return on investment, especially if that investment costs hundreds of thousands of dollars.
There is a small manufacturing company in Arkansas that installed and implemented an enterprise resource planning system last year. The industry in which the company works is not particularly important. Neither is its geographic location. But the fact that the company, call it Company A for the purposes of this story, decided to move forward and install an ERP system is particularly important. It will change the fortunes of Company A in rather short order.
Prior to the installation and implementation of its ERP system, Company A shipped about $200,000 in inventory per week and it stored about five weeks worth of inventory in its warehouses. But executives at Company A figured there was a more efficient way to run the warehouses and, in turn, the business of the entire company.
So after months of research and planning, after working with a top technology firm, after moving forward to install that ERP system — and, in particular, a handheld wireless scanning system to better handle its inventory management — Company A did find a more efficient way. It was able to decrease its amount of stored inventory to about three weeks worth of items. That allowed Company A to free up about $400,000 in working capital, more than the total cost of investment in the ERP system. And that allowed Company A to restructure a large swath of the way it now does business.
What is ERP? You might know, but even if you have a grip on the technology, it has certainly changed since its introduction to the business world in 1990, and it has changed even more during the last couple of years.
“The term ERP has remained pretty stable,” says Alex Attal, general manager, Sage ERP X3, within Sage North America. “It was developed more than 20 years ago, but we still use the name; it still means something. The reason, I think, is because it has filled an important need for businesses. The application is different, but the process is always the same: How do you automate complex processes?”