When considering a new business system it’s often difficult to calculate a Return on Investment (ROI) number that you can believe in – which is why a replacement ERP application seems to become, more often than not, a grudge replacement rather than a new opportunity to improve your business.

Another complication is that your new ERP application will almost certainly cost you more than the running costs of your existing one (because it was paid for ten years ago and probably hasn’t been invested in since).

To keep things simple I think the most effective way to calculate the ROI is on staff hours, can you reduce by one FTE or with a new system can you avoid hiring an additional FTE in the future? If a FTE has a loaded cost of $40,000 per annum diverting that money into a Tier 2 or 3 system will pay for itself. And it will be easy to monitor with most software companies charging a monthly license fee the actual dollars spent are easy to see.

For example If you are in distribution and have five staff and it takes one staff member 15 minutes to process and despatch an order and this can be reduced to 12 minutes with new software then it’s likely you can achieve a head count reduction. Or in a more positive light you can grow sales 25% without adding new warehouse staff. Some of our customers have this time down to four minutes so big improvements are achievable.