How to Measure Benefits of ERP/Software?
No matter what business you are in, the decision to invest in a product is heavily influenced by one factor - ROI. How soon a product can start giving the returns on investment? Although all the products such as ERP software shall not be measured by this factor, it does and foundry is no different.
Here is where to measure your (monetary) returns/savings in order to calculate ROI in your foundry:
1. Employee (Time) Cost: Calculate savings at the cost of time (Salary of employees). You can calculate the cost savings by how much time it used to take for your employees to record data and generate reports before and after implementing the ERP system.
2. Calculate Least Cost Charge Mix: Biggest saving of all using maths algorithm! Very few software vendors provide this function and most of them provide this at extra cost. ICAST ERP is one of the few vendors in India that provides this module integrated as well as a stand-alone module. Basically, it calculates the least costly charge mix from the materials available in the foundry depending upon the stock, recovery percentage and also calculates ‘Additives to be added’ after taking the running sample. The study says that it saves up to 4% material cost for Iron Foundries, up to 8% material cost for steel foundry and up to 15% in Aluminum Alloy foundry.
3. Cost Saving by Improving Inventory Turns: ERP Can help reduce excess inventory levels by improving inventory turns. One can simply release the money blocked into excess inventory and calculate the interest percentage and consider that as a saving. That alone will turn out to be a huge amount? The direct advantage of having an ERP!
4. Weed Out Loss Making or Less Profit Making Items: With the help of the right data and precise reporting you can find out which items cost you money rather than help to earn it. Usually, foundries are the job industry and calculating profitability is a difficult task. ERPs like ICAST can help you provide ITEM ANALYSIS and to find out how much profit (or loss) do you earn. Finding out this only if a foundry replaces 5% of the items comes at the bottom of the list of ‘Item Wise Profitability Report’ can save you from a loss or can help you make earn a lot of money with the same production capacity.
5. Cost Saving with Predictive Maintenance: With the help of a predictive maintenance feature, even if your foundry can save one day per year of break down then it’s equivalent to saving one day's profit! Because a day lost if production is a profit loss!
Above mentioned are some of the ways to save/ earn more with the help of software technologies. There can be other ways as well like you can take a leap forward towards industry 4.0 and integrate your ERP/Softwares with your machines/ SCADA or take the help of IIOT and save time in the production process! Till date, no one was calculating the benefits from the monetary aspect and we have just shown how to measure the advantages of the software technology with monetary aspects.
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