Chapter 3: Cost of ERP
Chapter 3: Cost of ERP
Instead of focusing on the cost of ERP solutions or the bottom-line ERP price, which can vary greatly from one project to another, it’s most important to look at the potential savings and growth potential an accurate, focused ERP solution for the apparel industry can provide.
ERP Cost Savings
When the right ERP system is in place, an organization can expect to see significant savings stemming from streamlined processes and better overall order and organization. In general, cost savings from ERP systems are associated with:
- Order to shipment times that are 23% faster
- Reduced operational and administrative costs
- Increased on-time deliveries
- Better operating margins due to a reduction in manual, repetitive labor
ROI is complicated, depending upon the size of a project and its associated implementation. However, parameters that can be enhanced include:
- Reduced sitting inventory levels through improved planning and control
- Minimized inventory shortages and delays
- Increased user productivity due to fully automated repeating processes
- Improved financial management through access to more reliable data
Because ERP systems are not a one-size-fits-all solution, the price can be difficult to quote without understanding specific details and pertinent information. The price of a project is dependent upon the needs of a company, and the greater the investment, the greater the potential for long-term savings in most cases.
According to the most recent study, the average implementation price is steadily decreasing. However, this varies based on numerous factors — especially the size of the company. Factors included in this cost include:
- The number of users: Depending upon the functions in use and the number of applications, the number of users will influence the price.
- Third-party software integrations: Integrations with third-party software solutions are important, as they allow custom operations that are needed for ultimate success. These are factored into implementation costs.
- In-house implementation or consultant-based: Costs are also influenced by which players are necessary for implementation and whether a business implements the software in-house or uses consultants who work with the software on a regular basis.
While the average cost may seem great, small to midsized apparel companies can expect a total cost somewhere between $150,000 and $750,000. A more specific average is somewhere between 1-3% of your organization’s annual revenue. However, with the average ROI of $7.23 per dollar spent over time, this cost is generally justifiable.