Maximizing Return on Investment Using ERP Applications

INTRODUCTION

Return on Investment justification is a standard part of business planning. If a business is deciding to build a new manufacturing plant, it is necessary to determine whether it makes financial sense to invest in this project. The calculation of the profit that the new facility will provide is compared to the cost to design and build it. The expectation is that once the business case is developed and approved and the project completed, the business will be held responsible to produce the forecast results. This chapter deals with the development and incorporation of an effective Return on Investment case for investments in new information technology where business issues have frequently prevented this from being used effectively. Although there may well be some aspects of ERP systems that enable other processes and don’t produce results, in and of themselves, there are very few, and the vast majority should be launched only when it is clear that they will provide a tangible, measurable, believable, and desirable financial benefit to the business. Unfortunately, a large number of IT applications programs have not had specific Return on Investment targets, or the cases are so poorly prepared and executed that measurement becomes impossible and the programs are allowed to devolve into a “cost of doing business” approach. An effective Return on Investment business case is essential to enabling any organization to achieve planned benefits from new functionality. Part III ...