In terms of qualitative benefits from establishing an effective ERP software system, there are four big areas where tangible benefits are realized: inventory reduction, improved accounting controls, labor cost reductions, and improved customer service and sales (Hamilton, 2004). Inventory is of the most important aspects of any business, especially for Paragon. Paragon’s inventory is largely perishable and one of the tenets of their mission is to deliver fresh and quality food. A $300,000 savings is astronomical in a business with such a small profit margin and an even smaller margin for error. This would be a one-time savings benefit because once the software has been implemented, there will be no perceptible issues with inventory perishability.
Another benefit is generating and allocating revenue to be spend on future investment and stimulate the company’s growth through an increased amount of free time. Paragon must continue to reinvest capital into the business in order to remain competitive. The accounting improvements allows for increased free time to complete other more important tasks while generating revenue. This would benefit Paragon annually. Due to decreased labor hours, employees will have the opportunity every year to focus on future growth of the business. Labor is another large expense for any operation and the ability to streamline that labor force is imperative to success based on employee happiness and well-being and efficiency. The implementation of an ERP system such as JustFood will save Paragon $1,155,000.
Good customer service is one of the aspects of doing business that sets a company apart and improves business via customer relations. JustFood’s ability to streamline the production and distribution processes within Paragon will improve lead times and make for more satisfied customers.
There are a few of
the intangible benefits from using JustFoodERP as Paragon’s ERP software. One
of these benefits include the usability of the software for Paragon’s
employees; the software is very easy to use and is intuitive. Another benefit
is the reduction of data entry to allow for more free time during the workday (Eresource,
n.d.). Employees are able to streamline data inputs with less manual labor.
Additionally, all of the applications and sectors in Paragon’s system will working
together as one, another added benefit. For example, if a department reports
data that another department would not understand or is aware that data is being
reported, JustFood would make these unknown processes more streamlined and
accurate (Eresource, n.d.). In an article published by Kane, Palmer, Phillips,
Kiron and Buckley (2015) in MIT Sloan Management Review, their findings report
that only 15% of businesses that are in the early stages of digital maturity
have a clear and coherent digital strategy. If Paragon is on board with their
digital transformation and is ahead of the curve, they can be competitive due
to their advance digital strategy. Additional, Kane, Palmer, Phillips, Kiron
and Buckley (2015) states that employees from ages 22-60 are more likely to
work for digitally enabled organizations; therefore, another intangible benefit
for Paragon would be employee retention. Paragon will have more controls with
JustFoodERP, which will alleviate and risks of mis-utilization of resources.
JustFood also provides Electronic Data
Interchange (EDI) integration, which allows Paragon to integrate their current
system with JustFood. With the integration of all systems working together and
feeding information to one another, current employees should be more
understanding and willing to learn the new software. Furthermore, JustFood is
accustomed to working with similar sized companies compared to Paragon;
therefore, they will be able to provide the one-on-one training of the new
software, if needed.
Intangible benefits of implementing an
ERP system are difficult to quantify in terms of dollars savings, but can be
measured based on ease of company operation greatly benefits employees’ success
and productivity. Intangible benefits are even harder to quantify before
implementing a ERP system, but are actionable nonetheless. If the company is operating
efficiently, profits will reflect the implementation of the ERP system. Paragon
currently has around 135 employees and hopes to reach at least 175 this year.
As Paragon continues to grow, operations must grow accordingly, thus
complicating the processes necessary for success. The implementation of ERP
software will help to streamline Paragon’s growth and while maintaining high
customer service standards (Eresource, n.d.). The initial implementation cost
of the JustFoodERP system is indeed high at roughly $1,210,000, but, as noted,
Paragon has enough free capital to afford the implementation as well as the
associated fixed costs. Paragon’s profits only stand to increase as evidenced
in the potential quantifiable and tangible benefits. Furthermore, companies who
do not continue to invest in IT and new software run the risk of becoming
attacked from hackers and/or obsolete, which is easily quantified as failure
(Gallaugher, 2016). Therefore, it is important to continue to invest in IT and
new software, and to constantly update and scan processes to encrypt potential
financial and security risk in the company (Dwoskin, 2015).
References:
Dwoskin, E. (2015, April 19). What
exactly is encryption?. The Wall Street
Journal. Retrieved from https://www.wsj.com/articles/encryption-uncoded-a-consumers-guide-1429499476?mod=e2fb
Eresource.
(n.d.). What are the tangible and intangible benefits of ERP system?. Retrieved
from http://www.eresourceerp.com/ask_experts/tangible_and_intangible_benefits_of_erp_system
Gallaugher,
J. (2016). Information Systems: A Manager’s Guide to Harnessing Technology,
v5.0. Washington, DC: Flatworld Knowledge, Inc.
Hamilton,
D. S. (2004, February 10). Justification of ERP Investments. Retrieved from http://www.ism.co.at/analyses/ERP/Justify_ERP_Invest.htm
Kane, G. C., Palmer, D., Phillips, A.
N., Kiron, D., & Buckley, N. (2015, July 14). Strategy, not technology,
drives digital transformation. MIT Sloan
Management Review. Retrieved from https://sloanreview.mit.edu/projects/strategy-drives-digital-transformation/
Panorama Consulting Solutions. (n.d.). ERP ROI Calculator. Retrieved from https://www.panorama-consulting.com/resource-center/erp-roi-calculator/
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