Independent research confirms that facilities integration is a key reason behind ERP purchases, particularly among manufacturers. In its ERP in Manufacturing 2009 research report, the Aberdeen Group (an IT-focused research firm) cited interoperability issues across locations as the 4th most common driver of a manufacturer’s decision to acquire ERP.
According to the Aberdeen report, in 2009, companies of all sizes continued to increase the number of facilities in which they have implemented ERP. Specifically, the average small company (under $50 million) had deployed ERP in 2.4 locations, an increase from 1.4 locations in 2008. Medium sized businesses (between $50 million and $1 billion) had deployed ERP in 5.3 locations, up from 4.0 locations in 2008. Large businesses (over $1 billion) had deployed ERP in 10.1 locations, up from 9.4 locations in 2008.
So, why are companies integrating multiple facilities? Because centralization helps them achieve efficiencies and make better decisions. Some of the benefits include abilities to:
1) Make decisions based on a fulsome view of an integrated company;
2) Gain efficiencies of scale in areas such as purchasing;
3) Gain efficiencies of scope in areas such as marketing and sales;
4) Reduce redundancies, headcounts and associated costs
The ERP-driven benefits of multi-facility integration are equally if not more impactful when considering offshore facilities integration. An un-integrated scenario made offshoring an uneconomical proposition for many companies. For example, the administrative costs of dealing with multiple regulatory regimes, currencies and time zones outweighed the arbitrage benefits of lower wages.
ERP can reduce the administrative costs side of the equation and give companies an opportunity to take advantage of wage arbitrage opportunities. For example, by automating transactions and processes, many companies no longer need armies of accountants, analysts and lawyers to administer multi-jurisdictional reporting, multiple currencies, customs obligations and tax requirements.
Managing a multi-facility or global company is complex business. ERP can help your company manage the complexity.
If you would like to learn about whether ERP is right for your business or about Pemeco’s system selection services, please contact our ERP experts.