The role of ERP in delivering ROI to the manufacturing CFO
by Jaco Maritz, COO at SYSPRO
Sponsored by SYSPRO
The CFO plays a critical part in building measurable short-term and long-term plans that address the ongoing supply chain disruptions impacting efficiencies and revenue growth.
Gone are the days where the manufacturing CFO was predominantly responsible for the back-office or accounting function. In today’s dynamic world, the CFO is a strategic navigator – responsible for steering the business through unchartered waters and mapping a direction for the future. A big part of this role is the enablement of digital delivery models.
According to the 2021 SYSPRO CFO 4.0 survey, 57% of manufacturing CFOs agree that proficiency and knowledge to create an effective plan to operationalize and transition the business into a digitalized and automated business is the most critical factor globally. The CFO will need to understand emerging technologies and the impact that digital transformation will have on the business.
The role of the CFO 4.0 is also not only about supporting the business to make the right technology investments. The CFO plays a critical part in building measurable short-term and long-term plans that address the ongoing supply chain disruptions impacting efficiencies and revenue growth.
Here, Enterprise Resource Planning (ERP) is often regarded the digital backbone in that journey. As a single source of data, ERP provides full visibility into the entire operations of the business. With data insights, the CFO can plan ahead and make the right investments for the greater good of the business. ERP also allows the CFO to measure the impact of those plans to determine what is working, and what is not working and make the necessary adjustments. Here is how a CFO can garner ROI from their ERP system.
- Enabling agile sourcing and procurement
The manufacturing CFO has the difficult job of balancing expenditure with the operational need for agile and responsive sourcing and procurement. With ongoing supply chain disruptions, many businesses have struggled to collaborate with their supplier base in real-time and many were left with no choice but to revisit strategies on the sourcing of raw materials, sub-assemblies and finished products.
On top of that, many manufacturing businesses have still relied on manual, paper-based systems to complete month-end tasks, which further impacts sourcing and the procurement processes.
ERP can also assist with improved sourcing and procurement by fostering improved supplier collaboration, ensuring demand accuracy and even the ability to manage global pricing requirements, while minimizing the costs and effort associated with the administration of trade promotions and deductions. ERP also mitigates purchasing risks, improves governance and maintains negotiated agreements – while enabling the purchase of products and services at the best value-to-price ratio.
- Measuring the success of diversification of business models
The pandemic forced many businesses into thinking ‘out of the box’ to thrive. According to the SYSPRO CFO 4.0 study, 65% of businesses will look at diversifying businesses to drive profit and improved revenues. 29% of businesses stated that they plan to innovate with a new product line and 39% plan to invest in eCommerce as a new route to market. While these strategies sound good on paper, the CFO expects to see the ROI from such costly investments. There is no guarantee that introducing a new product to the market or investing in a new eCommerce platform will bring in tangible ROI.
An ERP can help by providing measurable data around areas such as Material Requirements Planning to purchase orders, inventory management, inventory control and lot serial tracking. It can also provide further success factors such as the ability to communicate effectively with staff and allocate accountability.
A good example of this in action could be seen with SYSPRO customer, Ventec Life Systems. Ventec provides respiratory care to improve patient outcomes and reduce caregiver challenges in the hospital and home. Ventec’s leading product, VOCSN, seamlessly integrates five separate devices including a ventilator, oxygen concentrator, cough assist, suction, and nebulizer into one unified respiratory system. In Spring 2020, the US Government partnered with Ventec, and collaborated with a large manufacturer to complete an order for 30,000 ventilators. This required the company to dramatically increase its production volumes and change business processes to achieve the necessary flexibility and customization. Utilizing SYSPRO’s technology platform, which provides extensibility to the core ERP, Ventec was able to streamline shop floor operations with a set of customized panes for Job Processing. ROI was clearly measurable, with the rate of manufacturing increasing by 80 times between May and August 2020. The full federal order of 30, 000 ventilators was completed in just 154 days, with one unit completed about every seven minutes.
Besides having clear objectives at the start of a pivot, the CFO should also have a clear understanding of the business case and focus efforts in the areas of the business with the greatest pain points to manage spend and ultimately generate revenue.
- Proactively managing business risks
When asked about top business risks for 2022, unsurprisingly, 40% of the CFOs within the SYSPRO study highlighted the management of rising inventory costs as a top concern, while 35% pointed to the management of local and global supply chains.
As CFOs take up more strategic roles within the business, the reduction of these risks is key, along with the critical need to budget for capital expenditure and to forecast the cash requirements.
Ultimately, ERP is an essential tool as the manufacturing CFO role makes a shift. It can give the CFO a heads-up around what to plan for and how to pivot in a time of continued volatility.