Can ERP = Enjoy Resource Productivity?

In a market that many economist project to be flat for a while, manufacturers and distributors are looking at their back office to identify where they can gain efficiencies. Many companies rely on older ERP systems and only utilize between 20-40% of the system’s capabilities.

As time passed, and new capabilities developed, many sought quotes to add additional functions, only to find that the cost appeared to be prohibitive and thus they didn’t upgrade. Many want efficiency and connectivity, but have been deterred by the investment (and some miss the adage “need to spend some money to make some money!”)

Internet connectivity is becoming a required capability (or perhaps a customer expectation). An example is the growth of Trade Services’ Supplier Xchange RFQ & return quote connectivity. Progressive contractors are utilizing the web to improve their productivity and to become more self-sufficient. Some older distributor systems still lack the necessary connectivity and distributors that wish they could get in on early quoting that lets their ERP system generate a quote at the early stage of contractor estimating. Some distributors have set up auto quoting, hands un-touched with managers being alerted to the activity.

Recessions have a way of causing companies to want to look at real time, automated data points. Many older ERP systems were built to grind out reports that may take days to generate. Newer and faster ERP systems can now generate real time data…in fact many employees can now see data that is critical to their job functions at the start of the day. But upgrading has had its problems.

The main problem for many companies is the cost and the management priority to upgrade. The disruption to the business to upgrade has always been in the back of managements mind. So is there a way to upgrade and not disturb your day to day business?

A press release that addressed manufacturer and distributor opportunities to upgrade from INFOR this past week caused us to look at year-end tax advantages that might enable distributors to write off much of the investment, presuming they are financially able and it is a good business move.

INFOR’s press release mentioned their Flex offering:

• Flex Upgrade—Upgrade to the latest release of your current solution with minimal or zero license fees and fast, cost-effective implementation services.
• Flex Exchange—Exchange your current Infor application for another Infor solution on a like-for-like basis, for a nominal transaction fee and very competitive services rates

While we presume other ERP companies have similar offerings, it may pay you to inquire about upgrade costs, non-business disturbing processes policies and incentives are available. Why?

You’ll want to check with your tax guys, but we’ve been told of two potential opportunities

• There is a $250,000 limit for immediately expensing qualified new or used equipment purchases in 2009.
• You may be able to take a 50% bonus depreciation on purchases of new equipment, software, and qualified leasehold improvements made in 2009.

Is it time for your company to move into the real world of back office efficiency and customer connectivity? There might be some good deals for your company. ERP systems have moved well beyond calculating inventory buys and printing invoices. Share your thoughts with us.