How open source ERP Gives ROI
How Open Source ERP Gives ROI
The open source enterprise resource planning is one of the popular enterprise software for the business management. The open source ERP software is specially designed for the small and medium-sized company to increase the efficiency of the company. By using the ERP, the company can use inventory, tracking, reports, management, and integration with the e-commerce, point of sales and others as per the enterprise needs.
What is open source ERP?
In the open source ERP, the source code is freely available so anyone can use, download and modify it. The automated control system helps to improve the activity of the enterprises. Today the market is rapidly growing and without the intended effect and correct structure of their implementation, it is impossible to achieve your desired result. The open source ERP allows the organization to access system code and then customize the source using their IT department paying extra for the licensing and the customizing services. The inbuilt ERP support is very important and the customization is not covered under the seller operated the software.
Simple way to achieve ROI in ERP
Most of the people choose the custom software for their business process and also avoid implementation of ERP because the cost of ERP is higher than expected. By using the simple way you can achieve ROI in the ERP implementation and they are setting the bar high, the center of the interest, understand the finish line, estimate the time and cost and others.
Setting the pragmatic expectation is important steps on the ROI driven and ERP implementation. You can estimate the project time, budget, cost, and place that make important sense for the business. Before choosing the technology to implement within your business, it is very important to envision the business process looking into the feature. The new technology will help you to grow your organization and some specific enterprises vertical helps to facilitate this ROI process for your employee and you. Understand the finish line- the enterprises go into the ERP implementation with expectation and the business owner is going to implement the advanced ERP system. Due to the estimated budget, resources and time most of the company end up quite a race that is expected functionality.
The lifecycle of the ERP can be classified into the five types such as selection, operation, acquisition, improvement, and implementation. Now the user can try to plan resulting cost at every stage of the ERP system lifecycle. They are license fee, adoption cost, and system software, support plan, consulting fee, equipment, and others. These costs are regarded to the tangible while calculating ERP in ROI. The main benefits of the ERP software reduce the operational cost and workforce. Most of the enterprises recognize the benefits of estimating the investment value. The cash flow operation helps to reduce the operational cost and most of the company implements the ERP that helps to grow operational rate.
Calculation of the ROI
It is to determine fee of several components of the project like license fee, implementation cost, consulting fee, modification cost, hardware cost and others. The maintenance cost for the pre-determined period should add to arrive at the ownership cost over the specified period and the estimated investment have the time period used to calculate the TCO. It is the difficult task that is to estimate the benefits of the ERP over the time period. For the estimation, there are a lot of the consultation and the reference to emanating from different survey report. It comes with wide range of the benefits such as reducing the operational cost, inventory level, labor cost, improve the production and others.
The three element have the direct impact on the profit, reduce in inventory and loss account will cause the release of the additional cash that can assign to yearly saving value depends on the business standard internal rate of the return. These points help to smoother the business process over the organization. The smoother process helps to improve the productivity that turns the result in consistent delivery. The consistency in the delivery improves the organization credibility in the market and also helps to improve the profit in the organization.
Benefits of the open source ERP software
The ERP is one of the best platforms that help to grow the business over the long term. The implementation of ERP software offers the business owner with the wide range of the advantages namely improves business process, increase productivity and others. There are three ways in the ERP implementation that help to generate the financial payback. The different techniques are payback period, internal rate of the return and net present value of the cash flows. The ROI model is the time value of the money analysis and in the ROI net costs versus advantages over the time period. Then it can be classified into three methods such as IPP, NPV and payback period. It provides the financial benefits of the user such as improve the customer service, reduce the inventory and reduce the operating expenses. This ROI model attempts provide the objective criteria which are result in reasonable value calculation for each.
- Customer service
The implement of customer service is one of the most important advantages of the ERP implementation. Most of them provide the high-quality services in three figures such as annual revenue, customer service premium and net margin percentage. The organization of the customer service integrates with the purchasing, engineering, and manufacturing has basic operational benefits that help to lead the customer service.
- Reduce inventory
In the ERP there is a lot of the way to reduce inventory in its investment. The wrong inventory and excess inventory represent cash the enterprises expand that have invested in some value added service. There are two features are generally associated to reduced the inventory such as material requirement planning and master production scheduling. There are different ways to calculate cash flow from the reduced inventory and it will provide various figures such as capital cost, inventory value, annual shrinkage, inventory reduction and others.