How manufacturing CFOs can achieve ROI from ERP

Three ways manufacturing CFOs can achieve ROI from ERP systems

Gone are the days in manufacturing where the chief financial officer (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 uncharted waters and mapping a direction for the future. A big part of this role is the enablement of digital delivery models. By Jaco Maritz, COO at SYSPRO.

According to the 2021 SYSPRO CFO 4.0 survey, 57% of manufacturing CFOs agree that proficiency and knowledge to create an effective plan to operationalise and transition the business into a digitalised and automated manufacturer is the most critical factor globally. The “CFO 4.0” 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 shortterm 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 full operations of the business. With data insights, the CFO can plan 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 are three ways the CFO can garner return on investment (ROI) from their ERP system. 1. 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, subassemblies and finished products. On top of that, many manufacturing businesses have still relied on manual, paper-based systems to complete monthend tasks, which further impacts on sourcing and 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 minimising 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. One of SYSPRO’s Australian customers is AF Gason, which designs and manufactures world-class broadacre farm machinery as well as industrial and woodheating products. The company’s Industrial Services Division provides technical solutions for commercial and industrial applications across multiple sectors. AF Gason distributes and supports all its products via an extensive dealer network across Australia and New Zealand. AF Gason uses SYSPRO as its enterprise system across the entire length of its supply chain to provide a single source of the truth. The SYSPRO ERP system records everything on the manufacturing side of the business from shopfloor recording to shopfloor data, job management, traceability, procurement and inventory management. It also covers all finance functions such as sales processing and invoicing, payables, receivables and cash management. “We’ve had 100% improvement in our results over the past couple of years,” says Leon Nash, CFO at AF Gason. “And a great deal is related to being able to use the information out of SYSPRO to give us better decision-making capability in the business.”

2. Measuring the success of diversification of business models

The pandemic pressured businesses into thinking ‘out of the box’ to thrive. According to the SYSPRO CFO 4.0 study, moving forward, 65% of businesses stated that they will look at diversifying businesses to drive profit and improved revenues, 29% plan to innovate with a new product line, and 39% plan to invest in e-commerce 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 e-commerce platform will bring in tangible ROI. Here 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. 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 requisite cash requirements. Ultimately, ERP is an essential tool as the manufacturing CFO role makes a shift. As the saying goes, the whole is greater than the sum if its parts, and ERP can at least give the CFO a heads-up around what to plan for and how to pivot in a time of continued volatility.

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