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Central Services and Multi-Site Integration: A Key Driver of ERP Acquisition

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) cites 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 in revenue) had deployed ERP in 2.4 locations, an increase from 1.4 locations in 2008. Medium-sized businesses (between $50 million and $1 billion in revenue) had deployed ERP in 5.3 locations, up from 4.0 locations in 2008. Large businesses (over $1 billion in revenue) 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 makes offshoring an uneconomical proposition for many companies. For example, the administrative costs of dealing with multiple regulatory regimes, currencies and time zones outweigh the arbitrage benefits of lower wages.

ERP reduces the administrative costs side of the equation and allows companies to take advantage of wage arbitrage. 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. ERP can help your company manage the complexity and boost productivity.

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