What is ROI (Return on Investment)?
A metric measuring the financial return of an ERP investment relative to its total cost.
Definition
Return on Investment (ROI) for ERP measures the financial benefits gained from implementing ERP relative to its total cost (TCO). ERP ROI comes from efficiency gains (reduced manual processes, faster order processing), cost savings (lower inventory carrying costs, reduced errors), revenue improvements (faster order fulfillment, better customer service), and compliance benefits (reduced audit costs, avoided penalties). Most organizations target ERP ROI within 2-5 years of go-live.
How ROI Works in ERP
Building an ERP ROI business case requires quantifying current-state inefficiencies (manual processes, duplicate data entry, inventory excess) and projecting improvements from ERP implementation. Common ROI metrics include: inventory reduction (15-25%), order processing time reduction (30-50%), financial close time reduction (40-60%), and operational cost savings (10-20%).
Frequently Asked Questions
What is the typical ROI of ERP?
Studies show ERP ROI typically ranges from 100-300% over 5 years. Most organizations break even within 2-3 years of go-live through inventory reduction, process efficiency, and reduced manual errors.