Centralized ERP: What Makes Sense for PE firms?

Centralized ERP: What Makes Sense for PE firms?

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The Ultra team is often called into a client engagement when a private equity (PE) investor acquires a manufacturing enterprise — whether in automotive, heavy duty, aerospace, food processing or other sectors. During an acquisition process, issues with legacy or outdated ERP systems come to the forefront, since PE firms usually seek to have centralized ERP, including performance data, reporting and IT.
We’ve seen situations where departments and divisions of the acquired company find they can no longer function independently of each other, maintaining basic spreadsheets of outdated information. Thus the need for centralized ERP.
In many engagements, Ultra offers Business Process Improvement services across the acquired enterprise in aiding with centralized ERP, to improve efficiency across the entire scope of business activities including: operations and production, supply chain, transactional activities, sales, service, engineering, distribution and ongoing customer satisfaction.
We add value by helping the acquisition set the course for achieving new levels of profitability, margin, and growth.

We looked at many of these issues in a previous blog post entitled Your Business Performance Plan and ERP: An Effective Acquisition Strategy.

The Importance of Visibility, Centralized ERP

One of the biggest issues we hear from PE companies acquiring manufacturing companies with older ERP systems is a lack of access to information and the need for centralized ERP.
For the PE company, an effective ERP selection and implementation helps the enterprise manage its performance with real-time visibility into the entire business. The PE firm benefits when an ERP system offers extensive reporting and analytics that track engineering and production, management of materials, quality, scheduling, tool tracking, inventory management and more in real time.
During an ERP or BPI engagement, we help the PE and manufacturing team assess:
  • Key performance metrics
  • Technology platform options
  • Information access methods: scorecards, dashboards, data cubes for analysis, and report processing
  • Business data dimensions, i.e., how we want to look at the business
For enhanced reporting and tracking of key metrics across the new acquisition, key performance metrics are developed with the business users. The goal is to leverage technology to get the information the PE team needs to accurately track business performance across the acquired enterprise.

A PE Success Story

We recently teamed with a PE organization that acquired a rapidly growing service provider and distributor of restaurant equipment. The food service company serves more than16,000 customers including national chains and institutional food service organizations around the US.
The company is based out of four US locations and 10 distribution centers.
After the food equipment company was acquired by a PE organization, it became clear that legacy ERP system was at the root of many challenges. The equipment company was unable to share data across the distribution center and main locations, thus they worked less efficiently, created waste, and lacked the ability to see manufacturing and distribution processes in real time.
Reporting was especially cumbersome. It was a challenge to get a real-time view into performance data, and reports required manual work-arounds and duplicate data entry.

Ultra was engaged to do a full business process improvement and software selection. After a careful analysis of current state and future state of operations, with an eye toward driving process improvement, the food equipment company selected the Cloud ERP technology platform. Once the detailed ERP requirements definition was concluded, the solution from NetSuite was selected as the best fit, since it lets the organization access needed functionality and provides the ability to add more functions as the need arises. It also lets them ramp up additional facilities as acquired by the PE firm.

A SaaS or Cloud model lets the enterprise avoid costly hardware, software, IT maintenance, upgrades, security and other costly infrastructure. With improved tracking and reporting, the PE company has gained the ability to act quickly, correctly and confidently when optimizing performance.

Final Thoughts on Centralized ERP

For the PE community, it’s important to consider that return on investment (ROI) is realized from process enhancements made possible by effective selection and implementation of ERP software.
A well-managed ERP selection and implementation can be a continuing source of cost savings and operational improvements, both of which help companies survive and thrive.
For a further look into these considerations and centralized ERP, visit Ultra’s library of white papers.
I also invite you to contact our team to discuss your ERP journey or need for centralized ERP.
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