Ashley Desiongco - Senior Product Marketing Manager, Supply Chain Management
As discussed in our previous blog, Microsoft Dynamics 365 was recognized as a leader in Gartner’s® 2021 Magic Quadrant for Cloud ERP for Product-Centric Enterprises. This month, we want to further substantiate our value proposition to customers by sharing the results of a recently commissioned Total Economic Impact™ (TEI) study conducted by Forrester Consulting on behalf of Microsoft. The study examines the potential return on investment (ROI) that enterprises may realize by deploying Microsoft Dynamics 365 Supply Chain Management.
Methodology and purpose
TEI is a methodology developed by Forrester Research to assist companies with technology-related purchase decisions by helping technology vendors effectively communicate the value proposition of their solutions. The purpose of a TEI study is to provide business decision-makers with a framework to evaluate the potential financial impact of implementing Dynamics 365 Supply Chain Management.
Forrester Consulting interviewed five organizations that used Dynamics 365 Supply Chain Management to conduct the TEI study. The characteristics of these businesses and the results of the interviews were then aggregated to develop a composite organization. The key findings of the study are based on the composite organization and are summarized below.
Dynamics 365 Supply Chain Management is a solution that is helping product-centric organizations to revamp their existing enterprise resource planning (ERP) platform and it enables customers to considerably increase supply chain visibility. It also empowers users to plan better, improves organizational agility, and maximizes asset uptime, allowing companies to operate smoothly and profitably.
Forrester’s study revealed five quantifiable impact areas: increased production volume, reduced downtime, improved quality, reduced infrastructure cost, and increased developer productivity.
Let’s look at each of these areas in more detail to examine how Dynamics 365 Supply Chain Management delivers value across enterprise supply chains.
Increased production volume
Dynamics 365 Supply Chain Management empowers users to improve demand planning by enriching demand forecasting with AI. It also allows companies to deliver production schedule visibility to the shop floor and to dynamically rebalance production schedules based on real-time material, labor, and equipment availability. These improvements translate into more responsive planning and scheduling, an improved synchronization of supply and demand, and the identification and minimization of production bottlenecks. The result for customers is increased production throughput that was worth $24.3 million over a three-year time horizon.
Our solution also enables users to create a connected factory and proactively manage the shop floor using a real-time view of production and inventory. This is one reason why customers surveyed by Forrester reported substantial increases in data collection from their supply chains. This data improves visibility into asset utilization and resource availability and provides a systematic means of identifying root causes of machine downtime.
Dynamics 365 Supply Chain Management also provides the ability to rapidly respond to quality issues and parts obsolescence with engineering change management. The organizations in Forrester’s study leveraged these capabilities to reduce costly downtime of business-critical production equipment, which improved overall equipment effectiveness (OEE) and ensured that production lines can run as scheduled 24x7x365. For an organization with 500 manufacturing machines, this reduction in downtime was valued at more than $1.5 million over three years.
Interviewees further noted that Dynamics 365 Supply Chain Management allowed their organizations to uncover new pathways for improving product quality. In particular, real-time production data provided the means for understanding when variations in raw material quality or machine operating characteristics were impacting quality. And, because they were able to make immediate decisions, they could ensure that quality was maintained.
By taking actions to improve adverse conditions in real-time, scrap rates declined, and root causes were identified, allowing these organizations to avoid unnecessary losses while simultaneously improving production quality. Over three years, the improvements to product quality reduced costs by more than $6.8 million.
Reduced infrastructure cost
A critical improvement point for the organizations studied by Forrester were the gains realized by retiring multiple legacy applications that were often on-premises, highly-customized, disparate, and disconnected. By migrating systems and processes to a modern cloud-based solution, users were able to pay less for server maintenance and system administration as well as avoid the significantly higher cost that would have been incurred to scale their prior solutions. These infrastructure cost reductions totaled $11 million in three years.
Increased developer productivity
Dynamics 365 Supply Chain Management takes advantage of Microsoft Power Apps to reduce customization costs by utilizing low-code/no-code extensions. Plus, it delivers operational application services by running on the Microsoft Azure cloud, significantly reducing the need for developers and technical staff to focus on system administration. By freeing up these resources to deliver other, higher-value work, the financial impact of productivity improvements is projected to be approximately $0.7 million over three years.
Study participants also reported other substantial organizational benefits that were unquantifiable in nature. These include increased flexibility to adapt, improved ability to deliver on-time, improved customer satisfaction, better forecasting capabilities for improved supplier collaboration and planning, and improvements to team members’ day-to-day work realized by breaking down siloes between teams and functions.
The big picture
As we have seen here, Forrester’s study uncovered five quantifiable impact areas as well as several unquantified benefits. When these are considered in combination, Dynamics 365 Supply Chain Management delivered a total economic impact of $44.33 million in financial savings over three years. At $23.27 million, the investment provided a ROI of 90 percent and took 22 months to pay back.
Read the full report: A Total Economic Impact™ of Microsoft Dynamics 365 Supply Chain Management