5 Costly Risks for Building Materials Businesses Sticking with Legacy ERP

Despite the high demand for building materials and a growing market, you may be struggling to protect your margins. This is because your legacy ERP system cannot determine the right price of products at the right time.

You are investing more money than necessary in a legacy ERP system that cannot keep up with today's fast-paced and uncertain business environment. To match the market's pace, you need proper planning and execution, which a legacy ERP simply cannot provide!

Attention building materials industry owners!

Sticking with your legacy ERP system, with its burdensome structures and inflexible frameworks, resembles the creaky foundation of an old building vulnerable to seismic shifts of change!

Especially when the change is taking place at a breakneck speed around you.

Many building materials businesses face significant challenges because they continue to use legacy Enterprise Resource Planning (ERP) systems.

This reluctance to upgrade to modern ERP solutions is causing business owners and manufacturers to miss out on various opportunities, leading to lost efficiency, reduced profitability, and constrained growth potential.

This apprehension about upgrading from legacy ERP systems stems from concerns about the initial cost of implementation, the potential disruption to ongoing operations, and the perceived complexity of transitioning to new technologies.

Understandably, these factors contribute to the hesitancy among building materials owners to modernize their legacy ERP systems.

But to match the pace at which the world and your competitors are leveraging the digitalization of operations, you must decide your next move, too. Here's a detailed look at the five major risks associated to sticking with your aging legacy ERP systems, especially in the building materials industry.

1. Operational inefficiencies

Legacy ERP systems struggle to keep up with the demands of modern business operations. They are often slow, cumbersome, and rely heavily on manual input. Such inefficiencies lead to:

Delayed processes

Outdated systems can cause bottlenecks, resulting in slowed production and distribution. When your ERP system is not optimized, basic tasks such as inventory management, order processing, and scheduling can become time-consuming and error-prone. This impacts your ability to meet customer demands and increases unnecessary operational costs.

Increased errors

Manual data entry and outdated interfaces raise the risk of human error, leading to mistakes in orders, inventory management, and financial reporting. For example, an incorrect entry in inventory levels can lead to stockouts or overstock situations, affecting customer satisfaction and cash flow.

Reduced productivity

Employees spend more time navigating and troubleshooting these outdated systems, diverting their focus from core responsibilities. Instead of focusing on strategic tasks that drive business growth, your staff is burdened with mundane administrative work. Apart from affecting your staff's morale, this also limits your company's overall efficiency and productivity.

2. Integration challenges

Modern businesses rely on a variety of software solutions to manage different aspects of their operations. Legacy ERPs often lack the flexibility and compatibility required for seamless integration with newer technologies. This results in:

Siloed systems

Difficulty in integrating with other software results in isolated systems that don't communicate effectively, causing data silos and inconsistencies. This fragmentation makes it challenging to get a unified view of your operations, hindering your ability to make informed decisions.

Data discrepancies

Without proper integration, data needs to be manually transferred between systems, increasing the likelihood of errors and outdated information. These discrepancies can lead to significant issues, such as incorrect financial reporting, which can have regulatory and compliance implications.

Compromised efficiency

Lack of integration hampers workflow automation, making processes less efficient and more time-consuming. For instance, the inability to integrate your ERP with your customer relationship management (CRM) system can result in missed sales opportunities and poor customer service.

3. Scalability and adaptability issues

As your business grows, your ERP system needs to scale and adapt accordingly. Legacy ERPs often lack the scalability to handle increased transaction volumes and the adaptability to support new business processes. Consequences include:

Growth constraints

The inability to scale efficiently can hinder business expansion and limit growth opportunities. For example, if your ERP system cannot handle an increase in order volume during peak seasons, you may miss out on potential sales and damage your reputation.

Inflexibility

Outdated systems struggle to adapt to new market conditions, regulatory changes, or evolving business models, leaving your business vulnerable to external pressures. This rigidity can prevent you from quickly responding to industry trends or customer demands, putting you at a competitive disadvantage.

Increased complexity

Adding new functionalities or users often requires expensive and time-consuming customizations, further complicating the system. This complexity not only increases costs but also makes it difficult to train new employees and maintain the system.

4. Lack of real-time data and analytics

In the current data-driven market, access to real-time information is crucial for making informed decisions. Legacy ERPs typically do not provide the advanced data analytics capabilities needed for real-time insights. This results in:

Delayed decision-making

Without real-time data, decision-makers rely on outdated information, leading to slower and potentially less accurate decisions. This lag can be critical in fast-moving industries where timely decisions can make a significant difference.

Limited visibility

Inadequate reporting and analytics hinder your ability to monitor performance metrics, identify trends, and react promptly to market changes. For example, without real-time sales data, you may not be able to adjust your marketing strategies effectively, resulting in lost opportunities.

Competitive disadvantage

Competitors with modern ERP systems have access to real-time analytics, giving them a strategic edge in the market. By leveraging real-time insights, they can more effectively optimize their operations, reduce costs, and enhance customer satisfaction than they can with a legacy system.

5. High maintenance and support costs

Maintaining and supporting legacy ERP systems can be a costly affair. These systems often require specialized skills and continuous updates to stay operational. The financial implications include:

Increased IT costs

Keeping legacy systems running demands substantial IT resources, including hardware, software updates, and skilled personnel. These costs can quickly add up, diverting funds from other critical areas of your business.

Frequent downtime

Older systems are prone to breakdowns and downtime, disrupting operations and leading to potential revenue losses. Unplanned downtime can be particularly damaging in the building materials industry, where delays in production or delivery can result in significant financial losses and customer dissatisfaction.

High total cost of ownership (TCO)

Over time, the cumulative costs of maintaining and supporting a legacy ERP can exceed the investment required for a modern solution. Upgrading to a new ERP system may seem like a significant upfront expense, but the long-term savings and efficiency gains can far outweigh the initial costs.

Bonus point: Wasted opportunities

In a rapidly evolving building materials industry, clinging to outdated ERP software solutions is a critical mistake that can cost you dearly. 

These legacy systems fail to provide a comprehensive view of your operations, resulting in fragmented communication and collaboration across teams. With an obsolete tech stack, you miss out on harnessing cutting-edge technologies like AI and ML, which can transform your business processes and drive innovation.

Too often, companies only recognize the need to replace their aging ERP systems after they see detrimental effects on their operations—by then, it's often too late.

The fallout can be devastating, leading to customer loss and forcing you to incur double the costs of maintaining a failing legacy system while investing in a new solution.

Transitioning your legacy system to a modern ERP can seem daunting, but the benefits far outweigh the challenges. By making the switch, you can replace your legacy ERP system with a solution that offers real-time data, seamless integration, and scalability to support your business’s growth.

Don't wait for the crisis to hit!

Concluding thoughts

For building materials business owners, persisting with a legacy ERP system can result in notable operational inefficiencies, integration challenges, scalability issues, delayed access to real-time data, and elevated maintenance costs.

To stay competitive, it’s essential to migrate your legacy system to a modern ERP solution that can support your growth and adapt to changing market conditions.

Embracing modern ERP systems represents more than just an upgrade; it marks a strategic shift towards amplifying operational efficiency, adaptability, and competitive edge.

By making this transition, businesses can better position themselves to navigate the evolving industry landscape and effectively mitigate the challenges associated with modernizing their legacy ERP systems. 

Want to know where to start or how to modernize your ERP system and what things you require? Talk to our ERP modernization expert over a cost-free consultation call and take the first step towards modernizing your building materials legacy ERP today!