If you run a manufacturing business, there may be a number of issues that may warrant your attention at any given time. But if there are some issues that keep popping up time and time again, you need to find a permanent solution for them. Rather than constantly struggling with problems like incorrect inventory reporting, inconsistent production scheduling, non-integrated systems, lack of meaningful data, inaccurate product costing, etc., you should consider implementing ERP software.
And if you are in the market looking for an ERP, your mind must be buzzing with a thousand questions. In the case of small and medium-sized businesses, the question of ERP cost looms large. On the other hand, large businesses are looking for stable systems that are capable of handling a high volume of transactions and data entries. Finding the functional fit for your organization depends on the modules/functionalities required to suit the organization’s current business processes.
Out of the many questions you have, we would try and answer the most frequently asked questions in this newsletter. Let’s start!
What is Enterprise Resource Planning or ERP?
ERP is a modular software solution that integrates and automates key business functions to provide real-time data for strategic decision-making. It is a collection of separate but interdependent modules for business activities like production planning, procurement, inventory, manufacturing, compliance, finance, sales & marketing, etc. An ERP System compiles all the available business information on a centralized database to grant cross-departmental visibility to employees and managers.
The integration of all the modules into a single system facilitates the free flow of data and provides a single source of truth. It empowers manufacturers to analyze various business scenarios, discover process improvements and generate major efficiency gains, which translate to cost savings and better productivity. ERP can also generate performance reports with metrics, graphs, charts, and other visual aids for the company to measure the outcomes and take data-driven business decisions.
What are the Business Benefits of ERP?
As stated above, automation is one of the major benefits of an ERP. By standardizing a business process and feeding it into the system, the manufacturer can be assured that all the steps in the process will be followed with pinpoint accuracy. When data is entered into a particular module of the ERP, automation also ensures that relevant changes are made in all the connected/affected modules.
Listed Below are some of the Major Business Benefits of ERP:
- Streamlined processes: ERP streamlines day-to-day chores and business functions supporting the complete supply chain end-to-end.
- Real-time reporting: The integrated system furnishes accurate real-time data for informed decision-making.
- Enhanced productivity: Redesigns workflows to eliminate redundant processes and optimize cycle times.
- Increased visibility: Provides complete control over the movement of materials and resources.
- Improved agility: Enhances the business’ ability to respond to disruptions and minimize their impact.
- Quality management: Facilitates the setting up and execution of standardized quality metrics.
- Regulatory compliance: Keeps track of compliance requirements and regulatory guidelines
- Business scalability: Matches the growth of the business and keeps abreast with new norms plus standards.
- Reduced costs & risks: Reduces operational & management costs, with data integrity and reduced risk.
What are the Different Modes of ERP Deployment?
ERP software can be implemented in 3 different modes: On-Premise, Cloud and Hybrid. The three methods come with their own advantages and caveats. Depending on the nature of your business and the size of your enterprise, you can choose from any of these implementation modes to achieve business efficiency.
- On-Premise: The traditional face of ERP software where the entire data resides on company’s internal servers. The hardware required for operation is managed by the clients’ own IT staff.
- Cloud ERP: The responsibility of hosting the data lies with the vendor. The data is stored on a remote server (internet cloud) and is accessed by the client over the internet.
- Hybrid ERP: A combination of the above two models, it stores portions of data on-premise and also on the cloud as per the client’s discretion. Ease of installation, vendor support and greater mobility are some of the benefits.
Enterprise level organizations with a large volume of data exchange generally choose on-premise ERP solution, as they are more sensitive about data integrity and operational speed. On the other hand, cloud-based ERP is implemented by companies that require anytime-anywhere access to their data and processes. Companies that are looking for a middle ground and best-of-both-worlds, choose to go with the hybrid ERP option. In the end, it boils down to one question – “What are you looking for from your ERP system?”
What is Generic ERP or Industry-specific ERP?
Generic ERP solutions can be used across industries and vertical markets. Their features and functions cover a broad range of cross-industry requirements. In today’s economy, industries often straddle other industries and the pros of generic ERP software include an ability to leverage cross-industry best-practices. Generic ERPs are generally less expensive as compared to industry-specific ERPs and are suitable for companies that don’t operate in a particular niche market.
On the other hand, industry-specific ERP solutions are curated for specialized industries and their unique micro-verticals with relevant operational features. Industry-specific ERPs don’t require a great deal of customization, as industry standard practices are already baked in. These solutions are based on industry insights and hence offer a variety of alternatives to redundant business practices. The cost may be high but manufacturers operating in niche markets can use the industry expertise to their advantage.
Generic ERPs are generally less expensive as compared to industry-specific ERPs and are suitable for companies that don’t operate in a particular niche market. However, they may required a lot of customizations to meet your specific needs, which ultimately adds up to the cost.
Is ERP Suitable Only for Large-Scale Manufacturing Businesses?
Small or big, don’t all businesses have to compete in the same market? Don’t they have to deliver the same quality with the same consistency? So the simple answer would be, NO. Every modern manufacturing business needs an ERP to standardize their processes and optimize their workflows. In fact, ERP is even more useful for small or mid-sized manufacturers because it has industry-best practices baked-in to allow these businesses to redesign their processes to match those of the bigger enterprises.
ERPs may have first been developed for large-scale enterprises, but now, they can be tailored to any size of organization. The marketplace now has many different ERP providers that cater to all types of businesses of different sizes and in different industries. Along with discrete manufacturing companies, ERPs for process manufacturing have also been available for a long time now. Industries like food, pharma, chemical, paints & coatings, personal care & cosmetics, etc. have been successful in unlocking the potential of ERP.
What is the Cost of Implementing an ERP?
If we measure on-premise and cloud deployment on the same scale, we would arrive at a very broad benchmark. On-premise implementations are based on a perpetual licensing model, where the client pays an upfront fee to the vendor and also bears the cost of all the supporting hardware. All these investments hoist the Total Cost of Ownership (TCO) out of range for many manufacturers. But, organizations with specific needs for data integrity and transactional volume still opt for on-premise implementations.
On the other hand, small and medium-sized organizations have benefitted from the advent of cloud ERP. Companies can pay a periodic fee to access an instance of the ERP software and the vendor will host their data on a public or private server. This drives down the cost of ERP and brings it within reach of SMEs. Upon careful consideration of the costs and benefits, organizations of any size can obtain an ERP suitable for their specific requirements, with the cost varying according to the features they select.
*Manufacturing organizations may also need specific customizations in their ERP systems, which would inadvertently increase the cost of implementation.
How long does it take to Implement an ERP?
Implementing an on-premise ERP project takes anywhere from 3 to 6 months. The timeline can vary based on factors like the size of the company, the complexity of the system, required customizations, expected concurrent users, data transfer requirements, and so on. If the right change management practices are undertaken, the timeline can be kept under control and the implementation can be completed well within the expected duration.
However, in case of an out-of-box cloud deployment for an SME business, the ERP can be up and running within 2-4 weeks. The vendor only has to create a separate instance of the already developed ERP system and share it over the internet. But if the manufacturer asks for a customized ERP solution that is tailored to his specific requirements, the implementation might take much longer. A comprehensive implementation plan will help organizations estimate correctly and execute it on time.
While this newsletter has covered the most important FAQs, it’s inevitable that you have some specific questions pertaining to your business and its need for an ERP.