How to choose the right ERP vendor for your small manufacturing business – a quick guide
Small manufacturing businesses vary in their IT experience, depending on their size and resources. For many, however, the prospect of enterprise resource planning software (ERP) would previously have seemed unattainable, or something only large businesses could benefit from.
Now, though, there are affordable ERP systems specifically created for small manufacturers with out-of-the-box functionality. They can manage repetitive administration tasks and access up-to-the-minute business insights to give managers a clearer picture of how the company is performing.
Whether you are looking to adopt your first ERP, or to replace an existing outdated system, this guide will explain how to find out which software vendor is the right fit for your business.
Getting started with your ERP project
First, you should bring together a team of people from different areas of your company to create a business requirements analysis document. This is what will define your commercial goals and what you need from an ERP. Who this team includes depends on the size of your workforce, but could typically comprise senior management, production managers, department heads and people involved in managing accounting, sales, procurement and other back office functions.
However, creating the business requirement document should not be the sole focus. Instead, the document should concentrate on the most important functions that the running of your business requires.
This is because a vendor that follows an agile implementation method will have the ability and flexibility to factor secondary requirements into the roadmap as the project develops, without causing a delay to the whole project.
Understanding your budget
Choosing a solution that best fits your budget is a large part of narrowing down the right vendor. Define how much you’re prepared to spend and determine which providers best meet your business’ needs. Equally, it’s important to choose a system that can scale with you so you don’t have to replace it in a few years’ time.
The way to calculate the budget required is to work on the basis of all the direct and indirect costs that will be associated with the system over five years. This is what will give you the most realistic estimate, rather than working on a 12-month basis – particularly as an ERP system might last you up to 10-15 years.
While the total cost of an ERP over this period might seem like a large sum, remember that SaaS providers allow you to pay a flat monthly fee. Furthermore, you won’t have to pay for and manage additional hardware and software, backups, and security.
For the number of users, which will vary during that five-year period, work on the basis of one third of employees in your business and add one extra per shift, to give you sufficient margin.
Evaluating ERP project costs
In financial terms, there are two primary models for software procurement. The first is a large investment in on-premise software and physical servers, which you must maintain locally. However, as mentioned above, SaaS products allow you to pay a subscription to the provider to use a cloud-based ERP, with all the hardware maintenance and security looked after for you by the provider.
The SaaS model offers a number of advantages compared to on-premise. As well as avoiding the huge upfront cost, a SaaS ERP provider will constantly update the features, functionality and security of the system, so it meets your changing requirements. A good vendor will also work with you to help you get the most from the software, so you don’t have to turn to expensive consultants.
Spending hundreds of thousands of pounds on a package meant for a large corporation will not work for a small manufacturing business – and not only because of the initial financial hit. Highly customisable ERP systems, designed to align with the complex business processes of international or multi-site companies, will likely create more problems than they solve.
Small companies should walk before they run. Think about low start-up costs, quick wins, and fast payback. Ask potential providers if they can give a breakdown of pricing for small businesses like yours.
Assessing ERP technology
As alluded to in the previous section, cloud-based ERP gives multiple advantages over traditional on-premise systems. In a nutshell, it means you can avoid:
● Having to pay for the installation of systems
● Being tied to one location or device – as SaaS ERP gives you remote and mobile access from anywhere in the world
● Costly software updates – as the system updates and evolves automatically
● Having to invest in servers and other IT infrastructure
Even if your team includes highly experienced IT specialists, using a cloud-based ERP eliminates those hardware and installation costs, and gives you greater flexibility.
Your data is also better protected too, since cloud ERP systems are hosted in dedicated and highly-secure data centres, away from your site. New threats are monitored continually by cyber-security experts, while the fact that your data is stored remotely means it won’t be lost if there’s a fire or flood at your factory.
Evaluating ERP fit
There are hundreds SaaS ERP vendors available, but how specific they are to manufacturing will vary. Some will state they have a focus on it but, in practice, may not include the most helpful features for you.
When comparing systems, remember that nobody has more knowledge of your own business than you do. Search for specific manufacturing ERP software that meet your requirements, and include manufacturing-specific features like production planning, scheduling and equipment load charts. Also consider what features you need for your area of manufacturing, whether it be food and drink, metal fabrication, electronics or something else.
Once you know what you will need from the package, start to include others that would make for useful extra features – not essential for functionality, but nice to have, such as full integration with your existing accounting software. These criteria will help you further narrow down your list of vendors.
Considering industry experience
The technology industry may be focused on the new, but to create an effective and reliable system, you need a supplier with strong experience in your sector, familiarity with small manufacturers’ issues and knowledge of what they are looking for.
There are many ways in which you can evaluate the ERP vendors you’re considering, and how thoroughly they understand the manufacturing sector. For each, ask the following questions:
● How long have they been developing solutions for manufacturing and your sub-sector?
● What support is available – both upfront and ongoing?
● What level of training is provided to staff?
● What do their product road maps look like?
Also ask for customer references – especially ones in your industry or with similar business models – and find out how they managed the implementation process. This won’t just give you feedback, it’ll enable you to see in real time if the product will be able to handle your operation.
Even if you can’t see a customer demo, be sure to request a run-through of the software from the vendor. Ask them to show a simplified version of your production processes so that you can see if the system will fit how you work and the nature of what your business produces. When there is a gap between the product and what your business needs, ask the vendor about it. They are continually developing the software, so there may be something on their near-term roadmap that will bridge that gap.
Confirming ERP training and support proficiency
Training and support can be where even suppliers of great software can fall down, because a capable system is no good if users don’t have the knowledge to get the best out of it. ERP software can be a powerful thing, with the potential to make a huge difference to small manufacturers’ businesses.
When quizzing your potential vendors and gathering information on each service, take the time to thoroughly understand what training is offered. How is it delivered? How long is it available to you? What happens when a new employee joins the business? How much does it cost?
For example, we will train all staff to use Fortee before your business begins to use it fully, and support is ongoing any time it is needed. Refreshers are available, and specific training can be organised for new employees – or for those who move to other roles and would benefit from more detailed knowledge of another function.
And don’t forget the general ‘ease of use factor.’ When you look at an ERP system, you should intuitively know how to use it – or at least – you should be able to figure out what to do pretty quickly. The user-interface of an ERP software solution should be an important indicator for how easily your employees will be onboarded and trained.
Understanding the ERP implementation process
The implementation process – both in terms of the steps required and the time it will take – can vary depending on your specific business and the vendor you choose.
However, there are factors to consider in your choice of vendor that could indicate a smoother, more efficient implementation process. Chief among these is the style of project management they use.
A vendor that uses a more traditional waterfall method, in which the entire process is planned out and major stages follow sequentially one-by-one before a single launch, is more likely to encounter problems when faced with unexpected snags or delays. This is because such things are never planned for.
On the other hand, a vendor that implements projects with an agile ERP methodology breaks down the project, easing your employees into it and allowing them to steadily feel more comfortable in using the system.
This, along with the fact that an agile-managed project can react much better and more flexibly to unforeseen events, means the implementation of your ERP will be ready and effective much more quickly. In turn, this ensures you have a quicker ROI, as it gets to work faster on streamlining your business processes.
Fortee is a brand new cloud-based ERP solution from Forterro, developed for small-scale manufacturers in key industries such as metal, electronics, furniture-making, medical devices and others. Cloud-based, it is low-cost and zero-risk, with an implementation and training time of just 40 days.