Why your first ERP might be more affordable than you think
UK manufacturers are well-aware of how much costs have risen over the past couple of years due to the ongoing supply chain disruption. Shortages of essential labour, materials and components have sent prices soaring – putting pressure on margins and forcing you to pass the increase on to customers.
It’s no surprise then that cost topped the list of problems for manufacturing companies in 2022, according to the Make UK/BDO Q2 Manufacturing Outlook survey. Higher raw material prices concerned almost 72% of companies, while around 68% said that energy rates were causing catastrophic or major disruptions, and a similar proportion had experienced rising transport costs.
Now more than ever before, every purchasing decision in machinery, staffing and, of course, software, must be carefully considered to ensure it’s both affordable and delivers value from the start.
During uncertain times like this, it’s tempting to tighten the purse strings but working smarter is key, and this is where technology can help. Enterprise Resource Planning (ERP) systems were developed to support manufacturing businesses by streamlining processes and allowing you to do more with your resources – whether that’s finances, materials or skills.
For small businesses, the thought of undertaking a software implementation project could seem overwhelming and unaffordable, especially while still dealing with the fallout of the Covid-19 pandemic and war in Ukraine.
Yet a modern cloud-based ERP for small businesses has been developed to keep costs low and implementation times short. Traditional ‘on premise’ systems, on the other hand, often have numerous hidden costs after the initial implementation. Essential features such as upgrading the system, keeping it secure and training staff to use it effectively can all add up to make it an expensive tool over time.
However, cloud-based ERPs enable firms with tighter cash flow and fewer IT resources to develop standardised and efficient workflows to boost resilience and performance, while responding more effectively to the ever-changing demands of the sector.
What makes today’s ERPs cost-effective?
Software has come a long way since the early incarnations of business software. You might not remember the first ERPs, which date back to the ‘60s, but you may recall the clunky software installed from floppy disks and CDs in the ‘90s. As well as the software, you also had to invest in on-site servers to host traditional systems, which meant high upfront and maintenance costs. Any additional upgrades, customisations or expansions to the system would come with a servicing fee, adding to the overall cost.
In contrast, SaaS (software as a service) enables the user to access the software via a subscription-based model. Hosted on remote cloud servers, there’s no need to invest in your own hardware – you simply access the system through your web browser for the contracted period. Lots of key features are covered in one ERP package but the specifics will vary from provider to provider, so it’s important to do thorough research prior to purchasing. Tech support, maintenance and security are also included with SaaS products like Fortee ERP, so it’s a simple, affordable way to transform your factory and stay ahead of the competition.
Low upfront costs, regular software improvements and updates, and ease of implementation means that the SaaS market is growing quickly, and statistics show it generated £8.5 billion in the UK in 2021.
Clearly, there’s growing confidence in the effectiveness of cloud technology, including ERP. SaaS is a viable solution for small-scale manufacturers, who don’t have huge funding pots, by providing an affordable subscription-based ERP that aligns with the subscription-based pricing models and user-experiences increasingly seen in the consumer market.
One investment to future-proof your business
This SaaS model also facilitates the wider technological and workforce revolution that’s happening in the UK manufacturing sector. The Covid-19 pandemic has made flexible working the norm for many people, rather than a privilege or granted for extenuating circumstances.
While it may not be possible for production teams to work from anywhere, managers and office-based staff can now access critical data remotely using mobile ERP software. This is particularly useful when moving between different factory or customer sites as well as working from home. However, HSBC has published research that shows remote-access software could help to meet the needs of the entire workforce as their expectations change.
According to the study, 91% of manufacturers think that lifestyle benefits would improve productivity more than financial incentives. Of all the benefits, 89% of staff consider flexible working to be their biggest motivator, compared to money (77%). Due to the hands-on nature of manufacturing, there are specific challenges when it comes to enabling this in the sector. Being able to monitor production from anywhere is one solution, but according to the World Economic Forum, in 2021 only 46% of the industry have facilities to enable this.
A cloud-based ERP system for small business that facilitates home or hybrid working could provide greater flexibility and improve employee morale, giving people an incentive to stay especially when budgets are too tight for financial rewards.
Easy to implement and upgrade
Due to the nature of SaaS, purchasing the best ERP for small manufacturing businesses is now an investment into the future of every company. A low upfront cost gives you access to the software and expert tech support needed to reap the benefits of a streamlined operation – and as best practices evolve and new technologies are developed, the software moves with you.
Traditional on-premise ERP systems are much tricker to upgrade. Rather than clicking a button to install a new update at a time that suits you, you may need to book a slot with a technician before you can enjoy the new functionality.
Similarly, any bugs or customisations take longer to locate, optimise and fix, requiring an engineer to visit your site, or new packages to be installed onto existing hardware – if that hardware is capable of hosting the new capabilities and doesn’t need upgrading itself. Old, unsupported software is a cyber security risk to your business too, so it’s important to stay on top of new releases, despite the time and cost investment each one requires.
SaaS ERP software, in contrast, dramatically reduces the amount of time it takes to reap the rewards after making the initial purchase. It is easily upgraded with new features and functionalities, making it more cost-effective and valuable in the long term.
The fact that less investment is required for maintaining your ERP means that you have more time and the budget for other value creation initiatives. From creating innovative new products, to delivering efficient and professional customer service, a SaaS ERP helps you to achieve your wider business goals by delivering fast ROI.
Reduce recruitment costs
In a challenging job market, the wider benefits of using a cloud-based ERP system for small business shouldn't be under-estimated either.
The Covid-19 pandemic spawned the ‘Great Resignation’ phenomenon, as the number of workers resigning from their jobs soared. According to the Labour Force Survey from the Office for National Statistics, the majority of people leaving their jobs between 2019 and 2021 stayed within their industry but went to work for another employer.
Investing in technology to streamline workflows and futureproof operations could put your business at a competitive advantage when recruiting and retaining talent in the sector.
With ERP software, many time-consuming and repetitive functions can be automated, which leaves less room for human error and gives staff more time to do the value-added work they love. Burnout is always a risk for factory managers, but ‘boreout’ caused by prolonged periods of mundane work can also cause motivation and morale to slump.
According to the Office for National Statistics (ONS), the true cost of every new hire on an average UK salary of £27,600 is around £62,890, although this varies depending on the industry. By removing unnecessary workload, and giving staff time to spend on tasks they enjoy, investing in an ERP could help to reduce the risk of turnover – not to mention the costs that come along with it. By investing in the latest technologies, you stand a better chance of attracting younger tech-savvy people to your company too.
Most manufacturing companies kept their doors open during the Covid-19 pandemic, yet the sector is still reeling from the effects of delays, inflation and skills shortages. To counter these, a smart investment in cloud-based business software could help you to streamline your operations and work more efficiently, while the availability of data-led insights helps you to respond to changes in the market, and plan for the future with confidence.
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.