The Case for Buying Manufacturing Software in 2012

By Sheldon Needle

Consulting is pretty strong right now. Consultants are sending out a lot of proposals and getting new business. My associates report that there is a high level of interest in upgrading their clients’ systems. This is supported by improved demand for their products whether they are a custom machine shop, assemble to order, configure to order or repetitive manufacturing environment.

Consulting projects vary from help for strategic IT planning, to cloud (SaaS only) software selection for a small company, to implementation assistance following a successful selection study. 

Manufacturers who invest in consultants
When manufacturers retain a consultant, they are serious prospects. It is also a statement that they are willing to invest in their success.   One current observation is that now that manufacturers have come most of the way through a business downturn, they now have a much better idea of how valuable software (or lack of) is to their business and the future of their company. Consequently, more of them are willing to spend for a consultant in order to help insure they make the right decision.

Flat organizations, limited resources
Due to downsizing over the past few years, manufacturers no longer have the staff to do what the software should be doing by using Excel/Access.  They now understand they must either have a better solution or that they need to improve the support or level of training of their current ERP system in order to meet business needs. Many are realizing that in order to work effectively with their suppliers and customers they need to be in the sweet spot of software technology and connectivity to the Internet.

Consultants report that most of their clients have become staff lean and they have few to no resources to manage an ERP implementation.  This is a real challenge and cost factor to overcome.  They are not excited about the idea of adding staff that may prove to have only a temporary purpose.

Enough with the Excel worksheets!
One of the easiest ways to justify a software purchase is to eliminate all the ancillary Excel worksheets used to supplement inadequate systems. One consultant did a revealing exercise with a client recently.  They run legacy software with a lot of Excel.  It is a $30M business that now has 7 people whose primary/secondary role is to just maintain/track inventory.  Once they implement a new ERP, he estimates inventory control can be handled by just 2 people with much greater accuracy.  

Up and coming – cloud computing, an easier entry point?

A couple of years cloud computing was barely on the horizon ( no pun intended). But now it is becoming a more acceptable option for many users. There are several reasons why cloud is starting to take off

• More vendors are offering it
• Cloud systems usually offer canned, one size fits all configurations which can save time on installation and training
• Users who have very old versions of products like Epicor , Macola or other legacy programs are often faced with major, expensive hardware upgrades to bring in a version of the same software or a new system. Cloud removes that issue entirely since clouds (AKA SaaS) can be run over just about any PC built in the past few years.
• A lower cost entry point. With a cloud solution you pay upfront only for installation and training. After that, it’s a monthly charge based on the number of users that is usually in the $70-100 per user range per month. That number can be higher or lower depending on the number of users. Another benefit compare to traditional on premise is that the latter model charges 18-22% per year for maintenance.

Advancements in technology
.Net user interface and SQL server is still the predominant foundation with just about all vendors having close ties to Microsoft.  Much effort has gone into making their applications web enabled and accommodating visibility on iPads, Android tablets, and iPhones and Android phones for remote connectivity.  ERP vendors seem to be slow in getting into the Saas business. 

Noticeable trends
Medium and larger manufacturers want to make sure that they can be connected to their suppliers and customers through their website depending on what the site is doing for the users of the site.  This is typically customers who want to create or check orders, salesman who want to check inventory or create quotes and for issuing Purchase Orders to vendors.

Manufacturers who look at vendor demos are becoming more astute at evaluating the software. Many vendors like to focus on trackers, dashboards, and business intelligence capabilities.  Nowadays, prospective buyers want to carefully review process – getting the data into the system to “feed the beast” knowing that without the data in the system there is not much to analyze.

Summary
Owners put off purchasing new MRP software when the economy tanked and now they are seeing that up-to-date ERP software is the new operating paradigm and they are accepting it.  They want systems designed to support lean business operations, supplant Excels worksheets and meet increased supply-chain demands (from customers and suppliers). 

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