According to a study released by the AberdeenGroup, the majority of small manufacturers - those with annual sales less than $50 million - are not taking full advantage of Enterprise Resource Planning (ERP).
In recent years, the price of ERP infrastructure has dropped significantly, which is allowing for more recent installations of an ERP solution. While 35 percent of respondents have implemented a solution in the last five years, 14 percent have not yet implemented any ERP solution at all, Aberdeen said.
According to the study, a small start-up company has “a significant advantage” over a start-up 10 years ago when it comes to ERP options, which today offer more features at a lower cost than implementation options a decade ago.
The top two challenges for ERP implementation are “customization related challenges” at 40 percent, closely followed by “redesigning business processes” at 39 percent. Training was also a major concern at 39 percent. The study found that because smaller companies tend to run leaner, not enough attention is given to training during the important implementation phase.
Small companies also noted they are more likely to use external consultants for training. For all the potential issues, however, less than one fifth of small company respondents addressed ERP challenges by utilizing standard integration methodologies and utilized web-based services.
The study also found that small businesses are more likely to align their processes to software capabilities as a way to avoid customization issues. One third of respondents responded to ERP challenges by deploying newer applications. ERP is also extending out to peripheral areas like CRM (Customer Resource management, SCP and SCE (Supply chain Planning and Execution), and by combining these areas, integration issues are potentially reduced.
The study warns companies against the status quo when approaching their ERP systems. While 43 percent of companies intend to stay exactly where they are, 47 percent are planning significant upgrades in the next 12 months. A major concern with companies is the quality of new releases of the software. If a company has a poor experience with an upgrade, it is less likely to move to a new release in a timely manner, with 72 percent of respondents running one or more releases behind.To review the entire study, click here.