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Small Manufacturers Need To Fully Deploy ERP Functionality

To leverage success in implementation, small manufacturers need to establish performance indicators and fully deploy the functionality of their ERP solutions, according to a study from the Aberdeen Group.

The results of a recent paper from the Aberdeen Group, "Benchmarking ERP in SMBs," (small and medium-sized businesses) allows SMBs (revenues less than $50 million) that are searching for or are already using enterprise resource planning (ERP) software to compare their progress to similarly-sized companies.

“The search for core ERP functionality not needed by [small] companies…produces a relatively short list. While small companies desire less complexity, they also require most of the same basic functions needed by larger companies,” said Cindy Jutras, vice president and service director for manufacturing research for the Aberdeen Group.

According to the study, 64 percent of small manufacturing companies use functionality as their most important selection criteria when evaluating new ERP solutions.

However, Jutras notes that once the ERP solution is implemented, small manufacturers use only 62 percent of core ERP functionality available. Jutras also points out that the percentage of ERP functionality used has a direct relationship with the total cost of ownership.

“Once a threshold is reached and dues are paid, payback multiplies as ERP penetrates more broadly and deeply into an organization.” Jutras said.

The study found that even though both small and large companies increased returns by more fully implementing ERP systems, small manufacturers fared better than larger manufacturers in achieving initial system payback.

All small manufacturers in the study reported that their implementation was completed within two years, with 86 percent completing it in one year. By contrast, 47 percent of large manufacturers completed implementation in one year.

Moreover, the study found that the small manufacturers that participated developed long and productive relationships with ERP providers, with 51 percent using their current ERP provider for five years or more. 

Small manufacturers are also more likely to purchase things like supply chain planning and execution or customer relationship modules from their current ERP provider, rather than another source, according to the report.

While small manufacturers are already seeing some benefit from their ERP implementation, Jutras notes that they have not yet reached the maximum value of their ERP solutions. According to Jutras, small manufacturers need to establish measurable performance indicators for ERP implementation and fully deploy the functionality of their ERP solutions in order to achieve success.

“Don’t fall into the trap of believing an ERP implementation is ever completely done. There will always be innovative technology advances to consider, and a healthy business is constantly evolving,” Jutras advises.

To view the full report, click here.