Implementation of an enterprise resource planning platform is not easy for many organizations. This challenge is understandable: After all, ERP is the nexus of virtually all important business applications, including accounting systems, customer relationship management tools, productivity suites (e.g., Microsoft Office) and industry-specific solutions, such as 3D CAD software. Setting all the moving parts up and ensuring that they work well in concert often takes time – and money.
High costs and lengthy timelines are the norm with ERP implementations
Indeed, ERP implementation is like an overdue trip to the dentist for many organizations: painful, potentially expensive but wholly necessary. Let's look at what typical ERP setups entail:
- A 2016 report from Panorama Consulting – based on a survey of firms across different industries, with manufacturing being the largest group (37 percent of respondents) – found that in 2015, the average cost of an ERP implementation was $3.8 million, with 57 percent of such projects seeing budget overruns. Typical duration was 21.1 months.
- More than one-third (35 percent) of survey takers reported that that ERP setup consumed between 1 and 3 percent of their annual revenues. Another 20 percent stated that implementation costs were in the 3 to 5 percent range. The average for all organizations in 2015 was 6.5 percent of revenue, which was up slightly from 5.9 percent the previous year.
- Even with this high level of investment, at least 7 percent of all ERP projects still fail. While 57 percent of respondents reported success in their efforts, another 36 percent "didn't know" whether they had failed or succeeded. This remark usually indicates that teams did not pay enough attention to software selection or the business case for upgrading/changing the ERP system.
The problems outlined in Panorama's report cover a broad range of businesses, from the 26 percent with $25 million or less in yearly revenue to the 6 percent with $2 billion or more. But small and medium-sized organizations face unique head winds in getting ERP properly situated.
"Changes to scope in the middle of implementation, can be extremely costly."
Like the main character from "Goldilocks and the Three Bears," they need an ERP solution that is "just right" – i.e., not so disjointed, rigid and slow that it holds them back, but also not so vast, complicated and expensive that it sits well beyond their means. For engineer-to-order manufacturers, this can be a hard needle to thread between functionality and cost.
However, just as Goldilocks eventually discovered the perfect bowl of porridge, ETO manufacturers can find an ERP system that fulfills their specific needs while being eminently economical and reliable. What would such a platform include?
The benefits of an ERP solution by and for ETO manufacturers
When staring down an ERP project, SMBs have to be particularly sensitive to several issues, including but not limited to:
- Project scope: Inaccurate estimates of project scope, as well as changes to scope in the middle of implementation, can be extremely costly. Panorama has called scope creep "the Kudzu vine of ERP implementations." Smaller organizations must avoid it by finding an ERP package that can be set up quickly and all at once.
- Customization: Tweaking an ERP system to precisely fit an organization's needs is a common practice, but one that often comes at a high cost. If the ERP platform is not well-integrated with commonly used applications, then making the right connections can quickly become tedious and time-consuming.
- Inter-department communications: Poorly structured communications processes across teams can lead to information bottlenecks between engineering and purchasing. As a result, making key decisions about what to buy and when can get slowed to a halt.
A targeted solution such as Questica ETO ensures that ETO manufacturers have the tools to overcome these challenges and have successful ERP implementations. With Questica ETO, setup as well as updating is seamlessly handled by a software agent. Integration with all of your most important apps – from accounting tools to drawing programs – is straightforward, plus the overall cost is affordable, thanks to highly configurable ERP options. Learn more today about how you can get started with an ERP platform made by and for ETO manufacturers.