Choosing a new software for any business can be difficult. In addition to cost, founders and decision makers must research the software’s reputation, assess its capabilities across a wide range of desired functionality, and choose software that will meet company needs while not requiring an enormous learning curve for its staff.
They must also choose between cloud-based vs hosted options and assure that they purchase a balance of licensed seats for the right mix of users.
For large enterprises, much of the groundwork can be done by in-house IT staff and cost is spread over a large product base to minimize the impact on the company. But for small manufacturing companies that employ 10-200 employees, these challenges are magnified. Smaller companies are often at a disadvantage and IT professionals may not be on staff. Additionally, the extensive capital outlay for new systems may not be feasible for smaller manufacturers. As a result, the founder or decision maker risks choosing a system that is too weak or too strong, or one that requires such a deep learning curve from already overtaxed staff that full functionality may never be realized.
If these challenges are real for the selection of any critical software, it is especially true when a company reaches scale and complexity and finds themselves in need of a robust, right-sized ERP system. And if the challenges exist for selecting critical software for a singular functional area, then those challenges multiply for an important decision involving a software system that will drive most, and in some cases all, of a company’s core business functions for many years.
MRP Systems and ERP Systems
To make the best choice among existing platforms, it is best to first understand the difference between an MRP and an ERP. An MRP, or Manufacturing Resources Planning system, is a production focused control system that encompasses production planning, scheduling and inventory of components, raw materials and other parts or assemblies required to produce finished goods. Specifically, an MRP system ensures that material and equipment are available for production and allows for the planning of any associated purchasing.
An ERP, or Enterprise Resource Planning System, has all the elements of an MRP for production, shop floor control, and purchasing; but it also provides systemized management and data analysis for financial and sales functions, all optimized for a manufacturing environment. An ERP system will include financial integration of functions such as Accounts Payable and Accounts Receivable, Customer Retention Management (CRM), fixed asset monitoring and other key administrative and financial functions. This allows for integration and management of all company functions and leverages automation and real-time data analysis to improve the performance of the company.
Benefits of ERP Systems for Small Enterprises
There are many benefits to implementing an ERP system for a small company. For one, the company may need to replace an older system or one that was manually managed and labor intensive in the early history of the enterprise. Many small businesses often use cobbled together systems or legacy applications brought over by staff from previous jobs. An ERP system can replace an older system with increased functionality and analytics to allow accurate and best practice materials management throughout the company.
Secondly, an ERP system can eliminate “fragmentation”. Fragmentation occurs when a company uses numerous software systems from department to department to accomplish the initial growth experienced by the enterprise. The problem arises as the company scales and as product offerings and manufacturing volume begin to exceed the combination of different system’s capabilities for providing organization and control of production processes as well as back office functions as well. In many cases, fragmented software systems may not “talk” to one another and reporting between the systems may have to be manually reconciled. As manufacturing volume increases, an ERP system can eliminate fragmentation, integrating the material and business controls into a single platform with real time data and analytics.
Finally, a company may have diversified its product line with new and more complex iterations that explode the associated bill of materials required to produce. This bogs down the planning and purchasing required to feed the bill of materials and introduces inefficiency into the operation that extends throughout the manufacturing process. An ERP system can process the data and provide clear, organized, and automated functionality to manage core business functions and operate manufacturing efficiently and with the right level of material availability.
Top Six Manufacturing ERP Systems
Regardless a company’s reason for pursuing an ERP system, today there are a variety of options available for almost any industry and for companies of varying size and complexity. Tier I ERP providers such as SAP and Oracle have traditionally serviced companies with revenues above $200 million, although SAP now has a version for small to medium sized businesses as well. Tier II ERP systems generally service enterprises with $20-$200 million in sales and less than 100 users. And Tier III ERP systems generally focus on companies with under $40 million and with 5-30 users. To help choose the right ERP system for a growing small manufacturer, here is a look at the top 6 Tier II and Tier III ERP providers available today for small manufacturers.
This Tier II provider offers manufacturers a platform for any manufacturer with over $1 million in sales. It is also flexible in that core functionality of the basic ERP can be augmented through purchase of additional modules a ’la carte. This provides companies an option of purchasing only what they need with the flexibility of adding additional modules later. Epicor offer production management, supply chain management and scheduling as well as financial management. The platform offers manufacturers the ability to utilize make-to-order, configure-to-order and make to stock shop floor control and manage it all within the out of box software functionality. The system is easy to customize and is scalable. It is also compatible with all mobile devices.
Epicor also offers a few modules not often found in other ERP systems. It has a strong Customer Relationship Management (CRM) module and a Quality Performance Management (QPM) module. These modules are often only obtainable through ISVs (Independent Software Vendors) in competing vendor platforms. And it also has eCommerce capabilities, a feature not found in other platforms.
Some downsides include a common complaint over slow customer support. It also has limited flexibility in invoicing and order modifications and cannot be integrated with email and calendars. It has very limited import and export functionality, an oddity given that Microsoft import/export capability is available in most of its common products. In the case of Epicor, import/export can be done only through the purchase of an ISV add-on.
The system can be delivered on-premise, hosted or as a cloud-based SaaS application. While Epicor does not disclose pricing, estimates are around $175 per user per month after implementation costs.
This Tier II provider is often included in Tier I as many companies are giving it a look for use within larger enterprises. Microsoft Dynamics NAV offers the name recognition of Microsoft along with a strong ERP platform that includes operations, financial accounting, project management and purchasing. It also offers a field service options for companies that have extensive field technician operations and wish to integrate those actions into the managed ERP platform.
While NAV does have considerable core functionality out of the box, it may require the utilization of ISVs for specific work flow programming needs. And for companies with complex processes these ISV add-ons can add considerable cost to an implementation. However, it is a strong product due to its seamless integration and its ability to be customized for each customer.
Negatives include editing limitations among several modules and patchy integration with some external applications provided by ISVs. And while it can be customized for many industries it is not recognized as being overly user friendly. NAV ERP implementation also requires that adopting companies partner with a certified 3rd party company for programming and deployment. This adds cost and places the adopting company one step removed from the actual provider.
Microsoft Dynamics NAV is deployable both on-premise and as a cloud-based application and can be hosted on Microsoft’s own cloud platform. Microsoft Dynamics NAV can be purchased as a one-time payment or as a subscription. Cost per user after infrastructure and implementation costs is $210 per user per month for full features with the Dynamics 365 plan.
Another Tier II ERP supplier, Rootstock offers an ERP system built for manufacturing. It is built on the Salesforce platform allowing it to leverage powerful cloud options and superior integration among applications, a problem that often plagues other systems. Rootstock offers production and capacity scheduling, shop floor control, inventory, purchasing and financials as do most ERP systems. But Rootstock also offers engineering change management, sales order management, services, and returns and repairs. This broader selection of options can then be used to add applications and solutions from within the Salesforce ecosystem to customize and focus needs for specific industries.
Rootstock has additional modules for CAD and engineering allowing them to handle designs for electronics, electrical and mechanical functions. Work order routings can be modified without disruption to standard routings giving shop floor management the ability to customize production orders without the headaches usually brought on by special requests and customized production. The system also has strong costing capabilities from the micro through macro level.
Some negatives for the platform include slow customer support and scant documentation for products. Mobile applications, common with many competitors offering similar platforms, can only be obtained through an expensive add on. Of note, some common features within the finance module are missing, challenging its strength as a complete ERP.
The system can be delivered by web, SaaS or cloud, although cloud in this case has the advantage because of its association with Salesforce. While prices start at $75 per user, pricing for full functionality ERP seats is around $175 per user per month after implementation.
Syspro manufacturing software offers ERP functionality that can be tailored to the scale of the enterprise. This Tier III provider also offers a modular system and additional modules can be added later as the company grows. Syspro has the base elements common to small ERP systems such as shop floor control, inventory control and finance functions. Syspro also has a strong scheduling functionality that allows it to utilize single-constraint as well as multi-constraint scheduling. This allows the system to track actual vs estimated labor and manage materials and scrap for work-in-process. This is a valuable tool for smaller manufacturers where material costs can make a big impact on profit. The system also has Engineering Change Control (ECC) so users can track and manage changes to versions in production.
The platform has improved its user interface and has multiple visual tools to connect master data throughout an enterprise. It also has a unified system for mixed mode manufacturing, another important consideration for smaller manufacturers looking to optimize and track their production processes.
For all the sophistication within its core manufacturing functionality, there are some negatives related to reporting and data management. The out of box reports are not useful and must be redone to suit the individual company and there are limitations on how much customization can be done. And data between key areas such as inventory and AR must be in the same cost period to ensure accuracy. This limits some data analysis and forces users to be vigilant where other providers handle the issue seamlessly.
Syspro is available through the cloud as an SaaS or on premise. It is sold primarily through resellers and pricing is around $199 per user per month after installation costs.
Another Tier III provider, IQMS is a modular provider offering manufacturing companies the option of adding capabilities with additional models as they scale. Core functionality includes manufacturing and resource planning, scheduling, supply chain, CRM, purchasing and accounting.
Two strong features in the IQMS ERP system not commonly offered among competitors provide key benefits to small manufacturers. These two features are Vendor Managed Inventory (VMI) and embedded EDI. VMI allows the manufacturer to manage inventory on the customer end opening the company to consignment style arrangements as well as assuring JIT capability by placing visibility further upstream into the vendor’s warehouse. The embedded EDI feature allows for the development of seamless automation in purchasing from point of order through delivery of raw materials and key components. These features make IQMS an excellent choice for companies attempting to build lean best practices into their operation as they scale to optimize their processes and build lean into their culture.
Among the negatives are limited drill downs for inventory analysis, a deficiency that would seem to offset some of the benefits of VMI. There have also been issues with software bugs and limited functionality on modules such as Time and Attendance. Finally, the system does not connect work orders to sales orders meaning the chain from end to end is not seamless.
The system is available through the cloud or as an SaaS on premise. Pricing for IQMS ERP is notoriously difficult to determine. However, price ranges online have reached as high as estimates of $45,000 USD for annual cost and $3,000 USD per user per month.
This Tier III provider on the list is also the lowest cost. MRPeasy’s ERP platform was originally built as an MRP system. Its core functionality included manufacturing, shop floor control, material planning, inventory, sales order management, warehouse management and work order management. But as the strength of its core product became apparent, MRPeasy has moved to become a full ERP system with the lowest cost within the Tier II and Tier III space.
MRPeasy accomplishes its transition to full ERP product in a very clever way. MRPeasy has designed its new ERP platform to integrate with both Xero and QuickBooks. Both programs are used extensively by small and medium sized companies worldwide as their accounting software of choice. By integrating their core MRP functionality with both QuickBooks and Xero, MRPeasy can offer a fully functional ERP solution for small to medium sized companies from 10-200 employees.
The system also requires no installation as it is exclusively browser based. It also offers a deep level of service and information on its webpage in the form of User Manuals, FAQs and other tools designed to streamline the learning curve required for implementation. The integration with Xero and QuickBooks lends immediate credibility to the finance and accounting functions due to their partner’s name recognition and reputation. It also means that MRPeasy could leap frog over the kind of software development bugs and glitches other suppliers encounter when making the transition to a higher functioning iteration. By using Xero and QuickBooks’s system, MRPeasy can confidently provide this functionality because both are already a known and respected accounting platform. The system also works on mobile devices including Android and iOS. As it is browser based there is no maintenance and updates are not required.
The negatives so far include the “newness” of the product offering. But this should be mitigated by the reliance upon the strength of the Xero and QuickBooks platforms and allow MRPeasy to further innovate and improve its core functionality even further and at lower development costs. As a browser-based system there are some upper limits within the lower three packages in areas such as SKU counts, total allowable BOMs, lines per work order, etc. These limits assure server capacity optimization. However, the Unlimited package does not limit computations for any functionality.
MRPeasy is browser based. And while there are Starter and Professional packages available at $49 and $69 per user per month for the first ten users respectively, the most popular is the Enterprise version at $99 per user per month. An additional Unlimited level is available for $149 per user per month that has the same features as Enterprise but with added API integration capability. And MRPeasy’s prices beyond the first ten users are greatly reduced, meaning additional users as a company scales bring the average cost per user down even further.
Choosing the Right Software
ERP implementations are stressful, time consuming and expensive. In choosing a new ERP platform, a manufacturing company is making an investment in a product with a long life cycle, possibly longer than some production equipment. If the choice and selection is balanced, the company can accrue benefits in the form of improved efficiency and operating cost. Choose the wrong system and a company can drive costs in the other direction. For small and medium sized companies that outlay of capital can be especially critical as cost per user is only part of the equation. Over the life of an ERP, additional costs in the form of training, software upgrades, maintenance, support and other potential cost minefields will also come into play. It is imperative that owners and decision makers tasked with the decision of purchasing a new ERP do so with a balance of cost, ease of use, lifecycle changes and especially, the unique needs of their company within their industry.