ERP Systems for Job Shops: 5 Factors That Influence Your Cost
Sep 09, 2016
By: Mark Stevens
Manufacturing
“How much does an ERP system cost?” It’s a question we get often, yet one that requires a close look at a job shop’s needs in order to answer. The cost of the software itself can be determined fairly easily, but it’s the “other things” that go into an ERP system investment that will determine your ultimate cost. Together with an experienced consultant that knows the software and the needs of your job shop, you can begin to determine the actual cost of an ERP system by looking at these and other variables:
1. Business Size and Structure
The price of most ERP systems is based on the number of users – the people in your organization who will be using the system, and the level of access each of them needs. An ERP system may offer up to 45 different modules (each of which adds to the cost of the system), some of which are designed for large organizations with very sophisticated business models and others for smaller organizations with less complexity, so choosing those that align with your needs is important and will affect the cost of the system.
2. Type of ERP
There are two types of ERPs: cloud-based and on-premise.
- Cloud-based systems are hosted on the vendor’s server, not yours, and are accessed through the Internet. Systems that live in the cloud are a lot like your cable service: you pay a monthly or annual subscription fee, with additional fees for support, training and updates. You can upgrade your system at any time though, like your cable service, you’ll pay more per month.
- On-premise systems “live” at your facility, on your computers and servers. They’re usually priced under a one-time perpetual license fee, usually based on the number of users, with each seat costing around $4,500 per user. You’ll also incur costs of around 17% per year for upgrades and ongoing maintenance.
3. Integrations with 3rd-party Software
There are a number of vendors that provide specialized or custom software add-ins that allow you to do things like generate custom reports not available otherwise. The more “unique” your needs, the more add-ins you might require, and each adds to the total cost of your system.
4. Implementation Plan
Who will help you implement your ERP? Will you “go it alone,” work only with the ERP provider, or leverage the experience of a consultant?
We know that the experience of a consultant is extremely important when implementing an ERP – the value can’t be underestimated. A consultant with experience in your industry knows your challenges and knows how to put together a system that’s finely tuned to help solve them. A consultant can also work closely with the ERP provider to ensure the system has all the functionality and capabilities needed for your business.
5. Buy-in from Leadership
Your best chance for success in implementing an ERP system is to have complete buy-in from the top. When leadership supports and champions the ERP project, others will embrace it, too, and the necessary resources will be allocated to it. When leadership doesn’t embrace the ERP, the costs involved in training, software selection, testing – really, every aspect of an implementation – rise.
While understanding all of the costs associated with an ERP system is important, it’s even more important to understand the positive impact an ERP can have on your business. The right ERP system and the guidance of an expert in its uses and implementation can help you:
- Manage and integrate all your business processes, from marketing and sales to factory floor, shipping and financials
- Focus on the customer by managing the huge variety of orders, and responding effectively to changes in those orders
- Ensure profitable growth by analyzing costs and helping you price your products for profitability
- Reach your strategic goals by tracking and measuring key performance indicators (KPIs) throughout all facets of the company
- Achieve manufacturing excellence by helping you plan, manage and build jobs efficiently
With the right software for your business and the expertise and insights of the manufacturing team at Wipfli, you can optimize every part of your business with an ERP system that aligns with your needs. Even more importantly, you can better take advantage of opportunities to grow your market share. If you’d like to learn more about what the right ERP – and a consultant that knows job shops – can do for you, reach out for a no-obligation consultation with one of our manufacturing experts.
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