Running a small job shop in today’s competitive market becomes increasingly challenging as technology evolves and customer expectations rise. Maximizing profitability and growing a company often means taking advantage of software systems designed to help organizations become as efficient as possible. But many smaller job shops question what the payback of an Enterprise Resource Planning (ERP) solution might be and if their capabilities are appropriate for their operations.
There are a number of false assumptions about ERP systems that should be addressed as it relates to smaller job shops. Understanding the facts will allow you to accurately assess the long-term value that an ERP represents to your organization.
Myth #1 – Only Large Operations Need An ERP
Most small job shops operate very much like large manufacturers—tracking jobs, scheduling, routing, inventory, delivery, HR functions, accounting, and generating quotes and key reports. While larger shops may have more employees and obtain larger orders, the day-to-day business functions and needs are likely no more complicated. In fact, smaller shops may have more complex models because duties are often stretched across departments. As far as function goes, a small job shop needs an ERP just as much as a larger one.
Small job shops also need to find a competitive edge. Chances are, competing companies are utilizing some form of ERP software to their advantage. As a result, they’re likely getting quotes out more quickly, more accurately estimating raw materials and are more aware of their production schedules. All these insights can be leveraged to help generate more sales. By not having an ERP, you could be missing out on opportunities to achieve sustainable growth.
Myth #2 – An ERP System Is Too Expensive
The question any job shop owner asks before purchasing a new piece of equipment or other major capital expenditure is, “What is the ROI?” Some purchases are easier to calculate than others. With an ERP system, however, it can be difficult to estimate the real savings in comparison to the cost of the software. Hidden costs that don’t show up on a spreadsheet as a line item need to be factored in—staff downtime, duplicate work, wasted materials, delayed orders, faulty scheduling and lost sales. In fact, one lost sale due to inefficient processes can easily exceed the cost of an ERP many times over. When all these elements are considered, the ROI benefits become more evident.
Implementing an ERP system doesn’t need to be an all-or-nothing approach, so the costs can be spread out over time if necessary. When assessing your operations, consider the areas with the greatest needs and start there. A robust ERP system can have additional features added on over time and will grow with your company.
Myth #3 – ERP Software Is Too Complicated
As society relies more heavily on technology for everyday tasks and job functions, developers are responding to the demand for more intuitive and user-friendly systems, including ERP solutions. Users only need minimal computer literacy to reap the benefits of ERP, and the provider will provide the necessary training and support. Reports and other functions can be customized to meet the needs of individual departments, making it essentially a customized tool. Accounting can have their own dashboard outlining financial data while the warehouse can easily enter and track inventory with their own custom view, all within the same system, keeping lines of communication open and real-time data accessible to those who need it.
The software is also accessible to authorized users over the Cloud, meaning your sales force can pull up order information, inventory, scheduling and material cost information from anywhere, getting quotes out more quickly and keeping customers satisfied.
Myth #4 – Integrating An ERP Is Too Overwhelming
Most large manufacturers and suppliers have used ERP systems for decades to streamline their operations. Small job shops, however, often operate with multiple legacy systems that have been cobbled together over the years, each operating independently of the others. Accounting, HR, operations and sales may have all developed their own internal systems and processes, resulting in duplicated data entry, numerous errors, missing information, excess or mishandled inventory and, in the end, frustrated employees and disappointed customers.
Most job shop owners can see the value of having all that information available in one system where it’s accessible across departments, but the perceived time and effort to migrate vast amounts of data into an ERP system is daunting. Many job shops believe the transition will be more trouble than it’s worth.
While implementing an ERP will have its challenges, the right consultant and the right ERP provider can help make the transition relatively seamless and pain-free. And, when the results of increased production, efficiency and profitability are realized, you’ll see that it most definitely was worth it in the end.
You owe it to yourself, your employees and your customers to take advantage of the free consultations that many vendors offer to truly understand how the process works and how an ERP solution can help fuel the growth of your company. If you’re considering an ERP solution and ready to take the first steps, talk with one of our Wipfli experts who will be happy to start the process.