Small businesses that take the plunge into
enterprise resource planning (ERP) tend to
go live with their ERP projects faster than midsized and large
businesses.
Speed is often a virtue, but businesses that focus on it as a
measure of success tend to overlook the true potential ERP has for
transforming their operations.
 | | | | | We did put a lot of up-front time
into understanding the system.
Jenny Wieser
COOFischer & Wieser
Specialty Foods Co. |
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"There is more focus in smaller companies on just getting things in
there, which is probably why they're so fast," said Cindy Jutras,
vice president of manufacturing and ERP research at Boston-based
Aberdeen Group Inc. "At the same time they seem to stop short of
taking it to the next level. They get in there, and then they kind
of stop."
According to an Aberdeen survey of 1,200 manufacturers about ERP
adoption, 86% of small companies achieved their first "go live"
milestone within their first year with ERP, whereas midsized
companies reached "go live" in less than a year just 64% of the
time and large companies just 47%.
Jutras said 24% of the 450 small businesses (companies with less
than $50 million in revenue) surveyed measured success by the
amount of time it took them to reach their first "go live"
milestone.
Jutras said small companies look for a quick launch because of
limited resources. There's only so much time they can devote IT and
business staff to getting an ERP system up and running.
Speed is a virtue, but not when it's a measure of success,
Jutras said. There are better performance metrics to measure for,
she said. Without them, small businesses won't be getting the most
out of their investment.
"I think they get up and running faster than larger companies
but they don't necessarily use all the functionality that they have
available to them," Jutras said. "There is still a huge reliance on
things like spreadsheets. Management by spreadsheets is alive and
well not only in small manufacturers but predominantly in small
companies."
Successful implementations are more likely among small
businesses that actually set out metrics for measuring
return on investment (ROI) and cost savings. Jutras said her
survey revealed that less than one-third of small businesses
actually compute ROI for ERP.
Eric Klein, research analyst at Boston-based AMR Research Inc.,
said small companies often are nervous about getting bogged down in
the complexity of an ERP implementation. That nervousness partly
explains the slow growth in ERP adoption among small
businesses.
Klein said vendor revenue from ERP adoption among small
customers -- those with revenue less than $50 million -- grew by
just 3.3% last year. It's the midmarket firms, with revenue between
$50 and $250 million, that are seeing the robust adoption rate at
17%. And ERP revenue grew by 13% among companies with $250 million
to $1 billion
"There is a mindset of ERP being too complex," Klein said. "I
think a lot of businesses are afraid of how long it will take to
make it work."
Jenny Wieser, COO of Fischer & Wieser Specialty Foods Co., a
Fredericksburg, Texas-based manufacturer, said her company wanted
to go live quickly with a new ERP implementation. The requirement
didn't prevent her company from getting the most out of its
investment, however.
Wieser said she wanted a new ERP system to help get a handle on
her company's inventory control, its purchasing and accounting
processes. The company also wanted to implement a CRM system.
"One of our biggest nightmares was inventory control. We were in
a system that really wasn't suited to manufacturing," Wieser said.
"When we went out to do a physical inventory, we knew we were going
to have a big variance and we never knew what direction it was
going to be going in. We were able to service our customers, but it
was at a real expense to us."
Wieser said her company was able to conduct mock mandatory
recalls of a product within four hours, as required by regulators,
but the process required "mounds of paper and several people
digging through manual lot systems in order to trace where products
and been and where they had gone."
Fischer & Wieser purchased Business One, SAP's integrated ERP
suite for small businesses, nearly two years ago. The company went
live with its implementation in three months.
"We went live quickly, but we were able to go live quickly
because we were so small," Wieser said. "We did put a lot of
up-front time into understanding the system. The team that we
assembled could do every part of every transaction in the
system."
Now a mock product recall at Fischer & Wieser takes just
five seconds instead of four hours, Wieser said. When her company
does a physical inventory check, the results vary by only 3% or 4%,
instead of 30%.
And although the company went live with its SAP system in just
three months, it's still finding new value in its technology
investment. The company definitely hasn't settled for just getting
the thing up and running.
"We went live two years ago this July," Wieser said. "At about
the one-year mark, I'd be walking around and people would say to
me, 'Did you know we could do this?' It's like light bulbs are
going off in the entire company. We're exploring and using the
system better than we ever have. We're so excited. Once we got the
core processes in place, we've really started to use the system, to
learn and utilize it more."
Let us know what you think about the story; email:
Shamus McGillicuddy,
News Writer