What is Cloud Based ERP System for Manufacturers?
Manufacturing companies face numerous challenges in today's market place due to the forces of globalization. In the not so distant past a company could monopolize the market by leveraging its cost advantage. Not any longer!
Technology and breaking down of trade barriers have led to the blurring of the cost advantage. Expansion into global markets has come faster than the markets for goods suppressing business top line (revenues) as well as bottom line (profits). This has led to several businesses closing down or merging with their bigger rivals while others have resorted to IT to stay relevant in today's demanding business environment.
Over the last decade or so, ERP has gone from a system that only large companies could implement, to a default system for any size manufacturing companies requiring enhanced inventory management capabilities.
What is an ERP System?
ERP is an enterprise wide application spanning multiple functional areas of an organization for effective planning and resource management.
Until a few decades ago, it was used only by large enterprises with huge IT budgets. Now it is used by small businesses as well as medium scale businesses.
However, ERP adoption rate continues to be low in the small and midsized company segment for the following reasons -
- Difficulty in implementation - Small and Medium sized businesses do not want to be derailed from their day to day activity. ERP implementation takes days even months.
- Small Operations - Scale of operations are too small to mandate a changeover from manual to ERP based applications.
- Costs - Upfront investment, maintenance, salaries, electricity, lease are too costly for most small to midsized companies. They would rather spend their money somewhere else.
- Earlier system worked - Resistance to change. Businesses don't want to change existing systems because it takes time and effort mastering a new system.
However, the increased abundance of ERP solutions available as Software as a Service (SaaS), has made ERP affordable to small companies with a limited IT budget.
For Small Manufacturers
Cloud ERP is attractive to the small manufacturer because -
- Lower upfront costs - Since it is subscription, pay as you go model, there are no upfront costs with lock in period.
- Lower cost of ownership - Since it is managed services there are no variable costs to the manufacturers.
- Automatic upgrades - Upgrades are rolled out from the top.
- Limited IT Spending - In house IT is not diverted to troubleshooting ERP issues. ERP provider manages services from their end. Minimum downtime.
Cloud ERP has disrupted conventional Enterprise Resource Planning systems by providing a cloud based service spanning the various functional areas of an organization. It is the only way small manufacturers can stay relevant in today's market