5 Tips On How To Save On ERP

Enterprise Resource Planning (ERP) systems lower costs by streamlining manufacturing operations and improving financial management. With one fully integrated system, you get complete visibility and control over all aspects of your manufacturing business, including production, planning, purchasing, manufacturing, sales, distribution, accounting, and customer service. Implementing an ERP makes you more efficient and helps you deliver more jobs on time, all while reducing expenses.

But there is no denying that an ERP is a significant investment. There are strategies, however, to save money on ERP and ensure that you spend your dollars wisely when choosing a system. The right ERP system will improve your operations and lower your costs, all while fitting in with your budget. Read on to learn more about ERP costs, plus five tips on how to save on ERP.

How Much Does an ERP Cost?

ERPs are a sizeable expenditure for any business, and manufacturing ERPs tend to be more expensive than those for other industries. This is because manufacturers have complex needs that require additional modules and functionalities, driving up costs compared to software designed for less complex industries.

An ERP solution for a small manufacturing business typically costs between $40,000 and $150,000, while mid-sized companies may invest up to $325,000. What you spend, however, will be based on your own unique needs and the system you choose for your business.

How to Save on ERP?

1. Choose Wisely

Selecting the right ERP system is crucial for your business — and your bottom line.

Choosing a modern, industry-specific ERP tailored to your business’s unique needs can save you money. Unlike the one-size-fits-all ERPs of the past, these customized systems come preloaded with essential features your manufacturing business needs, like scheduling and shop floor management systems. By choosing an ERP built for your industry, you can implement it faster and more efficiently without the need for extensive (and expensive) customizations, which will help reduce overall costs.

2. Make Sure Your ERP Provider Knows Your Industry

The most expensive ERP project is the one that fails.

Failure can come in different forms: It can be an ERP that never gets implemented or a project that never realizes its goals. The reality is that 70% of ERP projects fail to meet their objectives, and only 40% deliver the expected benefits. Additionally, only 17% of companies see a positive ROI within the first year of implementing an ERP.

One of the best ways to ensure your ERP project is successful is to get to know your chosen vendor. A provider with deep industry knowledge is more likely to deliver a successful outcome. Make sure your vendor understands the challenges of your industry and that their system is designed to meet your needs. Also, be sure to check out their implementation track record. Do they know how to get a system up and running in a busy shop environment? Do their ERP projects more often succeed than fail?

3. Know Your Total Cost of Ownership

Before investing in an ERP system, calculate the Total Cost of Ownership (TCO).

TCO includes not only the system’s initial purchase price but also implementation, training, ongoing maintenance, and other recurring costs over 5-10 years. Remember to factor in additional expenses such as licensing fees, hardware, testing, and support, along with a bit of a cushion for unexpected costs.

When selecting an ERP, also consider the different pricing models and hosting options to find the best fit for your business. Perpetual licensing has a large one-time fee and lower yearly costs, which is ideal for companies that prefer on-premise systems — though it requires a more considerable upfront investment. Subscription-based pricing, on the other hand, has lower initial costs and includes automatic upgrades but may cost more over time. Cloud-based ERP offers minimal upfront costs, with hosting included in the subscription, while on-premise ERP requires more investment in IT infrastructure.

By understanding all the factors that go into an ERP and calculating your TCO, you can select the right ERP system that meets your long-term needs and budget.

4. Identify Your Business Goals

ERPs offer a wide range of benefits, from boosting productivity and efficiency to streamlining production workflows and improving inventory management.

To save money, it’s essential to identify your specific business and operational goals before implementation. This will help you pick a system that better meets your needs (and stops you from spending on unnecessary modules and features). But it also lets you focus on your most problematic areas first, so you can implement the ERP modules that address these issues immediately.

This phased approach allows you to achieve your top priorities and gradually integrate additional features, making the process more manageable and budget-friendly — and allowing you to see cost savings sooner.

5. Save on Implementation and Training Costs

It used to be that the only way to implement an ERP system was to bring in expensive consultants for on-site training days. While we have nothing against highly knowledgeable industry experts, this type of training and implementation is expensive. Look for an ERP vendor that offers alternatives to costly on-site training days.

While having a consultant on-site from time to time is extremely helpful during the implementation process, consider online e-learning platforms to train your staff at their own pace. Online training allows team members to get up to speed individually, and decreases the need for costly consultant time while keeping the project on track. From kick-off to go-live, online programs provide role-specific training through modules, videos, and virtual classes — offering comprehensive support at a fraction of the cost of traditional in-person training.

Bonus Tip: Many jurisdictions throughout Canada and the US offer grants and other types of financial assistance to help manufacturers implement technology projects and digitally transform their businesses. Check with your regional government and industry trade groups to see if you qualify for funding opportunities that can offset the costs of ERP implementation or other digital initiatives.

Closing Thoughts

An ERP is a powerful tool that can transform your manufacturing operations by improving efficiency, increasing productivity, and lowering costs. While an ERP is a significant investment, there are smart ways to manage costs and find a system that fits your budget. By carefully selecting an ERP tailored to your needs, planning for total ownership costs, and using flexible training methods, you can unlock the full value of an ERP without overspending.