The Competitive Advantage of ERP for Manufacturing Companies

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Does your manufacturing company generate more than $5 million in annual revenue? If so, you are at a competitive disadvantage if you do not have an ERP system. 

It is critical for you to understand this.  

Inventory management and preparation become increasingly difficult when a business generates $5 million or more in yearly revenue. They start using spreadsheets to keep track of things and it can get quite messy.  

Once you hit that barrier, your efficiency levels begin to drop dramatically. You'll be at a significant disadvantage when compared to your rivals who have an ERP system. 

Recently on Sabre Limited’s own blog we wrote about the different segments of the ERP software market.  

If you enjoy this article and would like to talk to Sabre Limited’s president Rob Jolliffe to chat about these concepts, you can book a one-on-one 30-minute call with him at https://calendly.com/robert-jolliffe    

Three Tiers of the MRP Market 

The cost of ERP software varies depending on the complexity of the organization using it. Some programs might cost tens of millions of dollars buy and install. Others are available for $100 per month as a subscription. 

There are effectively three segments, or tiers, into which all ERP software systems fall. 

The top-market is mostly controlled by SAP and Oracle. Dynamics 365 Finance and Operations and IFS are in this top segment too just below SAP and Oracle.  

Next, the mid-market is home to companies that make between $5 million and $1 billion in sales per year. Companies that have more than $1 billion in sales have moved up to the top segment of the market.   

Then, the bottom-market ERP software is nothing more than very sophisticated accounting software. They lack the complexity of mid-market ERP. Bottom-market ERP solutions are popular with small businesses. Sage, QuickBooks Enterprise, and Xero are products included in this segment. 

There are applications on the market that add modules to QuickBooks and Sage. They claim to convert those products into "ERP systems." Adding modules to QuickBooks or Sage will not turn them into an ERP system.  

Rather, those are MRP systems. They often even refer to themselves as MRP. You won't get the benefits of a real ERP system, especially if you're in manufacturing. 

The Mid-Market Tier is Most Popular in Manufacturing 

It is something we have noticed at Sabre Limited. The bottom end of the mid-market is particularly concerned with manufacturing. There are a lot of mid-market ERP systems designed for manufacturing. 

It's critical to pick an ERP software that is either cloud-based or actively moving to the cloud. Any current ERP system that isn't transitioning to the cloud is like a 1980s ERP system running in a green command line app. On premise, Windows based systems are like these old command line applications in comparison to contemporary cloud-based systems. 

The cloud is adding extra features and functionality to ERP systems. For example, taking photographs of damaged incoming shipments on the shop floor with a cell phone. Report it to purchasing by sending the photo. They can then request credit from the delivery vendor or shipper right away. 

This technology is not available in Windows-based programs for the most part. Or, if it is available, those programs must work hard to provide that level of functionality. 

Conclusion 

There are three ERP market tiers. Sabre Limited is most familiar with the mid-market, which is the largest of the three categories. Manufacturing's mid-market by far has the greatest number of ERP systems. The higher you go up in mid-market tier, the more capable the software becomes. It's not a low-end accounting program with a third-party MRP add-on like QuickBooks. 

The mid-market is most popular with manufacturing companies. The mid-market caters to companies that have between $5 million and $1billion in annual sales.  

Once a manufacturing company goes over $5 million in annual sales it is crucial for them to know that they are putting themselves at a competitive disadvantage if they do not have an ERP system. We highly recommend Microsoft Dynamics 365 Business Central for manufacturing.

By the time a manufacturing company feels the pressure to install an ERP system, they have grown to a size that mid-market ERP is their best option. You can find pricing for Production manufacturing here.

If you need help with a Dynamics 365 Manufacturing systems choice, Inventory Management in Business Central, or any other questions, give us a call at: (519) 585-7524 or contact our team, we're excited to talk with you soon! 

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