Organizations in any industry focus on benchmarks. You want to know where you fit among your competition. In order for us to better benchmark for our manufacturing clients, we have published our 2015 Manufacturing ERP Report. This report outlines the results of 266 manufacturing organizations from around the globe who have recently implemented new ERP systems. Below are a few highlights from the report:
The mix of ERP vendors among manufacturers is very different than in other industries. Our original 2015 ERP Report, published earlier this year, showed SAP, Oracle, and Microsoft Dynamics leading the pack among ERP vendors in all industries. However, Microsoft Dynamics shows the largest market share in the manufacturing space which is quickly followed by Epicor and Infor. This proves that manufacturers have unique – and oftentimes complex – business requirements that aren’t as well met by all ERP vendors. It also highlights the importance of an independent and thorough ERP software selection process.
Unpredictability is more rampant among manufacturing ERP implementations. Our 2015 ERP Report revealed a good deal of variation among average implementation durations and costs. However, this dynamic is even more apparent in the manufacturing space. For example, the 2015 Manufacturing ERP Report shows that manufacturers are just as likely to take longer to implement than expected, but when they do, they are more likely to extend their timelines by a greater amount than in other industries (33% extend their durations by 25% or more in manufacturing vs. 27% in all other industries).
Manufacturers implement at a lower total cost of ownership than those in other industries. While the average company across all industries spends a total of $4.1 million USD on their ERP implementations, manufacturers spend approximately half of this amount ($2.0 million on average). Even when normalized to account for variation in company size by looking at total costs expressed as a percentage of annual revenue, manufacturers come out ahead with costs of 7.5% of annual revenue compared to 8.4% in all other industries. On the flip side, budget overruns are more common among manufacturers as well (69% of projects go over budget in manufacturing versus 65% in other industries), so this area is a double-edged sword.
Manufacturers are more likely to customize their ERP software than those in other industries. Despite the relatively low total cost of ownership among manufacturers, these companies struggle to implement ERP software without significant customization. More specifically, 26% of manufacturers require “extreme” customization of their systems, while only 11% do in other industries. This is largely due to the unique needs and complexities of manufacturers, combined with the fact that the software is required to integrate with other third-party industry solutions, such as MES or shop floor automation systems. Customization poses additional risk to any ERP implementation, so it is imperative that manufacturers carefully mitigate the risks and costs associated with this propensity.
Adoption of manufacturing-specific functionality is relatively weak. While most manufacturers adopt core modules such as sales and distribution, materials management and MRP, relatively few are actually implementing more advanced functionality in areas such as product lifecycle management, advanced planning or CRM. Many of these same companies actually paid to acquire the software, but didn’t acquire those modules for whatever reason. It is important to be cognizant of the propensity for manufacturers to invest significant money in shelfware and to make sure they are getting a good ROI from some of this advanced functionality offered by ERP vendors.
Benchmarks are key. Anyone running an organization can testify to that truth, and although every manufacturer is different, this helps highlight some of the risks and opportunities unique to manufacturing organizations. Download the full report here.
For a review of our findings, you can register for our webinar on August 13.