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Evaluating Alternatives: Key Questions To Ask When Considering An Alternative ERP/MRP System

Written By: Ned Lilly
Published On: January 27 2003

Situation

Replacing an aging enterprise resource planning/manufacturing resource planning (ERP/MRP) system to stay competitive brings with it a host of questions. Will the system have the necessary visibility into manufacturing processes, particularly costs? Will it give customers and partners direct data exchange through the supply chain? Many companies facing this decision are still running old-style character-based terminal sessions, without the intuitive graphical user interface that the rest of the world is using.

These first-generation systems were good enough twenty years ago, when anything was better than paper and pencil. But most lack a real relational database underneath the applications, which leaves them stuck with rigid, proprietary data structures that don't "talk" to any other software in the office. These packages have little, if any, concept of open networking built into them, let alone the possibility of interacting with suppliers and customers over the Internet. Until recently, to benefit from that kind of functionality, you had to pay for one of the more expensive midrange packages.

New, alternative ERP systems are now appearing that offer the same full functionality as the high-ticket packages from companies like SAP, Oracle and Microsoft, but without the complexity, implementation headaches and costly licensing fees. These alternative systems are changing the ERP/MRP equation, and with them has come a new slate of questions that companies considering alternative IT resources need to consider before they choose a vendor.

What are my choices?

It's no secret that the big ERP/MRP packages are overpriced and overly complex. They frequently entail months of implementation worries and disruption of current operations, onerous software licensing schemes and forced upgrade paths. Fortunately, thanks to the technology boom of the 1990s, there's a raft of alternatives from smaller startups that draw on innovations like open architecture and open source. Alternative manufacturing and supply chain software can help small entrepreneurial manufacturers (SEMs) keep step properly with better-equipped competitors and customers without spending through the roof. They make manufacturing operations easier to manage at a fraction of the cost and complexity of standard packages. Duane, do not break for each question.

What should I expect from an alternative system?

Buyers have every right to expect an alternative IT system to be a fully integrated end-to-end ERP system and a true client/server application, fully Internet-ready. With the right manufacturing software, for example, manufacturers can realize substantial savings and efficiencies, including quicker inventory turns, more efficient use of production equipment and floor personnel, higher repeat sales through customer analytics, streamlined reporting procedures, and better use of vendors and suppliers. Don't settle for software that locks the IT department into one particular vendor strategy or technology platform.

Will I sacrifice essential features?

Some alternative systems pack more sophisticated functionality than others. Some vendors, for example, have merely grafted on weak manufacturing modules to a generalized accounting system, and it shows. Buyers need to be sure they're getting enterprise software that's powerful, flexible and affordable. Solid manufacturing software, for example, should include modules for inventory management, product definition and costing, master scheduling and MRP, capacity planning, work order management, purchase order management, sales order management, shipping and receiving, and sales analysis. Some systems include their own native accounting functionality; others interface with popular third-party accounting programs.

Is it flexible and compatible enough to integrate with my other internal systems?

Any ERP system you're considering should interface seamlessly to all your front-office systems over a local network or the Internet, and should comply with industry standard technologies such as ODBC (open database connectivity). Some alternative systems run on low-cost yet fully capable open-source alternatives such as the Linux operating system and the PostgreSQL database. This can bring lower total cost of ownership and let you sidestep forced upgrades and costly licensing structures typical of closed, proprietary packages. Some systems even provide customers with the underlying source code of the application itself, which affords the customer the ultimate in flexibility.

What are the licensing terms?

Many don't pause to think about it, but when you buy software, you're not actually buying a product, and that goes for pricey ERP/MRP software, too. Instead, you're buying a license to use it often only for a limited amount of time, and under certain conditions. Most vendors have some kind of per-user (or per-seat) pricing policy, and technical support offerings also track the number of users of the system. Some price their product piece-by-piece, module-by-module which is often a recipe for buying an incomplete solution.

One alternative approach that is gaining in popularity is an annual subscription model which avoids a big up-front license fee, and encourages a long-term partnership between the software vendor, any solutions providers that might be involved in the installation and support, and the customer. Some vendors' licensing policies incorporate elements of both the open source and proprietary software worlds, making their source code freely available, and encouraging contributions from qualified solution partners. Such an approach can help ensure companies own the keys to the engine that drives their business.

About The Author

Ned Lilly is president and CEO of OpenMFG, a company he co-founded that provides software and services to the manufacturing sector.

 
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