Fear is a paralyzing thing – it can force perfectly rational people to act in very foolish ways. Take katsaridaphobia for example (fear of cockroaches) – screaming while jumping up and down on the toilet is not a rational way to deal with the small problem of a cockroach on the floor. The solution requires action – a newspaper, slipper, or magazine to eliminate the tiny “threat.” Otherwise, you’ll be left looking foolish.
Today, many manufacturers are facing the very real threat of financial loss and stagnant growth during an increasingly unsteady economy. Instead of taking action to combat the very real economic threats they face, businesses are completely paralyzed with ERPphobia – the fear of purchasing and implementing an enterprise resource planning (ERP) manufacturing software system. This is perhaps because they have been “bitten” in the past by poor software and bad implementations, or simply too scared to change the way business is done.
Over the next few weeks, we will be analyzing the top fears of purchasing and implementing ERP manufacturing software, and how to overcome them – to enable your business to take action against the economic instability, by achieving organizational growth while steadily increasing company revenue.
Overcoming the Fear of Cost – Arguably the most prominent fear of purchasing ERP manufacturing software, is cost. This is of course very understandable considering the price tag (ranging from tens of thousands to millions), and the unknowns that go into such a purchase. After all, why should your business spend so much money for software, when it has been operating without it for years? To overcome your fear of manufacturing software cost, you must:
1. Consider manufacturing software as capital. This may seem inconsequential, but it is very important for the way that you will psychologically approach manufacturing software cost. Since control of capital is the primary means of creating wealth for your company, this is a very important distinction to make. But this isn’t just a mind game, even the United States government recognizes ERP manufacturing software as capital in their updated Section 179 tax deductions. These deductions are also a helpful way to deflect some of the cost of new ERP software – use the Section 179 calculator here to find out how much you can save.
2. Do Your Research. Now that you’re considering ERP manufacturing software as capital, its important to treat the potential purchase like you would any other capital investment for your business. Identify the factors that you would consider for such a purchase – what will the ROI be, what are the upfront costs, how will this improve my day to day operations, etc. to determine if the purchase is worthwhile.
No vendor or RFP sheet will be able to tell you where your economic benefit will be better than you can. If you have not first identified the specific areas that you are looking to improve, then you will not be able to determine how much an area has improved afterwards.
3. Understand the ROI. It is easy to get lost in all the percentages, numbers, and dollar signs that you will hear and read about when considering manufacturing software cost. While these numbers might serve to give you guidelines for what you can expect in return from your investment, the biggest ROI of any ERP system is the one form of capital that you can never create more of – time.
If you own a bicycle and upgrade to a car, the car won’t put $50K-$200K worth of cash in your pocket after owning it for 8 months, but it will certainly allow you to get from NYC to LA a whole lot faster – 28 days to be exact. ERP software ROI works the same way – it doesn’t place thousands of dollars in cash in your pocket after 8 months, but it will enable your business to execute operations significantly faster – performing year end in 1 day instead of 2 weeks, cutting labor costs by 75%, and increasing company revenue by over 300%. Speed kills, and your new-found speed of business will help kill stagnant growth.
4. Examine the Results. Before you make any major purchase, you typically want to know what other users of the product have to say about it. What was their experience like? What did the really love about the product? What did they really hate about the product? Etc. The fastest way to cut through all the case studies, whitepapers, and other criteria that vendors will throw at you, is to find out what their customer retention rate is.
If a customer is happy, they will continue to use a product through multiple life-cycles because they have developed a trust for the brand that they’re using. Take Apple for example. How many people do you know that bought an iPhone 3, iPhone 4, that haven’t bought the iPhone 5 (or planning on buying it?). For the consumer, that’s called customer satisfaction, for Apple, its called customer retention.
If the vendor that you’re talking with doesn’t have any idea what their customer retention rates are, they probably aren’t very good. This should tip you off immediately that customer satisfaction is probably not very high, and that you should steer clear of this particular vendor.
Conversely, if customer retention rates are above 95%, you know that you are dealing with a well respected vendor that should be capable of handling your business’ needs.
Conclusion: Remember the cockroach on the bathroom floor? Hopefully after you have gone through these steps above, you will be able to take control of your fears and make a rational decision and properly evaluate the financial cost of an ERP manufacturing software system for your business. But don’t forget – like the cockroach, action is necessary to rid your business of stagnant growth in a declining economy.