Trying to Reduce Costs? Trying to go Lean? Then why are you buying Traditional ERP software?

December 6, 2010
By grippen

Lean manufacturing and wholesale distribution

lean ERP software for distributionIt’s been many years now, since manufacturers of all sizes and industry types started embracing the principles of “going lean”. Also commonly called “Lean Manufacturing”, these organizations purposely set out to focus on eliminating wasteful and redundant activities from their processes, procedures and resources, to ultimately be reborn as a much leaner, more efficient company. Today, that same desire for performance improvements, better customer service, and a stronger balance sheet is gaining steam for the wholesale distributor as well. Distributors are fast discovering the concept of lean distribution and how it establishes a framework for helping distributors operate at peak efficiency, exceed customer expectations, and strengthen their bottom line.

Using technology to go lean

But, why am I bringing this up on a Cloud-based blog site? Technology is the corner stone of being lean and reducing costs. The speed, volume, and complexity of business transactions now dictates the use of technology to efficiently support communication and information exchange across departmental boundaries—and the organization’s supply chain. Furthermore, companies can leverage appropriately applied lean-centric technology to eliminate the redundant entry of information from one department to another. In other cases, technology eliminates steps traditionally requiring human intervention and, therefore, time.

Keep ERP costs low

But using technology brings up a very eye-opening question. Why would anyone buy an on-premise system – or even a SaaS based system from one of the normally on-premise vendors, like SAP – when the cost of going this way is 40% to 70% more expensive, and you get a fraction of the system? Unless I am wrong, lowering costs or going lean means reducing cost…not paying more money! And paying a lot of money to support being lean completely blows a big hole in the reason you are going lean in the first place.

To help make my point, try a simple side-by-side comparison of SaaS costs over a 3-5 year period, and it becomes incredibly clear that the new SaaS offerings from the traditional ERP vendors are far more expensive then the SaaS offering from companies who started out as SaaS companies from the beginning, like my company Acumatica. Fact is, traditional ERP companies are very accustomed to charging a lot of money for their on-premise systems and frankly they don’t feel comfortable with the low costs pricing that is associated with SaaS. So, whether the charge is for implementation set up costs, updates to the system, maintenance costs or charging for each user on the system, traditional ERP companies will always come up substantially more expensive.

Acumatica ERP supports lean distribution

My company Acumatica offers a very comprehensive Cloud ERP system that provide all the features needed to successfully run companies, from front to back. Yet, our costs are less expensive – supporting your need to reduce costs and go lean. In addition to the multiple cost-saving benefits of SaaS, including not having an IT infrastructure and the staff to support it, we do not charge for each user, allowing users to be added as needed without additional costs. We also allow our customers to implement their deployment as a service or on-premise in order to fit their individual requirements. Our customers can also switch from SaaS to on-premise or on-premise to SaaS based on their needs. Each one of these benefits allow our customers to best fit our SaaS offering into what they are attempting to accomplish.

Conclusion – fat software does not make a lean distributor

When you think about it, part of your decision to reduce cost and to go lean is to also choose an ERP system that embodies these goals. Facts are there, a Cloud ERP solution from a non-legacy ERP company is the only answer for companies to reduce costs and support going lean.

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