2012 ERP STUDY
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2012 ERP STUDY
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anufacturing leaders are ready to invest again in capital expenditures and information technology. After years of delayed or canceled projects due to recession, many of these executives find their firms constrained by aging facilities, failure-prone equipment, and outdated software and systems. For example, a recent study found that 40 percent of enterprise resource planning (ERP) systems were more than seven years old, and 7 percent of systems were more than 15 years old.1Manufacturing companies anticipating growth in 2013 and beyond are actively seeking new equipment and systems. Acquisitions of ERP systems — whether an upgrade, replacement, or first-time purchase — will be under discussion in many manufacturing boardrooms this year. The 2012 ERP Study assessed implementations of ERP systems, satisfaction with those implemen-tations, and the extent to which ERP systems have benefitted organizations. Conducted by the Manufacturing Performance Institute (MPI) on behalf of Plex Systems Inc., the study also analyzed implementations based on the type of system in place: software-as-a-service/cloud ERP systems vs. traditional ERP systems, where hardware and software reside on premises.
Limited investment during the recession, combined with significant executive turnover during this turbulent period, means that many new manufacturing leaders will likely face ERP decisions for the first times in their careers. They will seek to balance actual need for new or upgraded systems against potential organizational and functional requests. They will seek to predict total cost of ownership and return on investments, as well as project outcomes and performance measures that will drive enterprisewide success: customer satisfaction, productivity, supplier performance, etc. Findings from the 2012 ERP Study will help to inform their decision making.
Table of Contents
Introduction 1
ERP Licenses and Functions 2
ERP Implementation 4
ERP Value 8
Profile of Study Participants 11
Methodology 12
About Manufacturing Performance Institute 12
About Plex Systems 12
2 l The MPI Group
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majority of manufacturers (60 percent) participating in the 2012 ERP Study indicate they operate a traditional ERP system in which hardware and software are on premises; 22 percent of participants operate a software-as-a-service (SaaS)/cloud ERP system, and another 18 percent2 have noERP system in place (Figure 1). Lack of an ERP
system is highest among companies with lower annual sales: 26 percent of organizations with sales of less than $50 million have no ERP. Two-thirds of cloud ERP users (68 percent) have unlimited licensing agreements within their companies, more than double the percentage of traditional ERP users with unlimited company licenses. Overall, 42 percent of companies with ERP have unlimited company licensing.
Traditional ERP users are more likely to pay by the seat: 52 percent vs. 18 percent among cloud ERP users (Figure 2).
These licensing agreements impact the number of employees who can access ERP: 90 percent of employees (median3) for cloud ERP users vs.
30 percent (median) for traditional ERP users. Overall, 40 percent (median) of employees are licensed users at companies with ERP (Figure 3).
ERP Licenses and Functions
1. ERP system description
22.0% 17.7%
60.2%
All
Software-as-a-service (SaaS)/Cloud model Traditional hardware-software on premises No ERP
Unlimited within company Unlimited by site Limited by seat purchases Other
2. ERP licensing agreement
41.7% 43.1% 8.0% 7.3% 67.5% 17.5% 7.5% 7.5% 32.4% 52.3% 8.1% 7.2% All SaaS/ Cloud Traditional
3. Percentage of employees that are licensed users
All SaaS/Cloud Traditional
Median Average
Unlimited within company Unlimited by site Limited by seat purchases Other 0 20 40 60 80 100 40.0% 46.5% 90.0% 74.0% 30.0% 36.3%
2These participants did not answer questions pertaining to ERP implementation and value.
Only a small percentage of manufacturers with ERP make those systems accessible to suppliers (26 percent) and customers (19 percent). Cloud ERP users are significantly more likely to make their systems accessible to suppliers (60% cloud vs. 14% traditional) and customers (43 percent cloud vs. 11 percent traditional (Figure 4).
The most commonly used ERP function, regard-less of type of ERP, is accounting (91 percent of participants) (Figure 5). For the three next most popular ERP functions — inventory control, costing, and supply-chain management — usage is comparable between cloud and traditional ERP users. But usage patterns differ significantly for other functions. For example, 75 percent of manufacturers with cloud ERP use manufacturing execution systems (MES) compared to 57 percent of traditional ERP users. And 55 percent of manufacturers with cloud ERP use the system for document control vs. 30 percent of traditional ERP users.
Yes No Yes No
Unlimited within company Unlimited by site Limited by seat purchases Other 0 20 40 60 80 100
4. External licensed users of ERP system or portal 74.0% 26.0% 60.0% 40.0% 86.4% 89.1% 13.6% 10.9% 80.7% 19.3% 42.5% 57.5% Suppliers Customers All SaaS/
Cloud Traditional All CloudSaaS/ Traditional
5. ERP functions currently used by company
Accounting Inventory control Costing Supply-chain management Manufacturing execution system Quality management Product data management Customer relationship management Human resources Analytics/dashboarding Document control Program management Groupware databases/communication Ecommerce Other No functions used
All SaaS/Cloud Traditional
0 20 40 60 80 100 90.5% 90.0% 90.7% 84.5% 82.5% 85.2% 77.7% 77.5% 77.8% 63.5% 65.0% 63.0% 62.2% 75.0% 57.4% 49.3% 60.0% 45.4% 49.3% 55.0% 47.2% 39.2% 42.5% 38.0% 38.5% 55.0% 32.4% 36.5% 47.5% 32.4% 36.5% 55.0% 29.6% 25.7% 32.5% 23.2% 23.7% 35.0% 19.4% 19.6% 20.0% 19.4% 2.7% 2.5% 2.8% 0.0% 0.0% 0.0%
4 l The MPI Group
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majority of companies (55 percent) with ERP had implemented their systems more than four years ago (Figure 6). Notsurprisingly, the percentage of older systems is higher among traditional ERP users (62 percent) than cloud ERP users (38 percent), due to cloud ERP’s recent emergence.
A mix of big-bang and phased ERP rollouts have occurred among manufacturers — 31 percent and 41 percent, respectively, for all study participants. Phased rollouts are more common among cloud ERP users (61 percent) than traditional ERP users (34 percent) (Figure 7).
ERP Implementation
6. Years since ERP system implementation was completed All SaaS/ Cloud Traditional 18.0% 20.0% 17.3% 8.0% 5.0% 9.1% 14.0% 27.5% 9.1% 4.7% 10.0% 2.7% 55.3% 37.5% 61.8%
7. Company’s ERP implementation strategy
All SaaS/ Cloud Traditional 30.7% 26.8% 32.1% 41.3% 61.0% 33.9% 23.3%4.7% 7.3%4.9% 29.4% 4.6%
More than 4 years 3–4 years 2–3 years 1–2 years Less than 1 year
Other
Parallel (legacy systems alongside ERP) Phased rollout
Software costs are the most common expenses included in ERP implementation fees (81 per-cent of all participants report software as a fee component), but software is more likely to be a fee for traditional ERP users (86 percent) vs. cloud ERP users (68 percent) (Figure 8). It is
interesting to note that cloud users perceive software costs as component fees, given that there are no software systems involved with SaaS/cloud ERP other than web browsers.
8. Included in ERP implementation fee
Software costs Installation Training Company licenses Maintenance Hardware costs IT backup and security Disaster recovery Other None of these
All SaaS/Cloud Traditional
0 20 40 60 80 100 81.2% 67.5% 86.2% 65.1% 55.0% 68.8% 63.1% 55.0% 66.1% 61.7% 45.0% 67.9% 61.1% 65.0% 59.6% 45.6% 32.5% 50.5% 26.9% 47.5% 19.3% 15.4% 32.5% 9.2% 5.4% 10.0% 3.7% 3.4% 2.5% 3.7%
Installation, training, company licenses, and hardware costs are also more commonly included among implementation fees for traditional ERP users. Two activities — IT backup and security and disaster recovery — are more common among implementation fees for cloud ERP users.
6 l The MPI Group
ERP Study participants are most satisfied with hardware costs and the quality of their implementations: the study found a satisfaction differential4 of +26 percentage points and
+19 percentage points, respectively. Manufac-turers are least satisfied with other costs and overall costs of implementations: satisfaction differential of -2 percentage points and -5 per-centage points, respectively (Figure 9).
Cloud ERP users are significantly more likely to report satisfaction with all implementation factors; the lowest satisfaction differential for any factor for cloud ERP is +20 percentage points (overall costs), while the highest satisfaction
differential for any factor for traditional ERP is +19 percentage points (hardware costs). The greatest disparities in satisfaction differentials between cloud ERP and traditional ERP are for the following factors:
• Overall ease of implementation:
+61 percentage points for cloud ERP vs. -13 percentage points for traditional ERP. • Length of time/duration:
+55 percentage points for cloud ERP vs. -17 percentage points for traditional ERP. • Risks to corporate operations:
+67 percentage points for cloud ERP vs. +1 percentage point for traditional ERP.
9. Satisfaction Differential with implementation factors
% of satisfied users (rated 4 or 5 where 5=satisfied) minus % of dissatisfied users (rated 1 or 2 where 1=dissatisfied) Hardware costs
Quality Risks to corporate operations Resource requirements (implementation team) Resource requirements (non-team workforce) Overall ease of implementation Adapting existing processes and systems to ERP Length of time/duration Software costs Other costs (not hardware or software) Overall costs
All SaaS/Cloud Traditional
0 20 40 60 80 100 +25.5% pts +43.6% pts +19.1% pts +18.7% pts +60.0% pts +3.6% pts +18.2% pts +66.7% pts +0.9% pts +12.7% pts +47.5% pts 0.0% pts +12.7% pts +52.5% pts -1.8% pts +6.1% pts +60.5% pts -12.9% pts +4.1% pts +50.0% pts -13.0% pts +2.7% pts +55.0% pts -16.5% pts +2.0% pts +25.0% pts -6.4% pts -2.0% pts +25.6% pts -11.9% pts -5.3% pts +20.0% pts -14.6% pts
4A satisfaction differential is calculated by subtracting the percentage of dissatisfied users (responded 1 or 2 where 1=dissatisfied) from the percentage of satisfied users (responded 4 or 5 where 5=satisfied). A positive number reflects relatively more satisfaction among respondents; a negative number reflects relatively less satisfaction among respondents.
One-third of ERP users (35 percent) report it is easy (very easy or somewhat easy) to customize the functionality of their systems, and 39 per-cent report it is easy to upgrade functionality
(Figure 10).
Cloud ERP users are more likely to report that it is easy to customize functionality (61 percent vs. 26 percent of traditional ERP users) or upgrade functionality (73 percent vs. 26 percent of traditional ERP users).
0 20 40 60 80 100 120 10. ERP ease 22.0% 12.8% 30.0% 30.3% 8.3% 10.9% 15.2% 46.3% 19.5%
Customize functionality Upgrade functionality
All SaaS/
Cloud Traditional All CloudSaaS/ Traditional Very difficult
Difficult
Neither easy nor difficult Somewhat easy Very easy 13.3% 29.3% 25.3% 10.0% 26.8% 34.2% 26.8% 9.8% 2.4% 17.4% 31.2% 23.8% 25.8% 23.2% 11.9% 26.8% 4.9% 2.4% 15.5% 28.2% 15.5%
8 l The MPI Group
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RP Study participants are most likely to have improved inventory manage-ment with their ERP systems, with a satisfaction differential of +52 percent-age points. ERP systems are least likely to have positively impacted new-product-to-launch lead times, with a satisfaction differential of only +26 percentage points (Figure 11).Cloud ERP users are more likely to cite im-proved performance of all activities, and are also more likely to rate the activities as
sig-ERP Value
nificantly better or better. Activities with the greatest disparities in satisfaction differentials between cloud ERP and traditional ERP include:
• Product quality/reliability:
+73 percentage points for cloud ERP vs. +28 percentage points for traditional ERP. • Supplier performance:
+59 percentage points for cloud ERP vs. +21 percentage points for traditional ERP. • Customer satisfaction:
+73 percentage points for cloud ERP vs. +36 percentage points for traditional ERP. 11. ERP impact
% of significantly better or better minus % of significantly worse or worse
Inventory management Workforce productivity Manufacturing costs Deliverability (on time and to all specifications) Order-to-delivery leadtimes Customer satisfaction Production leadtimes (production start-to-end) Product compliance Product quality/reliability Asset management Administrative costs Supplier performances New-product-to-launch leadtimes
All SaaS/Cloud Traditional
0 10 20 30 40 50 60 70 80 +52.0% +75.6% +43.1% +48.0% +70.7% +39.5% +47.3% +68.3% +39.5% +46.0% +58.5% +41.3% +45.7% +53.7% +42.7% +45.6% +72.5% +35.8% +41.6% +60.0% +34.9% +40.7% +62.5% +32.4% +40.4% +73.2% +28.2% +38.3% +57.5% +31.2% +37.8% +31.1% +58.5% +20.6% +25.7% +36.6% +21.5% +53.7% +31.8%
The vast majority of manufacturers indicate that the total cost of ownership (TCO) for their ERP system is either very predictable (15 percent of study participants) or predictable (55 percent), a perspective that is comparable among cloud ERP users and traditional ERP users (Figure 12). But overall, almost one in
10 manufacturers report that TCO — typically considered to be direct and indirect costs of ERP ownership — is very unpredictable, a precarious position given the large investments involved. Yet despite the size of these investments, few companies track return on investment (ROI) from their ERP systems. Only 21 percent of manufacturers track ROI, although cloud ERP users are twice as likely to do so:34 percent of cloud ERP users vs. 17 percent of traditional ERP users (Figure 13). For the few companies that
do track ERP ROI, 78 percent report a positive ROI, and 30 percent report an ROI of 100% or higher (Figure 14).
12. Predictability of company total cost of ownership for ERP
All SaaS/ Cloud Traditional 14.7% 22.5% 11.8% 55.3% 55.0% 55.5% 22.0% 17.5% 23.6% 8.0% 5.0% 9.1% Very unpredictable Somewhat unpredictable Somewhat predictable Very predictable
13. Measured return on investment (ROI) from company ERP
All SaaS/ Cloud Traditional 21.4% 34.2% 16.8% 83.2% 78.6% 65.8% Yes No
14. If measured, approximate ROI from company ERP5
All SaaS/ Cloud Traditional 4.4% 11.1% 16.7% 7.1% 15.2% 28.3% 33.3% 0.0% 16.7% 14.3% 25.0% 10.9% 10.9% 8.7% 15.2% 11.1% 11.1% 10.7% 7.1% 7.1% 17.9% 6.5% 0.0% 10.7% Negative ROI 0% 1% to 25% 26% to 50% 51% to 100% 101% to 200% 201% to 300% >300%
10 l The MPI Group
Few measures are more revealing than an executive’s willingness to put his own reputation on the line and recommend a purchase — of any kind. Surprisingly, despite the negative attention focused on many ERP implementations through the years, 79 percent of executives would recommend their ERP system to others
(Figure 15).
Perhaps surprisingly, the age of an ERP system does not impact a user’s willingness to recom-mend it — i.e., newer systems are not necessarily perceived as better or worse. Two-thirds of companies (68 percent) that implemented their systems more than three years ago would recommend their systems vs. 70 percent of companies that implemented systems within the past three years.
The size of a company does seem to influence satisfaction with an ERP system: 77 percent of manufacturers with sales of more than $100 million would recommend their systems vs. 63 percent of manufacturers with revenues of $100 million or less. (Note: 22 percent of smaller companies use cloud ERP, 56 percent traditional ERP, and 22 percent have no ERP; 22 percent of large companies use cloud ERP; 67 percent traditional ERP, and 11 percent have no ERP.)
Cloud ERP users are far more likely to recom-mend their systems to any degree (98 percent vs. 59 percent of traditional ERP users) and are far more likely to strongly recommend their system (42 percent vs. 16 percent of traditional ERP users).
15. Recommend ERP system to others
All SaaS/ Cloud Traditional 0 20 40 60 80 100 23.0% 41.5% 16.2% 46.1% 56.1% 42.3% 24.3% 32.4% 6.6% 2.4% 9.0%
Strongly not recommend Not recommend Recommend Strongly recommend
Profile of Study Participants
Participant title/role 26.0% 14.6% 7.0% 11.9% 1.6% 6.0% 15.1% 9.7% 8.1%Manager/Supervisor (not IT) IT Manager/Supervisor Director/VP (not IT) C-level executive (not CTO or similar)
IT other IT Director/VP Other (not IT) CTO or similar None of the these
Company employees 35.7% 13.0% 7.6% 9.7% 28.7% 5.4% Less than 100 100 to 500 501 to 1,000 1,001 to 5,000 5,001 to 10,000 More than 10,000
Company approximate sales
51.1% 9.3% 12.6% 6.0% 13.7% 7.1%
Less than $50 million $51 million to $100 million $101 million to $250 million
$251 million to $500 million $501 million to $1 billion More than $1 billion
Geographic distribution of products
67.9% 8.2% 2.7% 21.2% International National Regional State/Province or smaller
12 l The MPI Group
Methodology
T
he 2012 ERP Study was designed to assess manufacturers’ implementations of ERP systems, satisfaction with those implementations, and the extent to which ERP systems have benefit-ted organizations. The study was conducbenefit-ted by the Manufacturing Performance Institute (MPI) on behalf of Plex Systems Inc.The study was conducted using an online questionnaire; Plex Systems promoted the study to manufacturers, including its customers. There were 186 total respondents, with surveys received from May through October 2012. Responses were received by the Manufacturing Performance Institute (MPI) and then entered into a database, edited, and cleansed to ensure answers were plausible, where necessary.
All respondent answers to the survey are confidential. As an incentive, respondents who provided contact information were offered a copy of a customized benchmark report, which compares their responses to respondents with similar profiles. Only MPI has access to participants’ answers to individual questions. Plex Systems received only aggregate data along with a file containing contact information for participants who requested a customized benchmark report.
About The Manufacturing Performance Institute
The Manufacturing Performance Institute (MPI) is a unit of The MPI Group and serves business leaders with research, advice, and performance-targeted solutions that provide a competitive advantage in today’s fierce marketplace. MPI combines the disciplines of research, strategic advice, knowledge development, and hands-on leadership to create a difference — in performance, in profits, and in the people who make them possible.
About Plex Systems Inc.
Plex Systems Inc. is the developer of Plex Online, a Cloud ERP solution for the manufacturing enterprise. Plex Online offers industry-leading features for virtually every department within a manufacturer, including Manufacturing Execution System (MES) and Quality Management System (QMS) for the shop floor, Supply Chain Management (SCM) for procurement, Enterprise Resource Planning (ERP) for finance and management, and Business Intelligence (BI) for executive management. Plex Online’s comprehensive functional coverage delivers a “shop floor to top floor” view of a manufacturer’s operations, enabling management to run its business at maximum efficiency. Founded in 1995, Plex Systems is headquartered in Troy, Mich., with customers around the globe.
Conducted by The MPI Group
www.mpi-group.net +1 216-991-8390
Sponsored by Plex Systems
www.plex.com +1 855-534-8012
