There have been a series of articles on this subject and the topic is covered in almost every softwa...

1. Why Should You Invest In A Cloud ERP System?
There have been a series of articles on this subject and the topic is
covered in almost every software manufacturer?s PowerPoint presentation to a new prospect. There
are many reasons, usually written in upper level business-speak about growing revenues, creating
business efficiencies, aligning the various departments of a company into a cohesive unit and so on.
Lofty goals all.
The truth is that every company has a unique set of circumstances and will require its own way to
justify a major project. In general, a good approach is to look at the investment from both a
quantitative and qualitative perspective.
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Let?s begin with the quantitative. The first thing most companies examine is how much inventory
reduction they will obtain with an effective ERP system. Industry analysts generally agree that
between a 20 to 30 percent reduction is achievable with improved management of raw material,
parts, WIP and finished goods. Even if the incremental improvements are only 10 to 15 percent, this
still results in significant savings.?
Forecasting and scheduling improvements resulting from an effective ERP system will have a
positive impact on purchased materials and components.? With the ability to provide firmer
commitments with predictable lead times to the company?s vendors, purchasing departments can
negotiate better terms which can lead to five percent reductions.
An area often overlooked is the direct labor and indirect labor costs in the production area. Direct
labor savings flow from improved scheduling that balances workload and minimizes overtime. If a
manufacturing firm is currently using a combination of QuickBooks and spreadsheets, they will be
shocked on how much time is being spent feeding the spreadsheet system and emailing documents
to substitute as a work flow system. Indirect labor savings resulting from modern ERP systems add
up quickly. Most industry analysts believe that a ten percent reduction in labor costs is easily
achievable.

2. The last quantitative area to discuss is accounts receivable. With a manufacturer?s ability to product
error free and timely invoices, the turns on receivable can be improved around five percent,
resulting in a significant improvement in cash flow.
Again, each company is unique. If a company has years of experience in implementing incremental
manufacturing operations improvements, it may see savings below industry averages. On the other
hand, if the company has been growing and using minimal production support systems, it may see
higher than average savings. Some companies may find other areas of the business may yield
significant cost savings. The best advise when developing the economics is to be consistent, be
realistic and develop a real world narrative around each savings category.
Qualitative Benefits of a Cloud ERP System
Now, let?s focus on the qualitative approach to making the ERP case. The best examples I can give
are the reasons our last ten new customers gave us for implementing our Cloud ERP solution. There
were basically two main groups of customers and all used salesforce.com?. If the company was
smaller and growing, they were previously using spread sheets or very simple ERP packages that
they had outgrown.
?We had been running all of our reports in QuickBooks,? reports Northeast Lantern Vice President
Christopher Heal. ?We then needed to take the various reports, export them into Excel and
formulate a single new report just to find the information we needed. Nonetheless, we still didn?t
track inventory or have a snapshot of our production flow. Manufacturing ERP will now help us do
that, which will mean our customers will be able to get product faster.?
If the customer was larger, it had been using an on-premise ERP system that was no longer
providing the help that they needed. A company with multiple divisions and differing ERP systems
cannot obtain the global deployment and integrations of systems that it needs to be competitive. The
cost/benefit analysis for a new Cloud based enterprise-wide system will often show significant
economic advantages over maintaining multiple On Premise ERP versions and their required
interfaces, conduits and translators.
We then found three main features/benefits that encouraged prospects to become customers.
Leveraging salesforce.com and Force.com
Salesforce.com customers and users want solutions that hook into their presently installed software.
But, that?s not enough. They need a Cloud ERP that also provides the integrity, robust performance
and flexibilities that traditional ERP provides.
Wilshire Coin is such a company. According to Zach Scott, Wilshire Coin operations manager, the
company was advised to look into salesforce.com. The management team liked the concept of multi-

3. person access to the data from anywhere in the world. As a result, Wilshire Coin became a
salesforce.com user. They then hired a consultant to help them pick the right ERP to help with their
other needs.
A larger organization wanted Cloud ERP to replace its on-premise legacy ERP software and
consolidate all of their key metrics onto the Force.com?platform, considered by many to be the most
powerful and flexible platform for business enterprise applications.
Lastly, domestic custom accessories manufacturer Unionwear wanted to convert its salesforce.com
quotes and? opportunities into sales orders with fully configured bills of materials and routings,
automating planning, procurement, inventory, manufacturing shop floor control and scheduling,
product costing, productivity analysis and financial management processes, providing end-to-end
process improvements, cost reductions and improved customer responsiveness.
Naturally, in all
three situations, the
ERP needed to
interface easily with
salesforce.com
and/or Force.com.
From that point on,
the reasons to
decide to sign up
were dependent on
the package?s
capabilities and how
the software
manufacturer could
perform for them.
Customization is Key
Most small
companies do not
have the resources
to develop and
maintain all of the
features their
growing businesses demand. Off the shelf software does not allow the customizations and
integrations they need and they do not want to get caught into a future legacy problem.
However, It makes little sense for an owner of a smaller business to invest in a new Cloud ERP if the
new software won?t provide the answers needed that are so sorely wanted from the present
elementary system. To spend more money to be in the same vacuum of information is simply a waste

4. of money, even though it might interface with salesforce.com. Yes, there might be some
improvements but not enough to force a solid payback on the new ERP.
The same holds true for larger concerns. With the supply chain now being global, additional
importance is placed on certain features of ERP, such as multi-plant inventory, planning and
tracking of freight and landed costs, plus having to track consigned inventory and sub-contract
expenditures. Increased machine automation in some industries means that they require more
analysis regarding the cost of materials versus the cost of labor. Meanwhile, there are a whole host
of manufacturing corporations that are making changes to the businesses to create a competitive
edge with their engineering and services. They are looking for new ERP system features which
provide better information and analytics in those areas as compared to tracking detail on the shop
floor.
Thus, from a ?features/functions? standpoint, these differences mean next-generation systems need
to be more functional in different business areas than their predecessors. To be competitive, they
must be able to rely on their ERP software vendor to continue to provide additional features and
extensions. Likewise, they need to assume that, as their own business and industry evolves, they
themselves will want to define some modest extensions to their ERP to help themselves, and only
themselves, thrive.
So, the bottom line becomes???why switch out the old, dated on-premise system if the wanted
solutions can?t be provided.
As a result, both smaller and larger prospects may hold out purchasing, hoping against hope that
some vendor will add what they need to their package or be willing to customize a solution. They can
almost take it to the bank that what they want won?t show up in a package for a very simple reason.
Typically what they want is what only they want, not a feature requested by other prospects. If the
vendor won?t customize the solution to their needs, they might as well go without the new package.
Here is a very simple example of what a customer wanted that won?t be found in an ERP package.
?Being in the precious metals business, prices fluctuate constantly and it is imperative to our
customers that the quotes they get are literally right on the money,? Wilshire Coin?s Scott advances.
?As a result, (we need) a pricing tool that will constantly update prices, assuring our customers that
the quote they get is at present market pricing.?
To paraphrase an old saying, ?Build it and they will come.?
Deep Functionality
Many Cloud ERP packages have fallen short, because in the rush to get to the Cloud, they are either
severely limited in functionality or they are only replications of a predecessor legacy ERP package

5. supporting one business type. They do not acknowledge that manufacturers require a greater variety
of manufacturing methods and services to be supported. Let?s look at some examples of what is
meant by this.
?Unionwear manufacturers completely customize products and we needed a cloud based solution
that will allow our textile and promotional clients to design accessories online, get real time costing
and stage opportunities that we flow directly into planning, procurement and production,? says
Unionwear president Mitch Cahn. ?The automation provided?makes small batch manufacturing a
more fluid, profitable experience for both us and our clients.?
?We are a small company who locally designs and manufactures a large collection.? That has always
presented challenges in production timing and material management.? With the MRP capabilities?,
we will be able to more efficiently get our production and work orders completed,? says the
operations manager of a fashion manufacturer. ?That really stuck out for us.?
Northeast Lantern needs to track inventory and have vision on its production flow on the floor. This
is especially important as twenty percent of the high quality solid brass and copper lanterns
manufacturer?s output is custom and the company provides a lifetime guarantee.
To assure they continue to make a top quality product and make their manufacturing processes
more efficient, Northeast Lantern requires a scheduling engine that dates work order operation
routing steps (which can be sequential or concurrent) and processes them against a comprehensive
set of prioritization rules.?Northeast Lantern must be able to easily reprioritize work orders visually
with drag-and-drop capacity planning screens.?They need to quickly locate overloaded work centers
or late work orders by color and, then, go to another tab in the capacity planning screens and see all
of the shop orders for a particular job.
A larger company such as Metal Shark has the same needs.
?Our goal is to build a great boat at the best value to our customers. Our plant manufactures
increasingly complex vessels in extremely tight timeframes with a high degree of automation,
requiring precise controls and planning,? explains Chris Allard, Metal Shark CEO. As a manufacture-
to-order job-shop, it is imperative to them that they can quickly schedule their shop and maximize
efficiency. They were especially excited about how they could benefit from drag-and-drop shop floor
features.
The Bottom Line
To purchase a new software suite, vendors must show owners and upper management how the new
investment will make money and provide a solid return on investment. Dino Farina, Proveris
Scientific founder and CEO knew that his company was consistently overbuying parts and materials
just to assure that it had enough in inventory to meet order demand for its nasal and aerosol testing
instrumentation. His question was, with cloud manufacturing ERP, would Proveris be able to

6. determine how many of its most popular machines could be built with the inventory on hand?
?We were constantly trying to get the answers to such questions,? emphasizes Farina. ?By the time
we finally got the data, the answers were too late. With manufacturing Cloud ERP, we will now be
able to not only find out how many units we can manufacture with the inventory on hand but
whether we need more inventory, how much, how soon and at what cost. This will make our business
more efficient by increasing our cash flow and improving our resource planning, while giving our
customers faster deliveries on their orders.?
ABOUT THE AUTHOR:? Pat Garrehy is the Founder, President, and CEO for Rootstock Software?
and has an extensive background as a software architect and engineer. With over 30 years of
management, sales and technical experience, Mr. Garrehy brings a unique blend of analytical focus
and business savvy to the table.