Tech Trends

Small Manufacturers Wish for Software Automation but Are Uncertain How to Proceed

December 16, 2014

Today, large manufacturers are a wonder of automation: not only their manufacturing processes, but their business processes as well. This software-based approach - much of it in the cloud - saves them time and money and increases the transparency of their processes across departments, locations and even partner companies.

For small manufacturers, however, the benefits of software-based approaches aren't so transparent, and many small companies struggle with the best approach to software-based process automation. Software Advice, a Gartner-owned consulting firm that provides research to manufacturing software buyers, recently pulled data from its interactions with thousands of manufacturing organizations to uncover trends in small manufacturing companies (defined as those will annual revenues of $100 million or less) and their aspirations with regard to software purchasing. The goal was to discover these companies' software needs and their pain points, as well as what would compel them to invest in new manufacturing process software solutions.

The results of the analysis were eyebrow-raising: 45 percent of small manufacturing companies identified as prospective buyers are still using pen and paper or other manual methods like Excel to manage their processes. The companies that were using software solutions were generally using only accounting software such as QuickBooks and a small but not insignificant percentage were trying to adapt non-manufacturing accounting software to their manufacturing operations. Of all the companies identified, a majority of them noted that a need for better planning and management tools was driving them to seek more suitable software solutions.

Manual Methods Becoming Increasingly Unusable

Manual methods would have been difficult to use 20 years ago, but today, they are virtually impossible. The number of data points has increased dramatically, which raises the potential for errors, duplication and lost time in attempting to manually process data that could be easily handled by software solutions. While many of these organizations were trying to save money by sticking with manual or old-fashioned in-house methods, it has become clear to them that skipping automation is actually costing them money and opportunities today. Automation can help identify better processes and process efficiencies, take better advantage of new opportunities and help manufacturers get more out of their labor forces and other assets and manage their supply chains better.

Companies' Wish Lists

The number one wish on these companies' lists - with 36 percent of companies putting it at the top - was materials requirements planning (MRP) solutions that facilitate planning around inventory, purchasing, labor and production. In second place, with 30 percent of companies identifying it as most desirable, were manufacturing execution systems (MESs) that can help manage production and shop floor operations. Product lifecycle management (PLM) suites were in third place with 15 percent of buyers identifying it as important, followed by manufacturing accounting suites with 12 percent of requests.

Premise-Based Versus Cloud-Based

Today, the nature of the software deployment is as critical as the capabilities of the software itself. Of those small manufacturers identified in the Software Advice study, however, 83 percent of prospective buyers did not yet have a deployment preference. Of those who did express a preference, 85 percent said they preferred premise-based software and only 15 percent said they preferred cloud-based solutions. According to Software Advice, this is a significant contrast to software buyers' preferences in most other markets, where they tend to favor cloud-based, or software-as-a-service (SaaS), deployments.

Paul Ventura, vice president of marketing for manufacturing software solutions provider ShopTech Software, told ThomasNet that there are several reasons small manufacturers express preferences for premise-based deployments, and most of them are based on ignorance of the model and the security options available today to SaaS solutions.

"First and foremost, they don't understand the cloud technology," said Ventura. "And secondly, there's the security issue of having all of your company data out in the twilight zone. They see the hacker stories on the news and just feel like they don't want to take those chances."

The reality is that most small manufacturers don't have the resources to maintain, diagnose, update and troubleshoot software solutions, and cloud-based approaches are actually ideal for them, particularly for companies without a lot of capital to sink in large software purchases.

Where to Start?

For a small manufacturer, it's recommended that a company "get its feet wet" with software automation and work up to more robust processes later. Ventura recommends an enterprise resource planning (ERP) solution to start.

"There are many good entry-level ERP systems," he told ThomasNet. "[Small manufacturers should be able to purchase a system for under $3,000. The thing to keep in mind is to buy only what you need. We price our additional modules out separately so they can grow into them as they need them. They don't need the whole ball of wax from the beginning."

For many small companies, a suite-based approach may be preferable to buying standalone "best of breed" solutions, as long as companies don't need to buy the whole product suite at once. This way, they can add what they need when they need it and be certain they won't run into integration problems down the road.

How Long Will It Take?

This is a bit like asking "How long is a string?" It depends on a number of factors, including the nature of the product, the manufacturers' existing systems and network capabilities (particularly if the company is buying a cloud-based solution) and what types of systems need to be integrated with the new software (databases, legacy systems, etc.) According to Ventura, the two most important factors are how organized the company's current system is and whether the company has enough bandwidth in the office to implement the new system. (If not, network assets may need to be added.) Highly disorganized companies will need to embark on an organization mission before they can implement a new system.

In the end, however, the work will likely be worth it. There is so much that data, particularly coupled with automation and analytics, can offer a small manufacturing company. Organizations still attempting to struggle with manual methods are missing too many opportunities to count, and they may even be harming themselves with errors and inefficiencies in a misguided attempt to "save money."