Small Companies Increasingly Eye ERP

Survey shows smaller players looking to invest in IT infrastructure to compete in demand-driven market

Survey shows smaller players looking to invest in IT infrastructure to compete in demand-driven market

Boston — May 24, 2005 — Only about a quarter of small enterprises currently are using enterprise resource planning systems, but a growing number of these companies are looking to implement ERP in order to compete in an increasingly demand-driven market, according to a new study released this week.

The survey of more than 550 companies, conducted by technology consultancy AMR Research and a manufacturing industry magazine, showed that just 27 percent of companies with fewer than 500 employees use ERP systems today, compared to 57 percent of companies with 500-2,499 employees, and 70 percent of large enterprises with 2,500 or more employees.

However, the study reports that more than 20 percent of the small enterprises are evaluating ERP systems for the first time in the next 12 months. Thirty percent of the survey respondents came from the services industry, while the remaining 70 percent were in manufacturing. Overall, 16 percent of respondents said they are evaluating an ERP system for the first time in 2005.

AMR attributed the growing number of small enterprises looking at ERP to the economy's shift to a more demand-driven model. "Many organizations, particularly smaller manufacturing shops, have realized that they do not have the IT architecture needed to compete in the new demand driven world," said David Caruso, senior vice president of research at AMR Research.

Compared to the old push supply chain model, the new business model defined by AMR Research as "demand-driven supply networks" (DDSN) states that consumer demand should drive all supply chain activities. Traditional manufacturing technologies, such as ERP, and business processes need to be amended to operate within this new model, AMR asserts.

The study, which AMR conducted in conjunction with Managing Automation, also revealed that nearly 40 percent of all companies surveyed completed their initial ERP investment within the last two years, and almost 50 percent of the respondents interviewed indicated that they would be making substantial changes to their existing ERP systems over the next 12-18 months.

"Companies are taking a look at their existing ERP systems and making substantial changes by either adding functionality, upgrading or evaluating wholesale replacement of their existing ERP systems," Caruso said.

Many organizations are making their new ERP systems the data management hub for compliant manufacturing, with investments focusing on providing key stakeholders improved access to operational data and business intelligence. Next generation ERP systems are comprised of product development, enterprise quality, health and safety, specification management, human resource management, product/recipe management, customer relationship management, portal technologies and business intelligence applications, according to AMR.

Additional Articles of Interest

For more information on solutions for mid-market enterprises, see "Stuck in the Middle" in the April/May 2004 issue of Supply & Demand Chain Executive.