One way that some manufacturers are reaping the benefits of enterprise resource planning (ERP) without a huge financial outlay is by deploying open source ERP for manufacturing.
Open source ERP enables manufacturers to access the source code of their ERP software without having to pay the upfront licensing fees associated with traditional "closed source" ERP offerings. Because the source code is open, they can customize the ERP software to meet their specific needs.
"Open source ERP [has] been growing in adoption and moving into the mainstream of enterprise software," Yossi Ben Haroosh, an independent ERP consultant, wrote in an email. Haroosh covers the open source market through the Open Source ERP Guru blog. "The current economic crisis got companies to be more cost-aware, and open source business solutions became a more viable alternative to proprietary, licensed [software]."
Haroosh added that open source ERP is ideal for small to medium-sized manufacturers that want to move from legacy, standalone manufacturing applications or Excel spreadsheets to a fully integrated ERP solution without spending a huge amount of money.
Open source ERP software poses some challenges
Companies using open source will need some ERP programming and ERP software development skills, "plus all the usual skills required for any other ERP solution -- business process savvy, organizational change management and training, etc.," said Eric Kimberling, president and founder of Panorama Consulting Group, a research firm that focuses on ERP software.
One challenge of open source ERP packages, according to Kimberling, is that they can be more difficult to maintain in the long term than commercial ERP software because there tends to be less vendor support. "Make sure you understand total cost of ownership, which could end up being higher in the long term," he said.
Open source ERP solutions include: Compiere ERP from Compiere Inc.; ERP5 from Nexedi, based on the Zope application server; Openbravo ERP from Openbravo; OpenERP (formerly Tiny ERP) from Tiny sprl; the PostBooks Edition of xTuple ERP from xTuple; and the open source ERP software from the Apache Open for Business Project (Apache OFBiz).
Manufacturer uses open source ERP to streamline processes
Creamer Metal Products Inc., a maker of material-handling equipment for the grain industry in London, Ohio, in 2007 began using the xTuple ERP Manufacturing Edition, an end-to-end ERP software system for make-to-order, make-to-stock and mixed-mode manufacturers. The open-source ERP software replaced the accounting software package that Creamer Metal Products had been previously using.
Wes Jacobs, general manager for Creamer Metal Products, wanted to deploy an ERP system that would enable his company to streamline business processes and improve planning, provide financial data on demand for decision-making purposes, and gain better control over inventories. He also wanted a product that could be continually improved as the business grew, and the XTuple Manufacturing Edition offered that possibility.
Leveraging the software's online user community, Jacobs interacts with other xTuple customers to discuss best practices and gather code recommendations.
By implementing the ERP software, Creamer can more easily measure its business from a financial perspective. "We now know what our margins are and what they need to be in order for our firm to be successful," Jacobs said.
Other benefits include reduced expenses. The company's cost of goods sold decreased by 10%, and general and administrative expenses have decreased 8%. Inventory has dropped by 40%. In addition, Creamer can better serve its customers by tracking orders in its manufacturing environment.
Open source ERP software adds automation to inventory, financials
Another company, PerTronix Inc., a San Dimas, Calif., manufacturer of electronic ignitions and other accessories for the automotive performance marketplace, began using Compiere's open source ERP software in May 2005 to add automation to its inventory and financial management processes.
PerTronix opted for the Compiere solution because it offered lower upfront costs than traditional ERP products, according to Steve Reh, special projects manager.
Among the benefits the company has seen are the elimination of duplicate systems for orders, shipments and invoices; up to 12 hours time savings per month in the production of sales summary reports; and easier and quicker customer access to information about order shipments.
About the author: Bob Violino is a freelance writer who frequently covers ERP and other manufacturing-related technologies.