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Is ERP vital for small businesses?

10-May-2024 8 Min read Written by: TCS iON BizHub

1. Overview of the manufacturing landscape in India

Before we understand whether you need ERP software for your business or not, let’s understand the manufacturing landscape and how ERP is helping business in terms of statistics.

  • The GDP is significantly raised by overall manufacturing output, contributing 33.4% to the GDP.
  • 96% of industrial units in the Indian economy belong to small companies.
  • Small companies account for 40% of the nation’s overall industrial production and 42% of all Indian exports.
  • Small companies offer various opportunities in both rural and urban areas, contributing significantly to employment generation.

[source: Forbes advisor]

In India, where the manufacturing sector is a backbone of the economy, from the above statistics it proves that small businesses are making a huge contribution among all micro, small and medium enterprises in India. While you as a small business helping India in many aspects, who can help you?

Technology! Yes can be your helping hand. The adoption of software solutions is instrumental in overcoming challenges unique to small businesses. From streamlining operations to enhancing productivity, and automating repeated tasks, right software can be a game-changer In this article, we will explore the nuances of manufacturing software, shedding light on its significance, and offering insights drawn from our own experience in empowering small manufacturers across India. Let's embark on this journey to discover the transformative power of technology in the realm of small-scale manufacturing.

2. Challenges faced by small manufacturers in India

Before getting into specifics of manufacturing software, it's essential to understand the unique challenges and opportunities present in the Indian manufacturing sector. With a diverse range of industries, varying scales of operations, and a strong emphasis on cost-effectiveness, the Indian manufacturing landscape sets the stage for the significance of tailored software solutions.

Small manufacturers in India encounter a myriad of challenges in their day-to-day operations such as

  • limited resources
  • complex supply chains
  • need for rapid adaptation to market trends

These challenges can hinder productivity and growth if not addressed strategically.

In our experience of working closely with small manufacturers, we've witnessed first-hand , the struggle to streamline processes amidst resource constraints. Issues with inventory management, order tracking, and maintaining competitiveness against larger counterparts are prevalent. The lack of specialized software designed for the unique needs of small businesses worsens these challenges. Traditional approaches often fall short in addressing the nuances of the Indian manufacturing ecosystem, leading to inefficiencies, and missed opportunities.

Our journey has taught us that by understanding these obstacles, we can craft solutions that are not only effective but also resonate with the specific requirements of small manufacturers in India. In the subsequent sections, we will clearly understand how software solutions can directly tackle these challenges, empowering small manufacturers to navigate the complexities of the industry and carve a niche for themselves in the competitive market landscape.

3. Does your business need an ERP?

Before reading out further sections, in case you want to quickly figure out if your business needs an ERP, go through the below list and you will figure out the answer by yourself.

If your answer to ANY of the below questions is YES, then most likely you would need an ERP system for your organization to streamline operations and experience growth.

  • Is your turnover > 10 CR ?
  • Do you struggle to handle / manage your operations in a more defined manner?
  • Compliance still a challenge? (GST filing and reconcilliation / E-invoicing / E-way bill)
  • Tracking at a Management level is tough or a challenge?
  • Does your business handle multiple departments like finance, HR etc?
  • Do you have a large team (above 30) to manage?
  • Do you want to associate with OEM or want to be a vendor to leading OEMs?

Now that you've recognized the necessity of an ERP system, read more to learn how ERP can elevate your business. It's not just about streamlining processes; it's about empowering your team with the tools they need to excel. From enhancing efficiency to enabling better decision-making, ERP holds the key to unlocking your business's full potential.

4. How an ERP software can address challenges

Manufacturing software emerges as a transformative solution to address the challenges faced by small manufacturers. From automating manual processes to providing real-time insights into operations, the right software can empower small businesses to navigate the competitive landscape with confidence.

Let's explore how adopting tailored software solutions can directly address these pressing needs and revolutionize the way small manufacturers operate :

  • Streamlining operations : Effective manufacturing software simplifies complex processes, streamlining day-to-day operations. From inventory management to order processing, every facet of the manufacturing cycle becomes more efficient, freeing up time and resources .
  • Enhancing productivity : Automation features embedded in quality manufacturing software significantly enhance productivity. By automating repetitive tasks, employees can focus on more strategic aspects of the business, fostering a culture of innovation and growth.
  • Competing effectively : Small manufacturers often find it challenging to compete with larger counterparts. However, the right software levels the playing field. It provides tools for data analysis, market insights, and customer relationship management, empowering small businesses to make informed decisions and stay competitive.
  • Adaptability to unique requirements : Our experience has shown that one-size-fits-all solutions don't suffice for the diverse landscape of manufacturers in India. Tailored software based on size of the business and sector allows for customization, ensuring that the unique needs and workflows of each business are addressed effectively.
  • 88% of organizations believed their new ERP helped their business overall.
  • 95% of businesses saw process improvement after implementation.
  • The India Manufacturing ERP Market is growing at a CAGR of 6.32% during forecasting period 2023-2029.

[source: software connect, maximize market size]

ERP systems offer an attractive growth platform, especially for companies that need to scale up quickly to manage the growing complexity of their operations. The above statistics showcase the benefit gained by businesses who use ERP systems to streamline business processes and enhance productivity. Though many businesses take a step back because of challenges involved in entire ERP system implementation, it benefits in the long term.

5. Need of tailored ERP for small manufacturers

One of the key lessons we've learned in our experience is the importance of tailoring software solutions to meet the unique requirements of manufacturers based on their size and sector. Off-the-shelf solutions might not fully address the intricacies of the local business landscape. Let us explore how customization options can make a significant difference :

  • Adapting to regulatory compliance : The Indian manufacturing sector operates within a regulatory framework that evolves over time. Tailored software allows businesses to adapt seamlessly to changes in compliance requirements, ensuring that operations remain compliant and efficient.
  • Scalability for diverse business models : India's manufacturing landscape is diverse, with businesses ranging from traditional to tech-driven. Customizable software solutions are designed to scale alongside the growth and evolution of different business models, accommodating their unique needs.
  • Integration with local payment and shipping systems : In the Indian market, integrating with local payment gateways and shipping systems is crucial. Tailored manufacturing software can be configured to seamlessly integrate with the preferred payment methods and logistics partners, facilitating smooth transactions.

Our journey has highlighted the significance of understanding and addressing the specific needs of Indian manufacturers. By opting for customizable software, businesses can create a technology infrastructure that aligns seamlessly with your operations and contributes to sustained growth.

Benefits cited by consumers who chose customizable ERP software :

1. For an auto component manufacturing company, ERP helped in identifying patterns in price and usage variances to help plan procurement and production capacities dynamically. It streamlines and optimizes procurement operations by automating purchase requisition, payment processing and enabling bulk procurement.

2. Implementation of ERP in any micro vertical helps streamline functions by addressing mandatory taxation, pricing, GST compliance, export, import and standardized procedures. It also enables tracking of costs and revenues per product across locations and monitors the byproducts generated during production to maximize the utilization of raw materials.

3. ERPs help organizations digitize, automate, and integrate enterprise-wide functions and processes. These solutions consolidate multiple applications to provide a comprehensive view of the business, enabling improved processes and better outcomes.

6. Cost-effective solutions for small businesses

Cost-effectiveness is a crucial consideration for small businesses, and in this section, we'll explore how affordable manufacturing software options can be a strategic investment for small manufacturers in India :

  • Open-source solutions : Our journey has involved working with open-source manufacturing software options that provide a cost-effective foundation. Open-source solutions offer flexibility and can be tailored to specific business needs without the hefty price tag associated with proprietary software.
  • Subscription models with scalability : Many software providers offer subscription models that allow businesses to pay for what they need. This scalable approach ensures that small manufacturers can access essential features at an affordable entry point and scale up as their operations grow.
  • Cloud-based solutions : Cloud-based manufacturing software eliminates the need for significant upfront infrastructure investments. Small businesses can benefit from the accessibility and scalability of cloud solutions, paying only for the resources they use.
  • ROI analysis for informed decision-making : Our experience emphasizes the importance of conducting a thorough Return on Investment (ROI) analysis.

Affordable software options should not only fit the budget but also provide tangible benefits that contribute to the overall growth and profitability of the business.

7. Is return on investment (ROI) a key factor?

While exploring affordable manufacturing software options is crucial, understanding the return on investment (ROI) is equally important. In this section, we'll delve into the considerations and methodologies for calculating ROI, ensuring that small businesses make informed decisions :

  • Identifying key performance indicators (KPIs) : Before implementing any manufacturing software, it's essential to identify the key performance indicators relevant to your business. Whether it's improved order processing times, inventory turnover rates, or enhanced customer satisfaction, establishing clear KPIs provides a foundation for measuring ROI.
  • Quantifying time and resource savings : One of the significant benefits of effective manufacturing software is the time and resource savings it can generate. Businesses can calculate the value of these savings by assessing the reduction in manual efforts, streamlined processes, and increased operational efficiency.
  • Measuring error reduction and compliance gains : Manufacturing software often contributes to error reduction and improved compliance. Quantifying the monetary value of these gains, whether through avoided penalties or enhanced product quality, provides a tangible metric for assessing ROI. An ERP system also help businesses improve the timeliness of orders and payments with streamlined invoicing. In contrast, manual bookkeeping is slow and prone to human error, which can lead to unnecessary costs and delays. The faster a business can process, ship, and invoice an order, the faster it reaches the customer and the sooner the business gets paid.
  • Long-term scalability and growth : Small manufacturers in India should consider the long-term scalability of the chosen software. Scalability contributes to future growth opportunities, and factoring in these expansion possibilities is essential when calculating ROI over an extended period.

Our experience has shown that a thorough ROI analysis is a critical step in the decision-making process. By understanding the quantifiable benefits that manufacturing software brings to the table, small businesses can make strategic investments that not only fit their budget but also contribute significantly to their overall success.

8. How to find a cost-effective ERP software

After reviewing many ERP software solutions and hearing from numerous customers, we found the key reason that makes the ERP non-affordable for most of the businesses is : “Cost involved in implementation services”. Most of the software providers do not offer implementation services, so businesses end up paying separate costs for the implementation services along with the actual software cost. This came out as a key factor for increased ERP prices that add additional cost to the business. We found that costs could be significantly reduced if software providers could also provide implementation services. There are few software providers who offer implementation services along with software, we (TCS iON) are ONE among the few. If you are interested in exploring our ERP for your needs, please contact us.

Conclusion

For all manufacturers in India, staying ahead of technological trends is not just a choice; it's a necessity for survival and growth. Understand how future trends of manufacturing are going to impact you.

Here are few tips on how Indian businesses can proactively adapt to and leverage future trends in manufacturing software :

  • Investing in employee training : As new technologies emerge, investing in ongoing training for employees becomes crucial. By ensuring that your workforce is well-versed in the latest software and technological trends, you create a competitive advantage in the market.
  • Collaborating with technology providers : Building strong partnerships with technology providers allows SMEs to access the latest advancements in manufacturing software. Collaborative relationships can lead to tailored solutions that specifically cater to the unique needs and challenges faced by Indian manufacturers.
  • Piloting new technologies : Instead of a wholesale adoption, consider piloting new technologies on a smaller scale. This approach allows businesses to assess the impact, identify potential challenges, and gradually integrate innovative solutions into their operations.
  • Adopting a data-driven Culture : With advancements like AI and IoT, data becomes a valuable asset. Cultivating a data-driven culture within your organization empowers decision-makers to extract actionable insights, driving efficiency and informed strategic choices.

By embracing these strategies, Indian businesses can not only stay ahead of the technological curve but also position themselves as innovative and adaptive players in the competitive manufacturing landscape.