It is easy to understand how homegrown ERP software systems began. Companies evaluated off-the-shelf software and either didn’t like the price or didn’t find the business fit they were looking for. So instead of paying more than they felt comfortable with or changing business practices to fit the software, these companies set out on their own to build a homegrown system through internal employees, friends or local programmers.
And it worked. Encouraged by the early success, these companies then integrated their software with an accounting package that gave them access to the source code. The years passed and more specialized packages were integrated and more custom code added to the base. Pretty soon, the company had three programmers and a couple of local consultants working on the system. Business progressed along great for five, 10 or even 15 years …
Why Homegrown Systems Fail
But then one or several of the critical pieces began to unravel. The accounting package grew seriously out of date and compliance. The programming tools or operating system became no longer supported by their vendor. A key programming employee or consultant retired. The list can grow long, but the results were the same. The homegrown system had become a costly project and the business was at risk if just one more thing changed.
Why Companies Outgrow Customized ERP Systems
Custom systems are not much different. A company buys a competent ERP package from a regional vendor. They negotiate and win the rights to the source code so they can tailor the system to their preferences. Over time, the customization grows deeper and deeper. More products are bolted on. But just like a homegrown system, a software demise begins. The vendor is long gone, the programmers have changed jobs and the system is now irretractably isolated from modern technology …
While the benefits of a homegrown or custom system can be substantial, the risks and expense eventually become overwhelming. It is uncommon today to see a mid-market manufacturer start down the homegrown path. Today’s best practice is to work with an established ERP vendor and, if necessary, have that vendor write special code to meet critical business needs. Not custom code, but code included in the ongoing mainstream base of the system so that future updates include the special features and they do not have to be reprogrammed with each new release.
Benefits of Transitioning from Homegrown ERP to Modern ERP
Ultimately, over time, nearly every competitive manufacturer outgrows its homegrown system. The challenges (cost, time and lack of functionality) are too steep to keep company growth on track. Let’s take a look at an example of a manufacturer who had utilized its custom ERP system to the fullest before realizing it was time to move on:
Mar-Bal, Inc. is a one-source solution provider of thermoset composite products. From design and formulation to compounding, molding and finishing, Mar-Bal is a privately-held manufacturing company with 350 employees producing state-of-the-art products across four facilities in North America. Over the last few years, Mar-Bal had been experiencing challenges in its day-to-day operations. Mar-Bal’s customized (AS400-based) ERP software was outdated, preventing the necessary increase in manufacturing activity required to keep Mar-Bal competitive in today’s global economy. As each year passed, it became more expensive to operate the old ERP system due to the specialized support required to maintain and upgrade it.
Challenges of the outdated technology
Among many of the old system’s pain points was the absence of a strong Electronic Data Interchange (EDI) program required by Mar-Bal’s customers. Inventory control with the old system was also sorely deficient. The inability to scan inventory from the shop floor was making inventory management a manual and extremely time-consuming process that included redundant data entry and unavoidable data entry errors. To round it all out, the old ERP system contained very limited reporting tools and forecasting abilities and no way to easily segregate the separate plants’ costs and sales.
Mar-Bal had two options: pour more money into its outdated system and attempt to manually streamline processes in its manufacturing system, or find a new ERP provider. Mar-Bal chose the latter and the search began for a modern system with more capabilities that wouldn’t add more operational costs to the existing organization. Mar-Bal selected the manufacturing-specific ERP and MES solution from IQMS.
Improvements with new ERP
After implementation, Mar-Bal’s total annual savings were $270,000 across its four plants as well as nearly 5,000 potential machine hours that were no longer lost to downtime for monthly physical inventory checks.
Like most manufacturers, Mar-Bal, Inc. was ready to significantly grow its business. The company realized that its homegrown, customized system was holding it back and took the steps necessary to find and implement a new, modern ERP solution.