Open Source ERP vs Vendor-Based ERP: Which Is Best for Manufacturers and Distributors
There is a pain point that often deters companies from taking the leap into digital transformation: cost. Hence the rising popularity of freeware solutions that are becoming the front runner for ERP solutions thanks to accessible source codes and the absence of licensing fees.
But is a free ERP system capable of performing at the same level as its commercialized counterpart, a vendor-based ERP?
What Is Open Source ERP?
An open source ERP solution is a type of enterprise resource planning (ERP) that provides businesses with complete flexibility in their business processes thanks to a publicly available source code.
Corporations are free to use, access, modify, and redistribute the software in a way that they determine works best for their operations.
It is a cost-effective way of streamlining business operations, as there is no pricey investment, and companies can easily tailor the system to fit their unique needs.
This differs greatly from vendor-based ERPs, as companies can only access their software in return for a license.
Can Your Business Run on Open Source ERP?
For any business starting out, there are several investments that need to be established. More often than not these investments are overshadowed by complex situations that leave decision-makers choosing between a cost-effective solution versus a powerful system that ensures growth over time.
For small businesses or start-ups that don’t have elaborate operations in place or don’t have plans to expand in the near future, open source is the ideal ERP software.
However, that being said, no one knows what the future has in store, and over time business objectives change and companies face unprecedented challenges and growth.
While less expensive solutions look attractive at first, it’s crucial to understand the potential risks that come with free ERP solutions.
The Risks of Open Source ERP
Extensive ERP customization done by inexperienced developers and consultants can lead to systems being built on crumbling structures that end up with inaccurate processes and functionalities.
Therefore, it is vital for all small and medium-sized businesses to know that a greater investment in technology solutions might burn a hole in a wallet in the beginning; however, the return will be far greater when you have a system that is scaling with you.
Why Don’t Large Enterprises Use Open Source ERP Systems?
Certain industries, in particular the manufacturing and distribution sector, are well-known for their complex operations. From product lifecycle to retail distribution to everything in between, it’s crucial for those industries to have a powerful platform in place.
While there is free ERP software available on the market, there are certain reflections to have before plunging into the deep end.
Security
Vendor-based ERPs are notorious for their secure data warehouses and constant updates. Free open source ERPs don’t have that luxury.
They’re not liable when system errors and failures occur. In fact, the security risk outweighs the price point due to the lack of standardization and regulations.
Business Processes
Backend functionalities are only as good as their integrations. Cost-effective ERP platforms generally have limitations in how well they work with other systems.
In simpler terms, while easy to implement, don’t overestimate the power of open-source systems, especially when it comes time to automate all your different software to one another.
Cost
There is more than meets the eye for companies that implement open source ERPs. Freemium software is often advertised as a free option, but don’t forget that access to certain customizations and additional staff will incur additional fees.
Before starting any ERP implementation, be sure to research the best option for you and always keep in mind that business objectives change over time. Prepare for challenges that are bound to come up unexpectedly.
What ERP Technology Do Successful Companies Use?
While every business is unique in its operations, one thing is certain: successful businesses ensure core functionalities and processes are managed by experienced vendors and consultants.
While every business is unique in its operations, one thing is certain: successful businesses ensure core functionalities and processes are managed by experienced vendors and consultants.
Customizable tools can be liberating for businesses that want to be free of limitations, but be aware that the reason why vendor-based ERPs don’t allow modifications is to stay in control of their core foundations.
When base structures can be modified, that means anyone, even individuals who don’t have backend experience, can go in and make changes, thus leading to errors that create a messy and unnecessary butterfly effect.
The logic behind profitable corporations is closed source ERP software. These cloud ERP systems are highly accredited and meticulously managed to ensure that everything is compliant and recorded accurately. Meaning all data and security is clean and offers the best track record for businesses to have a clear understanding of all the comings and goings of their operations.
If something should go wrong, companies can quickly pinpoint the problem and make corrections without long delays.
When Should You Invest in an ERP System?
We’ve all been there: manually entering data between siloed systems due to nonexistent core software that doesn’t integrate a company’s backbone.
Inventory management, CRM, finances, and human resources are just a few branches that growing companies need to maintain.
Imagine if you had each department attempting to manage the different aspects of each system and cross-referencing them. Nothing could go wrong, right? Realistically, that’s a future faced by growing companies using open source ERP. It’s a frequent occurrence and unfortunately makes growth unattainable.
Now, reverse the situation. A company who invested in a vendor-based ERP from the beginning and has experienced advanced growth. Thanks to a strong core system and solid ERP integrations, data and systems are automatically synced across the whole network.
SaaS is the better choice for companies looking to:
- Secure Data
- Streamline Business Processes
- Customize with Modules and Products
- Improve Productivity
- Add Data Visualization
What ERP Software Is Best for the Manufacturing Industry?
Powerful tools are known to be at the epicenter of manufacturing. Therefore, there’s no reason why the backend shouldn’t represent the front end.
Epicor Kinetic is designed with power in mind. It manages supply chain, strengthens finances, ensures customer satisfaction, and provides businesses with real-time visibility on all operations.
Synchronization across the board gives manufacturers the ability to focus solely on the manufacturing process and leave the business side to reliable software that is not only user-friendly for all departments but also guarantees increased performance on the production floor.
What ERP Software Is Ideal for the Distribution Industry?
For distributors, Epicor Prophet 21 is the ideal software because it is built specifically for them. With it they can drastically improve inventory management and sales expertise.
Companies benefit from total control and confidence in processes such as procurement, shipping, and delivery. In fact, customer satisfaction has never been better, as companies can spot shipping delays and warehouse issues to ensure that customers receive their goods on time.
Will Open Source ERP Replace Vendor-Based ERPs?
There is no need to worry about investing in powerful ERPs with the fear they will become redundant. The digital transformation era is just getting started, and as more corporations take on automation, the need for solutions like business intelligence and artificial intelligence will only gain traction.
This is more pertinent for manufacturers who continue to automate processes and require more and more reliable software to guide their future plans.
Open source software is designed for small businesses that are starting out and can’t quite fork out the investment. However, as they grow, they’ll find the lack of influential tools is holding them back, quickly discovering the need for better applications.
Frequently Asked Questions About Open Source ERP
Why Choose a Tailored Epicor ERP with EC Solutions
As an Epicor service provider, EC Solutions has over 20 years of experience helping businesses in the manufacturing and distribution industries find their way in the digital landscape.
With experienced consultants, seasoned developers, and expertise in implementation and customization, our team is ready to serve you and find solutions to your current pain points around rising costs, inefficient operations, and loss of productivity.