Understanding tiers of ERP solutions

///, Warehouse Management/Understanding tiers of ERP solutions

When dealing with ERP software, it's important to remember that there is no one correct solution in terms of what's available. Every business has a different model to work with and every company has myriad resources and personnel that have to implement the solution into their daily operations. The industry the company is based in can also have an impact on what system works best. With this in mind, making a choice between different ERP solutions means that companies may run into options that are either too large or too small for what they need. That is why there are tiers of ERP software to make the decision-making process easier.

I for the big players, II for little guys
As Panorama Consulting notes, there are two primary tiers of ERP software, aptly named tiers I and II. IT firm Compudata claims there is a "tier III" of ERP solutions, but most of the app suites in question lack the bulk of functionality that the other tiers have. So there is a two-tier system in place for the most part.

What separates the two tiers is not only total cost of ownership but complexity. The top-level tier I are app suites that are filled with a variety of programs that cater to specific needs. There are so many apps to implement that usually a very large team numbering dozens is required to handle it all. As a result, larger enterprises are usually the target audience of this type of ERP solution: They have major operations that usually span multiple locations, work in various verticals and need something comprehensive to cover every critical aspect of their operations. Consequently, these solutions are the most expensive in terms of installation and maintenance.

Tier II solutions are less complex than tier I, but more often serves the needs of smaller businesses that have less robust operations. This includes small-to-midsize businesses. What tier II lacks in robustness it makes up for in industry specificity. In other words, most solutions are tailored specifically for a vertical such as manufacturing or retail. It is also less expensive to implement and usually requires less resources and time because it pertains to one specific industry. At the same time, it can be riskier to implement because the size of the market makes the vendor vulnerable to acquisition by a larger service.

A little bit of both
What makes a Microsoft Dynamics implementation unique is that it's not just one tier but a combination of both. Dynamics NAV in particular has a unique advantage in it covers a large number of features that can be used by many industries, making it feel like a tier I solution. At the same time, through the creation of independent modules such as those for mobile WMS, manufacturers can have a solution custom-made with the features they need, similar to most tier II solutions. All of that can be done at a cost that is often less than standard off-the-shelf tier I software. Of course, choosing the right software is about what the business needs, so companies should look into all the choices they have and see how they fit within their operations.

Learn how to define your ERP strategy by downloading the white paper entitled "ERP in Manufacturing: Defining the ERP Strategy" from the DMS website today.