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Why Manufacturers Purchase Software

August 22, 2013

Why Manufacturers Purchase Software

By Derek Singleton*

Software Advice helps manufacturers review and compare the various manufacturing solutions on the market to determine which solution best fits their needs. To better understand what drives manufacturers to purchase software in the first place, I decided to dig into a random sample of our 2,000-plus phone interactions. Our sample ranges from manufacturing companies earning less than $5 million in annual revenue to others with more than $100 million.

In 2013, global manufacturing leaders and small manufacturers alike are in the market for new manufacturing software. Here are a few key takeaways from our research:

1. The majority of manufacturers we spoke with cited the need to improve efficiency, accuracy or organization and wanted to automate their manufacturing processes.

2. Among manufacturing software buyers that utilize manual tracking methods to record their processes, the highest number cited the need for automation to improve their effectiveness.

3. Two-fifths of software buyers were looking to replace legacy software. They wanted to do so because their current solutions were outdated or unsupported.

4. 45 percent of the manufacturers were either customer job shops, metal fabricators or industrial machinery shops.

One striking thing that I noticed after digging in to the data was that three out of five of manufacturers that we spoke to relied on manual methods (e.g., pen and paper or Excel spreadsheets) to manage at least some part of their operations. Even in the age of automation, many manufacturers rely on labor-intensive methods of managing shop floor and backend processes. Meanwhile, the other two-fifths of our sample managed operations with industry-specific software.

After understanding current methods of managing manufacturing processes, I wanted to understand what drives manufacturers to purchase software. By far, the most cited reason that manufacturers were looking to purchase software was to automate or improve shop floor and backend processes. Of course, many were also concerned with updating and modernizing their current system, expanding functionality or purchasing software to better manage company growth.

 In order to address these challenges, manufacturers looked to four key applications: manufacturing requirements planning (MRP) software, manufacturing execution software (MES), accounting and customer relationship management (CRM) software. Nearly all software buyers are searching for an MES or MRP application--with 98 percent and 96 percent of buyers looking for these applications, respectively. Accounting trailed behind with 54 percent of buyers stating that they required this application.

 One final note from our finding is that only a small portion of manufacturers stated that they were preferred a Web-based deployment model for their software. Although most industries are moving toward adopting a Web-based deployment model of software, manufacturing software buyers are not yet seeking Web-based systems at the rate of other industries. We found that only four percent of buyers that only four percent of buyers specifically preferred Web-based deployment over an on-premise deployment.

 Our buyers report points to the importance of effective software solutions, especially MES and MRP applications, in modern manufacturing. It is also worth noting that this is not isolated to global powerhouses, it is also representative of small manufacturing businesses looking to improve the efficiency of their operations.

* Derek Singleton

 Derek Singleton joined Software Advice after graduating from Occidental College in Los Angeles, California. At Software Advice, he manages the manufacturing software markets and manages the manufacturing blog. Derek's work has appeared in a variety of publications, including the Huffington Post, New York Times, SYS-CON, ZDNet, and Manufactruing.NET. Derek can be reached at [email protected]

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