A Brief Description

scm software

Manufacturing ERP software systems manage the core financial and accounting operations for manufacturing companies. Specific to manufacturing, strong ERP systems help with managing the entire supply chain, from order processing to shipping to invoicing, and can provide insight on project and job costs and manage engineering changes.

Virgo Capital’s View

As the economy emerges from the recession, middle market manufacturing companies are growing and have built up demand for quality IT systems to give them the edge in being their sector’s low-cost providers and reducing delivery cycles. Established manufacturing-focused ERP software providers with proven solutions and strong customer support are well positioned to succeed in the next decade as the middle market manufacturing sector grows. Further, in the middle market, software providers with domain expertise in manufacturing have an edge on large vendors, such as SAP and Oracle, as their solutions are specialized for their customers’ niche processes, and they can better implement and respond to changes.

Current Trends

NetSuite’s recent 2011 survey on the state of business within the middle market manufacturing industry shows a strong optimism in the sector. The majority of respondents reported significant optimism for growth in the future. More than 75% believe their business will improve in the near term, and almost 98% reported that they believe their business will either improve or remain steady—a dramatic and significant improvement over 2010 survey results. With respect to companies’ key objectives, 60% of respondents are focused on both revenue growth and cost savings, with about 30% focused primarily on revenue growth only. These results are in stark contrast to just a couple of years ago when manufacturers were focused on cost reductions above all else.1

Boston Consulting Group recently projected strong growth in US manufacturing, identifying several industries with the potential to create 2 to 3 million jobs and $100 billion in revenue. Many factors are driving this shift, including shorter lead times, quality control, improved customer service, and more control over intellectual property. Labor costs are moving in favor of domestic producers. Wages in China have been rising, and though they’re unlikely to reach parity with the U.S., the change has been substantial enough to make manufacturers look closely at the costs and benefits of moving jobs abroad. Contrary to popular opinion, the U.S. never really gave up its manufacturing capacity. As the BCG report notes, the U.S. continues to manufacture more than half of the appliances sold domestically, 61% of machinery, 70% of transportation goods and 71% of furniture. It exports roughly $1.3 trillion of manufactured goods annually, primarily to Europe, Canada and Mexico. Behind each of the major manufacturers in these markets stand dozens of middle-market vendors, supplying parts and subassemblies.”2

Not surprisingly, manufacturing is cyclical, and IT spending can be affected considerably. An eWeek survey indicated 66% of respondents delayed, halted, or cancelled IT projects during the recession.3 That said, times are improving and the NetSuite survey indicated that only 6% of middle market manufacturers are seeking to cut IT budgets, whereas 47% of respondents said that IT budgets have room for new software purchases. Manufacturing ERP and lean manufacturing solutions are the two most desired solutions for manufacturers. There is also a significant amount of demand that has built up from spending cuts during the recession.


1 NetSuite. The State of Manufacturing. 2011.
2 The Deal Magazine. U.S. manufacturing resurgence: A midmarket PE perspective. 2012.
3 eWeek.com. IT in Manufacturing Hit Hardest by Recession, Report Says. 2009.