Overview
SAP was founded in 1972 by five former IBM employees in Germany under the name SAP Systemanalyse und Programmentwicklung (Systems Analysis and Program Development), with the goal of a real-time data processing system instead of data running overnight in batches (SAP, n.d. a). They currently offer a variety of business software applications in the following portfolios: ERP and Digital Core; Cloud and Data Platforms; Procurement and Networks; Analytics; Customer Engagement and Commerce; IoT and Digital Supply Chain; Human Resources (HR); and Finance (SAP, n.d. b).
A mentioned in ZDNet website, “SAP has formulated a three-tier product roadmap to cater to the Small to Midsize Enterprise market. Here’s the breakdown:
- Business One targets companies up to 250 employees.
- Business ByDesign is aimed at companies with 250 to 1,500 employees and will have native
integrations with various SAP assets such as Concur, Ariba, and SuccessFactors.
- SAP Anywhere is for companies with fewer than 250 employees with a sweet spot of 20 to 100
workers.” (Dignan, 2016; SAP, n.d. c; SAP, n.d. d)
The estimate size for Paragon is 135 employees with a possible expansion to 175 employees, so Business One is the most appropriate version for Paragon.
SAP ERP for Small Business
SAP Business One
SAP One in 60 Seconds Video
SAP Business One offers several pre-customized packages for consumer products, industrial machinery and components, professional services, retail and wholesale distribution (SAP, n.d. b). The best fit for Paragon and the closest match to JustFood is the wholesale distribution customization package hosted on the Business One Cloud.
On the SAP website, they state that businesses should “Proactively meet customer and supplier demand with SAP Business One for wholesale distribution. Improve everything from demand planning to inventory and supply chain management – and run flexible, tightly integrated processes to achieve operational excellence:
- End-to-end visibility – Get full visibility into your business, including accounts, inventory sales order
processing, invoicing, and deliveries
- Supply chain and supplier management – Streamline your supply chain processes, and build and
manage your supplier network
- Chargeback management – Increase profitability with smarter, more efficient chargeback management
- Ordering and order processing – Improve the overall customer experience with multi-channel ordering and
fast order processing
- Reporting – Create fast, accurate reports on inbound and outbound shipments, inventory, and item
locations” (SAP, n.d. b)
One of the key values to using SAP over other systems is the worldwide use of the program, which has been implemented by over 55,000 companies in 150 countries (SAP, n.d. b). The worldwide adoption of SAP platforms also increases the likelihood employees have encountered SAP in the past and reduces the total learning curve for training. Employees across all industries actively seek companies which have integrated advanced digital technologies and the implementation of a software suite such as SAP’s ERP would keep Paragon up-to-date (Kane, Palmer, Phillips, Kiron, & Buckley, 2015). Gallaugher (2016) notes using ERP systems such as SAP also improves supply chain efficiencies as well as improved external integration, especially if partners use the same software package. Built into the SAP ERP software are analytics and other reporting tools common to all businesses, which can save employees time and effort when pulling reports. As seen above, the SAP Business One platform is priced using a modular structure, so businesses can manage costs by only paying for what they need (SAP, n.d. b). SAP Business One is less expensive to launch and maintain than JustFood, and the long-term costs should be considered when choosing the system.
Risks
It is noted this system can be complicated and confusing for employees in small to medium sized businesses. SAP is only sold through SAP channel partners, so there are likely to be additional costs to the firm for initial set-up and potentially for locally hosting the software. The front-end setup, data conversion and migration, and employee training must be done by capable professionals or the company will have functionality issues down the road (Needleman& Marvin, 2017). Paragon needs to ensure a quality installation, as failed ERP launches have caused companies to lose millions and/or go bankrupt (Gallaugher, 2016). SAP informational materials directly address these complaints, so there is some confusion as to how difficult using the Business One platform may actually be (SAP, n.d. b). As noted in the Risk Management Analysis, there are inherent dangers to cloud software and mobile access to the platform; none of these risks are avoided using SAP versus JustFood. Additionally, SAP Business One is not specifically designed for use in managing food manufacturing, and will require more in-depth setup in order to work well for Paragon’s operations.
Costs
SAP has several pricing models based on where the platform is housed; therefore this analysis will focus on the one closest to the JustFood version chosen in this analysis. Based on their platforms, this analysis will price SAP based on the cloud subscription. Note that pricing is derived from a SAP Channel partner and may vary with final transaction.
The variable and implementation costs to install SAP for Paragon depends on the hours used. The channel partner
cost is $175 an hour. Therefore, the total variable and implementation costs
cannot be totaled. However, for 135 employees, Paragon user licenses will be
$145,800 and $189,00 for 175 employees. For fixed costs, the
total is $326,999.88 per year for 135
employees and $422,999.88 per year for 175 employees. This
includes the price for the cloud-based platform and high-speed internet to
operate the cloud.
Variable and Implementation Costs when Installing SAP for Paragon
Fixed Cost when Installing SAP for Paragon
Overview
Much like JustFood, LinkFresh aims to assist food businesses that heavily rely on warehousing and distribution of fresh produce through the use of a specialized ERP system. LinkFresh is a Certified for Microsoft Dynamics ERP solution with flexibility and customization to fit a large array of needs. LinkFresh and JustFood were similarly designed by food supply chain and industry specialists which the unique knowledge regarding how an ERP system can add peace of mind to a highly time sensitive business. LinkFresh provides a singular home base to track, trace, process, and ship produce while adhering to Produce Traceability Initiative (PTI) requirements. LinkFresh intends to provide transparency and efficiency to the food supply chain while maintaining and increasing profits through a highly streamlined process. Both JustFood and LinkFresh offer a business support platform that is used to both plan and forecast for the future of the business while improving the competitive advantage through automation and precision. If LinkFresh is analyzed in terms of the hype cycle, it is safe to say that LinkFresh has reached the productivity plateau. Food industry giants such as Starkist have adopted LinkFresh as their primary ERP system and testimonials support its continued use (Gartner, 2013).
Value
The food industry is a relatively old industry that relies heavily on historic techniques to manufacture and distribute. Food businesses also operate with a time sensitive product and have a very small profit margin. As mentioned a YouTube video provided by Harvard Business Review (2013), it is important to standout in an industry by being a disrupter. An industry disrupter approaches problems and profits in a new way that aims for efficiency and utilization of cutting edge technology that many larger status quo firms may over look. LinkFresh is an industry disrupter in that they provide a host of benefits that will allow smaller firms to compete with big business. LinkFresh, much like JustFood, can add a high level of value to a great number of food business and the food supply chain in general. Specifically, LinkFresh boasts a high level of ease of use for all employees along the supply chain as well as compatibility with just about any system. LinkFresh primarily supports the Microsoft Dynamic Nav system, but can be customized and adapted for use with a variety of other systems. Along the lines of customization LinkFresh also offers an array of add on modules to ensure that the ERP is specific to the needs of individual companies. LinkFresh is also a cloud-based ERP that alleviates bottlenecking in the IT department as it offers a high-level of real time customer support. “The impressive range of supply chain functionality and flexibility in the LinkFresh food supply chain software allows a solution to be configured to suit your specific requirements and business processes, while preparing your business to embrace future developments in technology,” (LinkFresh, 2017a).
Implementation
The installation of the LinkFresh ERP system is based on and supported by the Microsoft Sure Step methodology. This implementation process is backed by 15 years of experience in ERP software deployment and use. This methodology includes initial proposal, live use, and support. The first step in the process is for LinkFresh to diagnose specifically what an individual company requires from the ERP, but also what the company requires in terms of support for actual setup of the software. In the analysis phase LinkFresh will map out key business processes that the ERP could assume. Design is the stage in which the ERP is tailored for the specific company including all add-on module necessities. Development is the stage in which the system in implemented and tested to determine any further alterations for most efficient use. Deployment is the actual unrolling of the ERP as companywide software and finally operation is the monitoring of LinkFresh in action.
Risks
LinkFresh is designed for larger companies
than Paragon but could be tailored to fit some of Paragon’s needs. Though LinkFresh
would be beneficial to Paragon it would not be the most effective ERP system.
The other risk to LinkFresh is that it is primarily designed to work with
Microsoft systems specifically Microsoft Dynamics (Encore Business Solutions,
2017). If Paragon does not already operate with a Microsoft system there will
be an additional cost of software purchase and installation. LinkFresh is also
a lesser known ERP compared to JustFood and may not sync with customer systems.
When
considering some security risks faced by Paragon in relation to the LinkFresh
system, there are multiple similar ways that LinkFresh and JustFood present
comparable risks. Both LinkFresh and JustFood are cloud-based software systems.
This reduces physical data storage costs overall, but inherent in cloud-based
systems are threats to sensitive customer information that Paragon may be
storing in their private databases. Both of these cloud-based systems can be vulnerable
to cyberattacks in the same ways because they both connect to the internet.
Additionally, both LinkFresh and JustFood advertise that they increase
usability for every step of the supply chain, vendors and employees alike can
login and access the software system. This is great from a usability
standpoint, but increased access from different points in the supply chain can
also mean increased risk. If an employee or vendor becomes disgruntled,
sometimes they can utilize their access to the software system to change “soft
settings” type of preferences that may enable them to indirectly wreak havoc on
your organization. This is a risk faced by many companies that utilize these
widespread ERP systems at various points in their supply chains. It is important
to stay up to date on the type of access that each actor in the supply chain
has available to them to ensure that if they become disgruntled, they cannot
permanently impact the organization by affecting the settings of their ERP
system.
Costs
Microsoft Dynamics Nav ERP (general pricing)
Resources to find the
prices for LinkFresh is limiting; therefore, the prices given in this analysis
are general prices for the system. The price to run Microsoft
Dynamics NAV in the cloud platform is $400 to $1,200 plus $65 per user a month.
This is a combination of two identical parts: the cost of the infrastructure
(i.e. $400 to $1200 a month), and the cost of user licenses (i.e. $65 per user
a month) (Encore Business Solutions, 2017).
Overview
NetSuite is a
software product developed by Oracle. From their many different services and
products, NetSuite offers an Enterprise Resource Planning (ERP) product called
NetSuite ERP. This ERP software is currently the number one cloud based
managing suite for growing businesses and streamline mission-critical processes
(Oracle, n.d. a). It is also among the top 10 ERP manufacturing software for
the food and beverage industry based on Top 10 ERP.org (2017). IT offers
features from advanced financials to order management to supply chain
management to billing, and warehouse and fulfillment (Oracle, n.d. a).
Additionally, it can support inventory for multiple locations, assembly
management requirements, bill of materials, work order management, diverse
methods of measurement, barcoding procedures, other necessary business
processes in the manufacturing industry, and integrate shipping processes with
mainstream carriers, such as FedEx (Software Advice, n.d.). NetSuite ERP gives
companies the tools they need to accelerate growth and drive innovation
(Oracle, n.d. a).
Homepage in the system:
NetSuite provides cloud ERP solutions for every size company, across every industry:
- Small Businesses- This ERP solution is cost-effective and has the ability to scale up rapidly to evolve
with the changes needed to grow the business (Oracle, n.d. b).
- Midsize Businesses- Growing businesses have turned to NetSuite to help cut their IT costs in half,
reduce financial close times 20% to 50% and improve quote-to-cash cycle times by 50% and more
(Oracle, n.d. c).
- Enterprises- NetSuite’s agility, speed and flexibility are essential in getting operations up and running
fast following the launch of new products or services, acquiring or merging companies, entering new
markets or geographic expansion (Oracle, n.d. d).
NetSuite caters to
different types of industries; not specifically for the food industry. Since
Paragon is both a distributor and a small manufacturer/processing center,
NetSuite will be able work well with warehouse and manufacturing sectors of the
business because NetSuite provides applications in both sectors. The estimate
size for Paragon is 135 employees with a possible expansion to 175 employees.
According to NetSuite, Paragon would be considered a midsize business. Based on
NetSuite’s information, their ERP system does not have different levels like
JustFood. It is just one system that can benefit all business sizes. Therefore,
if Paragon decides to expand beyond their 175 employees to different
distribution locations, NetSuite will be able to get the system running right
away in real time and allow all users to access the business applications for
anywhere. According to their
midsize businesses, NetSuite has been able to slash their total cost of
ownership, improve their finance team’s productivity and integrate their sales
and finance processes (Oracle, n.d. c).
Value
NetSuite provides
many key values for any size business in any industry (Oracle, n.d. c):
- Efficient: Cloud delivery eliminates
on-premise IT costs.
- Integrated: ERP, CRM and ecommerce suite
cuts cycle times and errors.
- Visibility: Real-time dashboards and
analytics eliminate spreadsheets.
- Anywhere: Browser and mobile access lets
you access from anywhere.
- Global: Multi-subsidiary intelligence
scales as you grow.
- Adaptable: Customize with confidence
without risking version lock.
- Scalable: Support any size business
without having to start over with new implementation
upgrades.
- Up-to-date: Automated upgrades deliver the
latest innovations
Overall, NetSuite
will be able to provide all the aspects needed for Paragon to manage their
business. The biggest value that the software provides is the capability to
expand the business from anywhere, anytime. This may be valuable to Paragon
based on their goal of expansion. Compared to the Enterprise and cloud based
package of JustFood, NetSuite seems to be comparable in terms of functionality.
Risks
There are two
potential risks if Paragon decides to switch or use NetSuite as their main ERP
system. One, recall that NetSuite caters to different types of industries; not
just food. As a result, NetSuite may provide or make users buy their products
without the ability to pick and choose their needed application. This indicates
that Paragon may be paying more than what is needed for their company.
Additionally, NetSuite has a list of additional application that requires the
company to pay an additional price (CRM Exposed, n.d.). Paragon may need an
application in the list that requires them to pay more for it, which drives up
IT budgets and costs.
Two, the other risk is the cloud based software
system. Although NetSuite as the number one cloud based ERP system of all
system, there could be potential risks if the cloud is security measure is
compromised because there is no other way to store information or the cloud is
not working properly (i.e. the internet is connecting to the cloud) (Oracle,
n.d. a). Both risks will prevent the business from operating, which will be
detrimental for a food distributing company like Paragon (fresh food storage
can spoil if not sold). This is the most important risk because it is IT/IS
related and the risk is uncontrollable, making the risk hard to resolve
(Austin, Nolan & O’Donnell, 2016). Additionally, it is projected and
forecasted that there will be an increase in the number and impact of data
breaches in 2018 (Olavsrud, 2017b). Therefore, this is a risk Paragon needs to
consider because NetSuite does not offer any other way to store and back-up
information.
Costs
After speaking with a
sales representative in the company, NetSuite does not fully disclose their
cost and pricing information because their system structure is generally
custom-built. The following monetary values are based on old values and from a
different source (not from NetSuite) (CRM Exposed, n.d.). Therefore, these
costs may not be valid for this cost analysis. The cost of implementation
varies depending on the customization needed. The user licenses
for 135 employees is $13,365 and $17,325 for 175 employees. The total price of
the system for 135 employees is $95,744.88 a year without the customized
implementation cost and the total price for 175 employees is $123,224.88 a year
without the customized implementation cost. Compared to
JustFood this system seems to be more cost effective; however, these total
prices do not include the application prices or implementation prices because
it depends on what Paragon needs to be fully operational.
Variable and Implementation Costs when Installing NetSuite for Paragon
Fixed Costs when Installing NetSuite for Paragon
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