Cost of Inventory Management – Part 2

Mark Canes

Following on from a recent post, let’s revisit the question of how much inventory management software costs. For this purpose, we’re going to assume that you’re looking at Inventory / Accounting software – a fully integrated ERP system that includes the appropriate level of inventory management functionality for your business.

So how much should this cost? The most accurate answer is…”it depends”. Two of the chief factors influencing the cost range will be number of users, and level of functionality. For the latter, some influencers include:

  • lot tracking and expiry date needs
  • single vs. multiple warehouse
  • units of measure – single or multiple
  • complexity of pricing and discount rules
  • bar code integration
  • handhelds for picking / packing
  • level of sophistication for replenishment

Michael Burns, a respected industry consultant, suggests using an estimate of $2,000 – $3,000 per user for software license fees, and then at least the same amount again for implementation services. Using this rule of thumb, for 15 users you’d budget between $60,000 and $90,000 all in. My feeling is that, if you need all the influencers noted above, you’d likely fall pretty close the upper end of this range, whereas if you did not require most of them, the lower end of your budget range could be around $35,000.

Then, of course the advent of SaaS complicates this further. You’d use a similar approach to estimate implementation fees, b
ut then eliminate the license fees and replace them with the monthly SaaS fees - and how do you budget those? Well, in addition to the influencers discussed above, SaaS fees will also vary based on what else is included, the term for which you’re locked in, and the ability of the vendor to subsequently increase monthly fees (beware of this – some SaaS vendors lowball the monthly fee, then a year or two later escalate it by 40% or more, feeling that they have you trapped).

We’ll explore budgeting monthly costs for a SaaS environment in a future post.

ERP Pricing Guide