Increasing Efficiency with Manufacturing ERP Software

erp-manufacturing-efficiency
With consumer demand for increased production colliding with an industry-wide talent shortage, it seems the most obvious answer is to improve manufacturing efficiency.

With consumer demand for increased production colliding with an industry-wide talent shortage, it seems the most obvious answer is to improve manufacturing efficiency. You can miss out on true efficiency if you don’t have the backing of a system that knows what is going on in your business.

ERP solutions for inventory control, real time reporting, and material requirements planning can help streamline manufacturing processes and increase productivity.

Evolution from MRP to ERP

Manufacturing ERP rose to prominence in the 80s and 90s, when the focus at the time was on basic automation and transitioning from material requirements planning (MRP) to enterprise resource planning (ERP). In short, the goal was to use systems to identify different criteria to know how much product to buy and when it should be bought.

Over time, needs and expectations of manufacturing ERP software have advanced and increased. What used to be a primary focus on inventory has evolved into forecasting, reporting, and off-site reporting. Today’s goal is that an ERP system should able to automate almost all of the individual processes within the greater manufacturing lifecycle.

Three Trends in the Evolution

  • Depth of Automation — improving shop floor execution and ability to track time and materials included in a work order
  • Collaboration — bringing information across the departments to increase reporting and analytics
  • Technology Investments — willing to invest in potentially risky technology with capital

COVID and Manufacturing

Over the course of the pandemic, there has been a noticeable transition in the manufacturing world: there is a greater need for automation and artificial intelligence in the fulfillment process, with tracking from the shop floor to different work centers and shop locations.

Many manufacturers were considered essential workers throughout the pandemic, meaning their jobs were secure because there was need and demand for their output. And when shutdowns came to an end, manufacturers with capital available for investment have been choosing to take more risks than ever before by investing in new technology — including cloud ERP solutions.

The thought process behind this is that, unlike many other businesses, demand for manufactured goods is stable throughout disaster. This indicates that manufacturers must maintain efficient and effective in order to stay relevant and compete with other manufacturers.

“In the Trenches” Perspective

Despite the advanced technology available through ERP software, many manufacturers still rely on a paper trail to track the shopfloor process. When this is the case, manufacturers are unable to rapidly determine in real-time where goods are in the process, when goods will be delivered, or how long the process will take from beginning to end.

Inventory management, serialization, lock control, knowing where your bins are, where your materials are, how quickly you can get them, where they are, what was already used, what’s going on, is there a miscount — all of this is vital to having a full business. So, yes, manufacturers build things, but all the other parts of the business must be in place as well.

Crawl, Walk, Run

ERP alone does not create efficiency. It takes time and effort to make your ERP work for you.

  • Crawl: Get your item master right, get your costings right, and clean up your data.
  • Walk: Integrate with vendors and/or customers. Maybe even bring in a CPQ tool or two at this point.
  • Run: This is where you must commit to carrying out your long-term ERP goals.

Shipping

The cost of shipping can be inconsistent. Customers might see a flat rate, but businesses know that the shipping cost is variable. Sometimes manufacturers ship something out and have no idea of the cost until the moment it’s sent. Knowing the cost of shipping upfront is extremely important for many manufacturing companies.

Configure, Price, Quote (CPQ) Tools

Manufacturers utilize CPQ tools to generate accurate quotes for products. Implementing a Configure, Price, Quote solution solves problems for organizations because standardization up front helps with standardization on the back end. The simplification and clarification of offerings through CPQ tools eases processes to fulfill orders efficiently and effectively.

The Risk of CPQ

Standardization is not a simple task, and it is almost never a fast one. Discernment must be practiced in this process, as a single build can require thousands of options. Once you begin the process of implementing CPQ, it is easy to get distracted by the problems that need to be solved, because one problem exposes another. This process can truly destroy the ability of an organization to be efficient if there is not a project roadmap. Remember, technology can only help you as much as you allow it to help you.

If you’re looking at ERP for manufacturers, it’s easy to get sold on a vision. This is one of the many reasons it is important be thorough in the process. And if you think you need help increasing efficiency, that is what we are here for. We want to help you select and implement the best manufacturing ERP software for your business. Contact ERP Advisors Group today to set up a free consultation.

Get Expert Help From Our ERP Consultants

Juliette Welch: Thank you everyone for joining us for today's webinar, Increasing Efficiency for Manufacturing ERP Software.

Shawn Windle is one of our speakers for today. Shawn is the Founder and Managing Principal of ERP Advisors Group based in Denver, Colorado.

Shawn has over 20 years of experience in the enterprise software industry helping hundreds of clients across many industries with selecting and implementing a wide variety of enterprise solutions.

Quentin DeWitt is our guest today. Quentin is a Director at ERP Advisors Group and has been in the information technology business for more than 20 years and has worked with many manufacturers over his many years.

On today's call, we will examine how ERP solutions for inventory control, real time reporting, and material requirements planning can help streamline manufacturing processes and increase productivity.

Shawn, Quentin, welcome, thanks for joining me today.

Shawn Windle: You bet

Quentin DeWitt: Thank you.

Juliette: Glad to have you.

So, diving right in today, we're discussing manufacturing ERP software and focusing on aspects that will help improve efficiency for businesses.

With that, Shawn, I want to ask you, what are we seeing in the manufacturing ERP landscape in terms of the overall picture as it currently stands today. Can you start us off with that?

Shawn: Yeah, it's a great question, too, because it's changing which is good.

I think what I've seen in terms of evolution over 25 years now — we have to update my biography. I don’t know if that's good or not, actually.

It was a major focus in the 80s and the 90s on sort of basic automation, getting sort of basic information into a system and moving from really MRP, material requirements planning, into overall ERP for manufacturers, so using systems to determine how much we should buy basically and when and what we should buy, when we should buy it based off lots of different criteria.

That's sort of the basics of MRP.

But then over time these systems have evolved into really trying to automate almost all the processes within manufacturing. And not just width but depth, too. So, going very deep in terms of functionality that a manufacturer would require.

So, I think that is sort of the trend that — there's probably three of them that I would share that we're seeing as we've continued to evolve from that basic MRP to ERP and sort of next generation ERP and business transformation and all that kind of stuff.

The first thing is definitely, like I said, sort of depth of automation, like even something like shopfloor execution — being able to track time down to a work order and materials that are going into work orders and in real time, right?

It sounds pretty basic and I'm thinking with our client in Walla Walla, WA or some others that we can talk to specifically, Quentin, that you've worked on mostly — that a smaller organization is able to really get their costing down to very specific tasks that are being accomplished, which is pretty cool, because now they actually know, well, we're going to price based off of what things actually take plus markup instead of what we think they are.

So, definitely the depth of functionality manufacturing execution — shopfloor execution — is a big trend.

I think another good trend that we're seeing is this intelligent enterprise concept of how do we bring automation across all of the departments together and then bringing information in across those departments to do more analytics and reporting on.

So, sometimes I do sound like a software salesperson — I just do. And this is one where I'm going to.

That well, even if we think about Infor — we've been talking about them quite a bit this summer. They have an application called Birst. It's built right into the infrastructure of some of the CloudSuite products and I love that thing, like especially Carly loves it — from our team who's been in that seat several times.

It's great because now we have all this data about the enterprise in the ERP, but then we have the business intelligence and analytics built right into the ERP platform even as opposed to outside of it, like a power BI or tableau or whatever, right? This is right in the ERP.

And I think we're actually reporting on this in the ERP news more and more. We're seeing many more vendors are building those analytics platforms right into the transaction systems which is super cool because it's all right there and it's easy to get to and more practical. We love practical solutions for our clients.

I think the third thing that we're seeing is a very interesting trend. This is like super real time, right? That we're coming out of — well, we're COVID phase one now we're in COVID Phase Delta or whatever it is, right?

And we've all did the work from home last year. They're still sort of coming back to the office, kind of not. That's all like knowledge worker stuff, right?

But manufacturers were in their shop still, right?

Juliette: That's right.

Shawn: They were considered — what was the designation?

Juliette: Oh, it's essential.

Shawn: Essential. That's right.

So many of our manufacturers continued and we had situations or COVID outbreaks and you know people families — it's like oh my gosh like this is a big deal, right?

So, I think we all sort of got through that our manufacturing clients got through that which was kind of painful to watch that frankly — and concerning.

Like I'm thinking about even the tapes manufacturer we work with in town and just some of the things like, whoa, many of our clients went through a lot last year.

Now what we're seeing is that they do have a lot of capital available for investment — so kind of PPP loans and sort of getting out of that period and now sort of like, whoa, what do we do next?

And so, there's just a lot of technology investments that we're seeing manufacturers willing to take now that they weren't a couple years ago.

We have another client that Doug is working on our team that's actually in Denver also — it’s nice to have local clients because we can go visit them — and they've been on their legacy system for many years. Actually we have two of them that are like that in town. And they've decided that’s it, we need to get not just a cloud, right?

We talked a lot about cloud with COVID and everything, but we want to automate the business more. We want to leverage more sort of newer technologies, and we're willing to make that jump. And we know it's going to be expensive, but we're really willing to do it.

So, we're sort of seeing manufacturers coming out of the woodworks you could say — folks that would normally stay on their apps because they're good enough — not doing that. They're saying, I've got to change, I want to change, I've got the capital, I see the market opportunity. Supply chains are still tight. There's that whole thing we could talk about for a week and it's true, right?

We have a client that just went live over Labor Day and we were just talking this morning about how things were going, and they're saying their order allocations are a nightmare because they don't have enough inventory still. They're still waiting for shipments from overseas, so they're trying to figure out how to give all their customers a little bit so that they don't upset somebody and that person goes to another competitor.

So, this third item like I'm saying, is a little more macroeconomic-based, but even down to a really micro level of individual clients that we're working with — they really are seeing that software can give them more insight and more intelligence.

And I'm sure we'll talk a little bit more about like AI and manufacturing, and that will be good. But it's a really good time to be looking at manufacturing software for manufacturing companies because there's some great options and a lot of the gradient approach — we talk about this, NetSuite does a beautiful job with their sweet success model where it's sort of do the basics, remediation, then get in place optimization and then you're looking at more competitive advantage.

I don't know what their steps are, but it's that concept of gradients that we talked a lot about. And now is a great time, and we're having a lot of successes with our customers on getting in that sort of like whoa, we got to remediate. We got to get one item master that really matters. We got to get our manufacturing part numbers right. We've got to go in and understand our costs.

Systems are ready for that, there's tons of implementation partners that can help with that, so that's super exciting.

That's probably the biggest trend.

Juliette: Well, it sounds like from what just used to be inventory has evolved to so much more like forecasting and reporting and just being able to maybe pull your reports from afar rather than having to be onsite, right?

Yeah, that's been a huge difference.

Just to mention that one thing and then layer on top of that — because we had drop ship and we had other business models, maybe vendors — we would own the inventory but would go to a vendor to do some finished product and then they would send it to our customer or they would send it to our distribution centers or whatever kinds of crazy things.

We have one company we're talking to right now that basically takes the order and then everything goes to a vendor and it's their inventory. And then they complete it and then it goes to the customer.

There's all kinds of crazy scenarios going on, so having a system that tracks that is super vital.

Juliette: Because once it's out of your hands, do you really know where it is and did the other person actually receive it on their end?

Shawn: That’s right.

Juliette: So, Quentin, as we have discussed in many of these calls and webinars, you've been working with different manufacturing clients recently — what are you seeing and can you talk to us about the experience from working down in the trenches so to speak?

Quentin: Absolutely yeah.

I mean you have all sorts of manufacturers and there's everything from light, very simple manufacturing all the way to very complex, multiple levels of the bill of materials that go into different work centers across multiple locations even sometimes — it’ll be one component built in one place and it goes up from there.

So, there's a lot that can be gained from ERP in these situations.And what I've seen from down in the trenches is even though these manufacturing organizations have an ERP platform, many of them are still using paper to track that shopfloor process.

And they do it — they track it on paper. It goes from one work center to the next. They build out a component, but they're not really relieving inventory in the system. They're not really seeing where that moved through their transactional, so they can't update the visibility. They can't tell from their available-to-promise reports where something is really at or when they're going to be able to deliver it.

They can't necessarily even see if it's a long manufacturing process when they're going to need a certain component unless they're entering that and seeing it in real time.

So, I've seen a transition, especially over the pandemic, of needing more automation and more artificial intelligence in the whole process so that you have tracking on the shop floor, you can convert that paper process to an automated electronic process and move it through each of those work centers or phases or even locations, see what inventory got consumed, what — maybe serial numbers went into that because that may be a compliance or regulatory factor lock contract tracking or control can be involved.

So, there's so much that has been done on paper, even when ERP has been there that now we really have to get that edge in manufacturing because of supply chain issues and because of other things, they're moving away from that and really needing to take advantage of the automation and intelligence built into these platforms.

So, that's a little bit. I can go much deeper.

Juliette: That is a lot. That's for sure, you could break down each one of those and talk about it for the whole time.

Quentin: Absolutely. I mean there's plenty that can be said, some from the supply chain side and getting inventory in and when it's going to arrive and what work center it needs to be given to and if you have to issue it or if you consume it after the fact. There's all sorts of factors in that.

So, there's just a lot of shop floors are not been set up yet to be electronic so they don't really have dashboards or screens that can show where something is in a build process or if a work order is complete or what you have in your queue to do next, and you just get it when it shows up and it has a stack of paperwork with it — what do I do with this? Oh, okay. I'm going to deal with this.

You can miss out on a lot of efficiency if you don't have that electronic backing of a system that knows what's going on.

Juliette: Well, is the paperwork — does it go from person to person or does it go with item to item?

Shawn: Item to item or it's usually called like a traveler — literally where there's a whole stack of paper.

We have one client that requires regulatory documents that go with parts that different work centers will put on different parts. So, there's a piece of paper that maybe goes with that part. It goes with the traveler, right?

And then that like — you can almost think of it like a plastic envelope, because that's usually what they are and maybe it's attached to the item — like this particular client I'm thinking of makes these things called packages, which is sort of like an electrical unit that goes out in the field, and these are almost like little — they're little sheds really. And there's tons and tons of work that goes into them and different materials.

So, to track the actual materials that went in, like I said, the vendor has a piece of paper that goes with that serialized item. That piece of paper goes with that package as it's being built and moved on physically.

Juliette: And so, if it's a package, are there multiple pieces of paper that go with it?

Shawn: Yes.

Juliette: And so, the error that can go along with that, right?

Shawn: Right, that's right.

Juliette: So, Shawn, addressing some specific considerations for manufacturers as it pertains to their ERP software, can you talk to us about CPQ or configure price quote solutions?

Shawn: Yeah, I think the first time I ran into CPQ was with Aptis.

So, Aptis is a platform — gosh, you know, I can't remember, I think it's an independent company still — I'm surprised about that.

But anyway, this sort of an organization came on the scene based on Salesforce impending its strong hammer down on CRM, because there was Siebel and other products before that but Salesforce took over the market.

And so, what Aptis was able to do was to build software that sits on top of Salesforce and even independently now where a salesperson could be talking to a customer and say, okay, do you want option A or B?

Oh, I want option B. Great, what should be has these options to it? C, D, or E? Which ones do you want? I want D, N, E, O. Well, D adds these options to it you one, two, or three. I want three. Great, so that's the configure part of it. Well, I'll get to that in a moment. That's configure.

But pricing is based on all those options that you select drives the price.

And then the quote is okay, that's what you want — bing — push the button to create quote and voila, there's the quote and it gets sent over the customer. They review it all electronically. They agree to it. They electronically sign, click save, maybe submit. Oh, and voila, the deal is done and the salesperson is cheered on by all the people around.

That's the vision and that is what CPQ is for some organizations, but the reality is the configuration can be a nightmare, right?

It can be so hard to say, here's our options: A, B, and C. And B has da da da and D has da da da, right? That takes a lot of work to standardize the product.

So, that's the first issue that you run into. The second issue is on pricing. The other thing that these CPQs do is if the margin is below a certain amount, then kick the quote over to a director to review and confirm it, which is kind of nice because then the workflow is built into the app.

Like why are you giving them a 75% discount, right? Like, what are you doing? Like, at least we can control that now. Before salespeople would go out and do it and then we find out later.

Juliette: Right. Once the order has been placed and then it's too late.

Shawn: Yeah, like, that's way too late, right?

And then even in the quote, depending again on those attributes the system can say, oh well, here's the terms and conditions then that need to go in the quote, and magically they just pop right in. But those do change often as there's negotiations with customers.

So, it's sort of — so much of software — and life really — is this 80/20 analysis rule, right? 80% of what we do is very standard. 20% is just a nightmare, so let's try to automate the 80% — that's what CPQ is.

And — but then you know, working with organizations, again, we've had probably three or four CPQ projects I can think of with software companies specifically where trying to get them to standardize on what their features and functions and options and — what is it options and attributes there's a phrase. It's hard, it's very hard. That's the first challenge, like I said.

The second one again is to define the pricing rules and at what point do people need approvals and what are the prices for all these different components and all that.

But let's say you work all that out.

There you go, so you can tell I'm not the CPQ salesperson, right? Because it's hard — it's hard on the client side.

The software is like pretty easy to set up and there's other — many other CPQ solutions out there.

There's some specific for NetSuite. I think Verenia is the one that we've run across the most — I might not be getting that name right. But then there's other CPQs — Infor has a CPQ solution specifically for the Infor tool. So, there's good solutions out there for sure.

But a manufacturer, by going through all of those steps, they're really solving a lot of problems for the organization because the standardization up front helps with the standardization on the back end, right? Like we only build certain things.

I haven't actually talked about one of my most favorite companies ever on these calls, but I am about to because they just opened one like four miles from us, which is crazy and that is In N Out Burger. I love In N Out parking lot of I had a triple animal style the other night. I hadn't had a lot of food that day and it was amazing.

Anyway, but their menu’s very simple, which makes it easier on the back end then to actually fulfill an order quickly and with a lot of quality.

That's the vision that the manufacturers have with CPQ, which I love that vision. I think it's very valid.

But again, our clients, the folks that we work with, they understand, whoa, we got a lot of work of standardization to do up front. Building it into the app is the easy part, but it forces that standardization which all of enterprise systems, especially for manufacturers — maybe Quentin you could even talk to one of the customers we worked with recently that had to standardize their item master — like it's hard to standardize.

Quentin: Oh, extremely hard.

Shawn: Yeah, so, like even that standardization —

Quentin: Sometimes you're dealing with every branch. If you have multiple branches, have a different version of the exact same item with different attributes, different special locations — which ones do you standard on, which one’s the correct, do we do it different if it's coming from a different location?

Understanding your item master and then when it builds out into multiple levels and tiers and sort of a matrix structure with so many variables, you can get into literally thousands of options for a single build.

And it can just destroy an organization's ability to be efficient without having certainty of what that item master should look like, and then standardizing it and going, okay, we're not going to build 75 variants of this item; we're going to build this item in these three variants. But that first step is understanding your item master.

Shawn: And you can see how that ties into CPQ, where the variance or the bill of materials or bill of operations — whatever — are driven by the configuration the salesperson chooses up front. So, there's just a lot of like — it's like it's like, I think we were doing a house project or something, and it’s like, oh, hey, we're going to we're going to fix the — we're going to do a little bit of paint touch up.

And it’s like fine, I’ll get the paint.

Juliette: And then you look at the wall and see all the spots.

Shawn: Oh my God, we have to paint the whole thing and so then you paint the whole wall and you're like, there's a wall next to it, right?

It's sort of like that, it's easy — the steps to get there are straightforward, like it's easy to cover them, but it's like give a moose a muffin. Remember those books?

Juliette: Right, like, where do you start, where do you stop?

Shawn: That's it, that's right. Yeah, it starts small and then it just gets bigger. That's the risk of CPQ.

But like you said, when an organization goes through that effort, man that really pays off.

Quentin: Absolutely, yeah.

Juliette: Well, it's like hard work — that saying hard work now or hard work later. You have to do the work either on the front end or the back end. And it has to be done, right?

Shawn: That's right.

Juliette: So, Quentin, you mentioned earlier about real time reporting. Can you talk to us about the importance of being able to track in real time as a production order goes through each phase of this process? Can you share with us a little bit about that?

Quentin: Absolutely. Well, as most people know, today is kind of an instant gratification type day — you order something you expect it tomorrow.

Well, how can you even tell if you don't have that real time — from a manufacturing perspective — of what's going on in the shop floor, that CPQ process goes through wow, we've got a sale. We've got all the specifications of what we're going to build. Great, now that has to get onto the shop floor.

You have to have all the inventory. Is all the inventory at that location? Can it be used? Is it already dedicated to another order?

So that real time visibility of the order as it goes step-by-step through the different work centers or phases of the work order or production order is vital to an organization knowing when they can get it to the customer.

So, if you can track it and know all the parts are there, if it got completed, how long it took, not only do you have the real cost involved with it — all the items and all the labor that went into it and where it is in the phase — you can then tell your customer based on past experience, this should arrive at this time.

Got everything lined up. We can see where it is in the process. It will be finished at the end of the day. It'll get on the last truck, it'll arrive tomorrow and for manufacturers, especially for those very fast manufacturers who have short build times this can be absolutely vital for them to be able to get their orders out that day and keep their promises.

Sometimes the salespeople are saying you'll have this for sure tomorrow. Or maybe in three days, whatever it is for that particular manufacturer. And this kind of gets into wholesale distribution as well. Distribution centers often deal with this as well.

But having that shopfloor visibility can make or break that available-to-promise setup and really make sure that the business can keep its promises, sell its products, and be the front runner in that particular vertical or business, because if they fall behind, if they don't have that visibility, if they're not technologically advanced enough, they're going to fall behind their competitors, and they're not going to be able to keep up and within the market as it is today, with COVID and the pandemic — that can break a business.

Juliette: They'll move on to the next person that might have it, right?

Quentin: Yeah, absolutely.

Juliette: Yeah, so Shawn, what do you feel are some factors that can be overlooked when manufacturers are looking at increasing their efficiency with ERP software?

Shawn: I think we're — I like this call; this a good call. This is very practical. We like to keep it practical and I think it's as usual, right? With all of our all of our marketing and everything that Shawn and Ashley are doing, even from our ERP news and everything, we're trying to make it very consumable and bite-size for real people, right?

You have wonderful management teams and all they're doing is focusing on efficiencies and everything. That's phenomenal, right?

But a lot of our clients don't have that. They're trying to improve their situations. And while they're working in the business and on the business and so on and so forth, so ERP alone does not create efficiency.

And you know, that's like — I'll do three strikes. That's the first strike about ERP. It doesn’t.

And I'm thinking from a very make-to-order environment that, again, we worked on together. They make art literally like one off pieces of art for the world’s most known modern artists all the way through to organizations that make shrimp. They don't make the shrimp, but they take the shrimp and add a couple things to it and then put it in packages and hundreds of millions of dollars of shrimp — billions really over time.

And if you look at the benefit of ERP, again, the most important thing is that gradient, that crawl-walk-run.

So, the crawl really is a fancy way, even though that's not a very fancy way of saying clean your stuff up — I'll watch my language — you have to clean up your stuff. Get your get your item master right, get your costings right, get everything else — your customer lists, your vendor list — I'm talking like all the least sexy things you can think of with ERP.

That's really what the focus of the phase one is — the crawl phase — because we're also putting in systems, though that are usually cloud-based — not always.

Some of our manufacturers don't do it like where we have a big distributor that's almost a billion dollars and they want it on prem — so they wanted their systems and they have them.

But same thing even for them, like get the inventory right, get everything about your items and what you do correct in the system. And then maybe even on the sales order side, get that sort of sales process really cleaned up.

So, all boring, non-sexy stuff.

Juliette: Well, like our data migration team would tell you to have your data clean. We hear that constantly.

Shawn: That's right, that's right.

Yeah, we sort of went through a go-live over Labor Day and yeah, like wow we're trying to move over this information and the customer list isn't correct.

Your customer list isn’t correct? How could that be? Oh, the older customer or whatever. It's like, okay, fine.

So, that's the first step, it's like you're basically going to do what you do today, just a lot more efficient in the system because we actually cleaned up our stuff that's been a little messy for the last ten to 20 years.

Then, once that platform is in place, we can sort of walk where, oh well, maybe we can do some more integration with vendors or customers. Maybe we can bring in a CPQ tool at that point. Or maybe we can do online ordering that we didn't do before, right?

Quentin is working on that with a client of trying to get a portal in place and that's hard because of the standardization of items and vector and stuff — a lot of decisions around that to get it right.

So, that's sort of that that walk phase. Now run is where it gets really interesting. You get all that kind of base in place. Then you get sort of — your core differentiation to the middle. Now what's the innovation like? What are the things that enable us to maybe bring in adjacent products to our existing product portfolio or even services?

We're talking to a company right now that manufactures a specific item and they're going into the market and buying these service firms that go out and service their products because it's more recurring revenue. So, now their platform needs to be set up to support a whole different line of business and be able to report on profitability.

And even sort of take a client that bought our product and now we're going to offer him services and we need to report across that. So, that innovation levels where it's super cool, right?

And that's where you got to be careful if you're looking at ERP for manufacturers, it's very easy to get sold on a vision because it's true and you may even have competitors already there. I mean, they've been working for years on this other kind of stuff, right?

And then they're like, oh hey, now we can blow out our Amazon business because we can take better advantage of integrations that we didn't have with our old legacy systems or whatever it is. Then they can do these really innovative things, which I think there's so much capital and so much opportunity still and like Q said that the customer demands are just going through the roof so the innovators are the ones that are going to win.

But the real innovators that we see in the market and the companies we love working with are the ones that are willing to take that approach because we want long term success with our clients. And if they just want sort of a — we want to be efficient tomorrow. It's like, okay, we're probably not the right client to help you. We can't do that. But we can help you get this in place.

We're like the old people I guess, but it's kind of true that we've been through so many of these situations that the fly by night sort of let's go get an ERP and everything’s wonderful just doesn't work in the long term.

But I will say one thing before we pass over Q. There are instances where an organization is growing so fast and they just need to get something in place which is better than nothing — makes total sense. ERP can totally help with that too.

So, you sort of have to like, just as always, right? I can hear you saying this to me and all these calls we've done, well, you know we do got to do our homework and we have to really understand our needs.

That's what we're talking about but in this area, for manufacturers, there's so much flash that it's so easy to get sold on all the big promises, right? All the promises and the apps that are out there, the functionality I wanted, you know ATP, available-to-promise, and okay, buy my app.

No, because we still have to figure out where your inventory is and what are your lead times. And now with COVID lead times are out the door, they're like 3X and all that kind of stuff, right?

Juliette: Yeah, well Quentin, let me ask you this, again, back in the trenches working with your clients, in your experience, what details can you speak to us about inventory, lot control, freight and shipping, and et cetera that people should consider?

Quentin: Well, manufacturing starts with inventory and ends with shipping. You have that manufacturing in the middle but without the inventory, serialization, lock control, knowing where your bins are, where your materials are, how quickly you can get them, and where they are, and what's really there versus what was already used, or what's going on if we have a miscount — all of that is vital to having a full business, so manufacturer, yes they build things, but there's all the other parts of the business that have to be in place as well.

And inventory for a manufacturer is absolutely vital. Knowing exactly where that is, what the cost of it was, do we use this one first or that one first? Is this the right serial number? Did it go into the right build? All of that is extremely important to being able to successfully run a manufacturing business — for certain ones.

Shawn talked a little bit about the different layers there, and for some they need that solid foundation, and that's where they're at. Others — they're really ready for that innovation. And when you're talking inventory, you can put in all sorts of automations. But is it right for you? Do you have that foundation in place?

So, that's the inventory front end conversation, and for different organizations, maybe a lot control doesn't matter, maybe serialization isn't a part of their business. They make one thing and they make it well and they make it fast. And so, inventory is just how much, how quickly, and can we move it?

So, then the other side, shipping and freight can't be underestimated. In today's world you can make all the product you want, but if you can't get it to your customers, again, you're shot. You're not going to be able to do it.

So, having great vendor relationships, having integration with your shipping providers, having the right freight providers that can do it, having a contracts and agreements that get you the right price to get it there. As well as the visibility in the tracking of those freight and shipping orders that you're putting out there.

So, that is very vital for manufacturers as well. Sometimes they're manufacturing and distributing to other businesses, so they'll have regular freight shipments, and they can do a pallet, or they can do a container load. And what's actually on that container? What's actually arriving? Did it arrive okay? Was it damaged? What's going to come back?

All of that is very vital to manufacturers and is often missed when they're looking at the flashy ERP that goes, oh, you're going to automate our shop floor. Well, if you can't get it there, it doesn't matter if you don't have the parts to make it, it doesn't matter.

So, all of it's very vital to making sure that your manufacturing organization can get from start to finish, order-to-cash and delivery in all of that. So, I think that's very important and often gets missed when you're looking at ERP because you're just focusing on the thing that you do — build things. So, that’s a little bit about it, and I definitely talk more about it.

Shawn: Yeah, usually the accountants say, okay, how do you calculate landed cost? Because that’s a big deal, because you get the item and you have your labor that goes into it and that’s it’s cost, right? No, no, no. There's shipping — tons of shipping. The shipping cost is crazy, right?

So yeah, I think you're right, Q, that those are some key things to focus on with ERP — the shipping side.

Quentin: One more thing about shipping: knowing the cost upfront is extremely important for a lot of manufacturing organizations, and they don't know. They oftentimes will be shipping something out the door and have no idea what the freight cost is going to be until that moment.

So they — the sales rep — maybe promised free freight, but it's costing them almost their entire margin to get it there. So, having good visibility and knowing upfront what your shipping and freight costs are is extremely important.

Juliette: Now, is that just like from learned experience that they're calculating their shipping and their freight or is it just like something that was overlooked by someone or?

Shawn: I could think of a client that basically says, our products are of a certain size, certain weight, and there's a — if you think about most e-commerce companies, there's like a fixed cost for shipping.

Juliette: Like a flat rate?

Shawn: Well, it's flat to you as a consumer, but to them it’s variable based on what it actually is.

So, if those costs, like Quentin’s saying, start to escalate beyond what we say the flat rate is on the website, then you're eating margin — like literally, you're not — you're taking money out of the business to go give it to the shipper. So, you have to be very careful about these things.

Quentin: And again, if you don't have good inventory and understanding of the size, shape, weight of your items when they're going to complete, you can't estimate your shipping properly, so that also feeds into it.

And if you don't have that foundation from your item master with all those attributes, you can't calculate it ahead of time except on an estimate or guesstimate basis.

Shawn: Dimensions and weight — that's fun. Fun data migration right there.

Quentin: Dimensions and weight and what can work with other items that may be shipped on the same shipment.

Juliette: All right, well, I think wrapping up our time today. Is there any other advice you can share with our viewers and listeners about increasing efficiency with manufacturing ERP software?

Shawn: The last thing I would say is — I do sound like I'm an old guy whose been around forever and all the wisdom and everything — but it really is true in this space that just know what you're getting. Like you really need to know what you're getting.

This is one area where it's a lot of sort of flash in the pan stuff.

Don't go for it — like start with the basics, guys.

I think we say this every call, but especially in this area, we have just experienced nightmare implementations or projects where they go way over budget because they're sold on a vision and then we go in there like, okay, we have to get your dimensions, where are they? Oh, we don't have them. Okay, but you have ten thousand items. I guess we have to get it.

So, just be aware, be realistic — that's the key thing.

Quentin: The only thing I would add to that is that when you're looking at any change in an organization, really look across the entire organization, because technology can only help you as much as you can allow it to help you.

It's not like you buy the ERP, and great, it can do all of these things. But can you really use it for that?

So, understanding your own organization and where putting technology in place will actually help you. Take a step back, look at where you're inefficient, look at how you could become efficient with changes, automation, etc, and then focus on that area.

Oftentimes, as you said, and you focus on the shiny thing, but really just take that step back and as we usually say, do an analysis, understand your needs, and then focus your technology changes in that place.

Juliette: So, as with all of our calls, we could continue this forever and maybe we'll continue it on another webinar.

So, Quentin, Shawn, thank you for joining me today and as always, sharing great information with us.

Quentin: You're welcome.

Juliette: Thank you everyone for joining us for today's webinar. Please let us know if you have any questions. We're happy to help in any way we can.

Our next call is scheduled for Thursday, September 30th — a free CPE event where we will be discussing what to do when you outgrow your accounting software.

Please go to our website erpadvisorsgroup.com for more details and to register.

ERP Advisors group is one of the country's top independent enterprise software advisory firms. ERP Advisors Group advises mid to large sized businesses on selecting and implementing business applications from enterprise resource planning, customer relationship management, human Capital Management, business intelligence and other enterprise applications, which equates to millions of dollars in software deals each year across many industries.

This has been The ERP Advisor. Thank you again for joining us.

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