If it sounds like we’ve heard this story before, to a degree, we have. What we’re doing with ERP is trying to home in on those aspects that are told consistently by users and vendors. Until we use it ourselves, it’s all abstractions and it’s hard to get a sense of how it works in practice.
Hearing it from different angles, different competitors, and different users can flesh it out. Getting into it is a big decision. Ideally, we’d visit a half-dozen users and vendors until the important issues stood out clearly. Think of FAB Shop’s approach as the next best thing – a collection of virtual shop and vendor visits. Our latest is an interview with Dusty Alexander of Global Shop Solutions, an ERP company that favors “complete” solutions, which, says Alexander, is where the big time savings are.
“I have this one story that I use as an example,” says Alexander. “This customer is a die builder who designs in SolidWorks. He’d design, and then they’d calculate the materials needed. It used to take him days and days to figure out the materials purchases. Then they had to cut the purchase orders, manually, to buy the stuff after he designed it.
“We got that process down to about ten minutes. Once he designs it and it’s approved, the model goes right into Global Shop Solutions ERP. It schedules a work order now. He runs our automated purchasing and he then can say, ‘Here is exactly what I need to purchase.’”
OK, we say. That’s the core of the ERP story – days to minutes, with no mistakes. What about the implementation? What’s it like to get started? This question uncovers one of the frustrations of ERP vendors, and it defines one difference among them: Some advocate the modular approach, by which a new customer gets into ERP one bite at a time, and others go for the all-in, build-it-right-from the beginning approach. Global Shop Solutions leans toward the latter but is well aware of the need for thinking it through in palatable bites.
How to be self-defeating
It’s not uncommon for a new user to implement it tentatively, with spreadsheets orbiting around the ERP functions, slowing the operations down. “I’ve seen a lot of manufacturers still run the materials purchasing and so on, on a spreadsheet,” says Alexander. “They may have bought an ERP system, but they haven’t implemented it very well, and they’re still running a bunch of spreadsheets outside the system.”
So spreadsheets are like a security blanket or a bridging step for some new users, but they defeat the real benefits of ERP. Alexander is not alone in this assessment; we’ve heard it from other software companies.
Defeating the potential automation made possible by ERP is the central issue, with an important corollary: ERP can handle design changes and feed them all the way through the planning, scheduling, and purchasing steps of the operation. Unless you have all the pieces tied together, however, you’re stuck with making adjustments to those spreadsheets and orders every time there is a change order from the design end. Every change multiplies work. Not so, with fully implemented ERP.
Alexander describes several examples from the field, but they boil down to this: “You make a change to a design in SolidWorks. You push a button. Everything is updated downstream. Your schedule is updated, your purchasing – everything.” That’s Global Shop Solutions ERP, operating at its full potential.
All of this suggests a big hurdle in the beginning, rounding up operations and bringing them all into the ERP system. Some vendors, as we’ve described in previous issues, bypass this issue by breaking ERP down into small, modular bites that can be absorbed one at a time. The modules may be separate programs that are integrated at the user’s computers as they are brought online, or they may exist in the cloud. You essentially log into new modules as you need them.
But that means that the big benefits of fully integrated ERP don’t appear until the modules are integrated. Users may continue to have “orbiting spreadsheets” for a long time.
Global Shop Solutions is one who takes the bullet-biting approach. “We have a consulting staff of 40+ employees,” says Alexander. “We assign a project manager to each new account and we assign a manufacturing process person and a financial process person. They may go onsite, or operate remotely.”
“We go through estimating and engineering. We go through quoting, order entry. We go through purchasing, production control, inventory control, HR, quality, preventative maintenance, shipping and receiving.”
“What we want to do is have them show us how they do it today, let them add our ERP to that, and tell them how we feel that best way to run each step in the flow, and then we show them ‘here is what the ROI would be if you do it our way.’”
You noticed that there was a big leap there, between production operations on one hand and HR, shipping, finance, and so on, on the other. Those who have explored ERP recognize what it’s about, and it’s been repeated here in the reporting from several ERP companies: To implement ERP to the fullest, say the ERP vendors, your entire operation has to be rationalized so that the tools of ERP can do their job and give you the result you’re after.
How much disruption?
Like the basic incorporation of automated management of operational data itself, this looks like a giant hurdle. Somebody is going to want to change your operations. That’s disruptive, and the question arises about how much disruption you can tolerate, all at once – or even if you really want the disruption to begin with.
It’s something each shop and plant has to decide, but we will point out that we have yet to hear of a case of a manufacturer who has implemented ERP in a serious way, that doesn’t recognize the benefits. At some point, some version of it becomes a necessity for every competitive manufacturer, jobber, or any other complex operation. The evidence is just piling up too high for us to duck or dodge drawing that conclusion.
Global Shop Solutions is realistic about how this works in practice. “I think you need to break it down into manageable, smaller pieces,” says Dusty Alexander. “For the smaller manufacturers. you have to be realistic with them and break it down into 4 critical pieces: Knowing your costs, knowing your inventory, flowing your Inventory and operations data to an accurate financial statement, and getting real time labor and material data from the shop floor. All of these areas are core benefits of our ERP system.
Although their approach looks more like the “all-in” style, nearly four decades of experience has helped the company make the bites palatable. But talking with them, you know where they’re going – and they have plenty of examples to prove the benefits.
One example is more than two decades old. Global Shop Solutions has been at it for a long time:
“We had one customer,” begins Alexander, “that had a lot of red time. People were there, but they weren’t charging the customer for their time. This was in the 90s. We were able to capture how much time they spent on direct jobs versus how much time they were paid for.
“That made a really big difference. Identifying the red time changed their world. We have integrated this customer all the way down to the machine tool. I think that was my example for smaller, manageable pieces, where we started with a barcode and then a “make part” command, and wound up integrating everything. Do we go with the single barcode for one part, or “make part”? Or more? Do we go with, ‘give us a little bit more time and we could integrate with all your machines’? We have to make it clear that you break it down into smaller, manageable pieces. But the goal is complete integration.”
As comprehensive and potentially complex as it can be to really get your arms around ERP, we see themes that keep repeating themselves among various vendors and customers. They are key elements that can guide us in understanding how to implement it and what it can do for us. Those themes are:
• Modernize and streamline your operations before building an ERP system. You want ERP to automate a smoothly running operation, rather than to compensate for one with inefficiencies
• Recognize that you will have to break down the implementation into bite-size steps, but that the benefits come from extensive integration
• You’re going to be working with your vendor’s experts a lot. Choose them wisely
In future issues, we’ll hear more about implementing ERP from the user’s end of the telescope.