E28c ERPodcast – Certainty in an Uncertain World
MFX up and under (but louder than last time)
It’s the ERPodcast Episode 28 – The official podcast of ProfitFromERP.com and I’m the Director, Gene Hammons, Over the past 18 months, we’ve helped about a dozen companies get through challenges we never thought any of us would face.
If you’ve listened to earlier ERPodcast Episodes, you know what a huge advantage digital companies had dealing with a world gone virtual.
The #1 Issue? Uncertainty. The country, the workforce, supply chains, inflation, is covid up or down? Opening up or locking down?
– – There’s a world of uncertainty out there – – – if we’re going to maintain the right business equilibrium we need to create more certainty within the four walls of our businesses. We can’t control outside uncertainties but we can surely affect the internal workings That’s Our ability to respond. That’s response – ability – and here’s how some of our clients define business responsibility today.
One big uncertainty is in today’s workforce. How do we deal with the changes, what are the technology issues that can even stop top talent from joining your firm? So let’s talk about how can technology help us get more done with the fewer people we actually do have on staff
We’ll examine that.
Supply Chain issues? Overseas shipments are bringing back the old phrase Slow Boat from China – which many of you didn’t even know was a phrase – tech can’t help get your boat unloaded. But we can use demand planning to anticipate shortages long before your ship is just offshore with the parts, raw materials and goods your customers are already waiting for – never mind the trucking
Creating certainty in an uncertain world comes down to the Information in Information Technology – just in case you forgot what IT stood for. Is your information good enough, timely enough, informative enough? You may be running a traditional ERP system that wasn’t ever giving you the reports you need. Or you may have a great baseline ERP but operationally, there’s no accurate way to gather data. Or FP&A modeling – can you project your profit margins when gas goes to $5 a gallon? Sometimes it’s modular additions to your technology stack – Sometimes it’s a complete Digital Transformation – a total software overhaul of your company.
Here’s what real world ProfitFromERP clients are doing to create certainty for savvy CFO’s and operational teams.
Item One – having a hard time finding enough people? Maybe your old technology is keeping today’s workforce away – – Item Two It’s the end of JIT, as Supply Chain complexity looms – manufacturers react, and Item Three using ERP to add Certainty to an Uncertain world. Any one of those topics can torpedo your business – let’s find out who’s doing what and how you can make the smart decisions going forward.
And that’s what we’re talking about today – on Episode 28 of the ERPodcast. Right back after this:
Endorsement – Feedspot
So there’s this website called Feedspot, it’s an aggregator of sorts, actually a super-aggregator that becomes a custom Content Reader. You click on Feedspot and select all of your favorite websites, podcasts, news feeds, RSS subscriptions – imagine all the websites you check out on a regular basis, now imagine them combined and presented from a single platform – it’s a cool concept and they offer a lot more, like companies can keep tabs on what millions of websites are saying about their brand, tracking bloggers and influencers. Nice concept that Feedspot.
But in their aggregation of content – they group certain similar topics together – and give you a choice of following say, the Top 15 ERP related Podcasts – which they recently released a new Top 15 for ERP related Podcasts lists – and the one you’re listening to, the ERPodcast was rated #3. Which was very nice of them to do. There were some big names on that top 15 list, like Podcasts from Microsoft, SAP – even one of the largest software selection services, Panorama Consulting Group – ranked #8, #9, #13. Now of course if they were ranking us by revenue, well, ProfitFromERP isn’t exactly Microsoft…but we have a higher rated podcast – We’re #3! In the country – heck in the world – probably the universe, but even Google can’t search Mars – yet – never mind the outer galaxies – but we’re #3 and on our way to #1 – so you’re in good company subscribing to the ERPodcast at Apple Podcasts, Google Podcasts or wherever you get your podcasts – and you’re always welcome to peruse the ProfitFromERP website where the latest episodes are posted first. The ERPodcast – ranked #3 ERP Related Podcast by Feedspot – so after today’s show, go check out Feedspot.com. They have particularly good taste in ERP related Podcasts – it’s a great start. #3.
So back to today’s Episode of the ERPodcast
Couple of things about our consultancy, ProfitFromERP. Some critics of the ERPodcast have spouted off about how all the business cases we present end up recommending companies implement new ERP software -which they then label as ‘self serving’. OK, a fair, if completely backwards assessment. Here’s the deal, our clients, the people we work with and work for are in the process or have recently finished implementing ERP to solve real business issues – that’s why they came to ProfitFromERP in the first place – and all these solved business issues, they’re driven by the same market you’re currently in, so you may face the same or a similar problem. Now you may well have an ERP system, it could be a wonderful system but perhaps it was implemented a few years back, so you’re not set up to address todays issues – great – get some consultants in and tweak whatever it is you need to deal with the issues others are tackling today. The point of the ERPodcast is not what ERP you use or whether you change your ERP – it’s pushing forward the ERP knowledge base. Now, when you do get ready to replace your 1980’s spaghetti code client server ERP package, we’re hoping you’ll be convinced that turning a ProfitFromERP is a good idea and perhaps you’ll remember our website www.ProfitFromERP.com and you’ll bring us in to save yourself serious dollars, increase efficiencies, drive productivities and all around ProfitFromERP instead of our competitiors website www.SpendBigOnERP.com , we’re hoping that happens.
But here’s the thing. Change is constant. The reasons companies devote capital expenditures and company effort on ERP change. Today it’s Finance teams needing better FP&A to better plan how to move into new markets and react to changing customer habits. It’s Manufacturers looking for redundant vendor sources and increasing raw materials on hand to escape supply chain constraints.
Anyway – when more than one client starts driving projects in the same direction, it’s time for us to take notice, to figure out why they’re going this direction and if this direction is a fad, a trend or something we need to focus on for all future clients.
And we’ll tackle three of those trends today.
Number One – JIT Just In Time inventory is Dead. Is it really? Of course JIT – means your vendors deliver raw materials for manufacture just as they’re being needed on the manufacturing production line. We even have an earlier podcast of how Dell Computers in the late 90’s revolutionized computer manufacturing by taking the very first online orders where customers selected how much memory, drive space, RAM – and then ordered the chips and drives from suppliers to build the next day’s orders – and Austin, home of Dell soon had factories building up all over Central Texas, AMD, Intel, IBM and dozens of others so they could deliver tomorrow’s production sub assymblies today. JIT cut inventory carrying costs for manufacturers – of course not all manufacturers are Dell and not all suppliers are queueing up to build a plant next to your manufacturing operation. In fact, sub assemblies are just as likely to be made in China. We had initial shutdowns during Covid-stop the surge phase. Followed by drastic changes in market demand – for example, the Ping wedges I recently ordered from Karsten Golf, local here to the Phoenix market – were having to promise a 6 week delivery –Ping’s traditional business model was to deliver custom fit clubs within a week after a custom fitting. While Ping’s main facility is in Arizona, where the customizations and assemblies take place, many of the heads, shafts and grips come from China.
Now during the covid shutdown – one of the few things you could do was to play golf. It’s outside. Most golfers can’t land a ball on a 50 yard wide fairway, so social distancing isn’t much of an issue. Anyway – golf, as a sport has taken off. There’s a link on the website from Golf Digest about golf’s recent boom https://www.golfdigest.com/story/golf-boom-equipment-delays and the resulting equipment delays for all golf manufactures. So now, in nearly October, the Ping clubs I ordered in July – we don’t even know when they’ll be delivered. Meanwhile, my approach shots are flying all over the place – my golf game is toast.
But Think about this – – if today, instead of Just In Time delivery, if we controlled the entire manufacturing supply chain, well, factories in China do, and now here comes a story of 10,000 counterfit clubs seized in a recent operation by a https://www.msn.com/en-us/sports/golf/busted-nearly-10000-counterfeit-golf-clubs-seized-in-china/ar-AANo5L0Manufacturers anti-counterfeiting group. And that wasn’t just Ping, but Titlist, PXG, Callaway, Taylormade – Conclusion: While JIT was our globalization answer for past manufacturing, supply chain control is starting to look better and better.
And we haven’t even talked about chips. We now have what’s called the IOT or internet of things, which means computer chips in everything. New pool motor for the backyard pool came in a couple of months ago – I now control it with my iPhone and an App. Thermostats designed for supercooling in the Arizona summers ice my house down during non-peak times and turn off during peak grid demand time. I control that with my iPhone but the power company can also do a limited cutback during peak periods to prevent brownouts. All of these things have chips. Phones, pool motors, thermostats, washing machines, refirdgerators – the list goes on and on. But as you may have heard there’s a chip shortage. Again, everyone shut down for Covid phase one – auto manufacturers wondered if they’d ever sell cars again so chip orders dropped to zero. But then demand came back. And now there’s no chips – we link a Wall Street Journal article on the website detailing a $213B in lost auto sales this year because there’s no computer chips. There’s also an article about Ford starting to build their own chip fabrication plants. Ford is also moving into electrics – and instead of the JIT concept of buying engines from sub suppliers, Ford is now getting into battery manufacturing.
Now not every small manufacturer is Ford, and starting a semi-conductor factory is a bit of a lift for any manufacturer – – – but let’s drop down for a second and go back to our Ping example. Say Ping wanted to start manufacturing their own club heads or spin up a rubberized line to make their own grips.
What would the costs be, the revenues, what we use for that is FP&A software Financial Planning and Analysis – it used to be called Advanced Financials as a module for ERP, but with new players in the market we can create spreadsheet like business models that allow us to vary the market assumptions, how many clubs could we sell if we had inventory while Taylormade was out of stock? What if the grips cost an extra 20c each to make? What if we sold grips to Taylormade? How would a eCommerce strategy change things? What if we start sourcing Golf Grips from that hirachi sandals company in Mexico?
Yes, you could do this yourselves on spreadsheets and business plans but by the time you finish writing the model, the world has changed – so we use these advanced software tools to project our market shifts and then we can make solid assumptions on which to base major decisions.
And JIT inventory? What do our profit margins look like if we start stocking two months worth of raw materials instead of JIT? And how does this all change if Bubba Watson wins another Masters or what happens if he wins a minor tournament using Ping clubs?
You can make these decisions – but you need good numbers and today’s finance groups are understanding that. It’s easy to see JIT inventory cost everyone a lot this year. And as crazy as the world looks right now, it’s hard to imagine this is the last global supply chain issue we’ll face.
But that’s why we’re seeing companies invest in their analytics. Moving to cloud based software and systems to track down to the penny exactly what the cost profile looks like. It’s converting that business office from a data entry team to an automated system to streamline data flow, which gives them time to become a data analysis team instead of expensive manual labor. Turning our business office from a cost center to a profit center? You tell me. In any case, that’s driving our manufacturer clients right now. The ones who look for ProfitFromERP.
Item Two – Hiring – getting good people – keeping people – who’s coming back to the office – who’s looking to change jobs instead of going back to the office – and where does technology come into play here?
When the covid shutdown hit and people began working from home, there were some surprising results. Several surveys showed an uptick in productivity as much as 31% as workers converted commuting time to actual working time. The business day – at least among ProfitFromERP client companies became 7a-7p – that is, if you sent an email at 6:45 in the evening, there was a better than average chance you’d have an instant response. 7am Zoom invitations were the easiest timeslot to clear when you had a large attendee list.
And coming back to work has not set well with the workforce. Prior to covid, losing a job seemed like a world ending event in most worker’s minds. After a year outside the office, with numerous job offers in the email box for virtual positions – returning to the grind has not been a popular idea.
The biggest issue is how middle management reacts. Managers who trust and value employees have little to no issues with remote workforces. Those guys who manage by walking around are kind of floundering these days if they can’t see their direct reports.
And then there’s technology.
Two prospective clients come to mind. One in home goods – a booming group with international connections and super rapid growth. Another was in mechanical parts for refrigeration. National company. Great management.
Both of these guys had openings – we referred several candidates, a 30-something young woman on a management track, a recent honors college graduate just getting started and a couple of other contacts we know – all turned the job down.
Of course our contacts being in the ERP industry were IT oriented workers, well versed in cloud technology and so on. But when they saw the systems these companies were running – it looked to them like old-school, ancient technology and they interpreted the companies themselves as a dead end, career snuffing and ancient has beens.
So here’s the thing.
For 20-somethings, they were about 2 years old when the internet started – it’s all they’ve ever known. For 30 somethings, their entire teen years, college and a decade of work has been internet based. They grew up on the internet.
If you’re a major director of a company – who worked with the first DOS based computers, you may well think that new business system you put in 7 or 8 years ago – well if you picked one of the leading software systems at the time, those were systems that had been around for nearly 20 years at that point.
To today’s younger workforce, that looks like something so old they’ve never even seen anything like it. I’m sure it does an adequate job, but here’s what we see when our clients replace systems like that.
Job lock – you have a workload issue in the business office. You hire an accounting staffer. Their job is the Weekly Roundup Report. Only the old system wasn’t set up for the Weekly Roundup Report. The data comes from several places. Then the business grows, more data is added – and now the accounting professional you hired to do the Weekly Roundup Report is doing data entry all day long all week long to get that report to turn out right.
Had you designed it this way, said, hey, lets hire someone in accounting to enter data for the Weekly Roundup Report – that would make no sense. But incrementally, it started out as an easy report to distribute – and today it’s an expensive, labor intensive kludgefest.
Had you offered that job to someone, hey, want to punch a keyboard for 50 hours a week forever, entering data over and over again every week? They’d have said ‘no way’.
And right now – as we’re reopening the office? Asking people to come back into work?
A lot of those data entry job locked workers aren’t so locked into coming back.
Today, we looked at this – a Brainyard survey of 500 respondents. Finance Leaders – Employee Turnover, 55% of the respondents said it was a top five of their Major Concerns. 56% said difficulty staffing skilled workers, and 56% were concerned that they had insufficient digital technology – the technology that eliminates those manual data entry snafu’s.
Do you see where these trends are intersecting?
The President of that home goods company – he was saying ‘all these kids want to go work for a startup or something, they don’t realize these are great jobs and they can make a lot of money’. Like me, anyone under 40 we refer to as ‘kids’ when they’re out of earshot. But that’s the situation – your technology can make it seem like you’re old school, even if it’s only 6 or 7 years old to you.
And we’ve talked about how cloud – and we need to distinguish – there’s made for cloud multi-tenant software – think NetSuite, Intacct, the common consumer equivalent might be Facebook – super easy to use, already provisioned so you simply join and go or now there’s a cloud version of all the old software systems, big name ERP’s with a me-too play, kind of a consumer equivalent of AOL.com.
So when a new prospective employee looks at your company, are they thinking, their technology is Facebook? Or are they thinking AOL.com? Not that they’ve ever seen AOL.com but they heard about it from their parents.
The point is, made for cloud systems designed during the internet era communicate a lot to prospective employees. We’ve detailed how well they work with a distributed, remote workforce – and getting and keeping that workforce is a new trend we’re seeing for clients to digitally transform their companies.
Item Three – we’ve already touched on this Decisionmaking Certainty in an Uncertain world.
Here’s the thing. Today’s media has changed from what we grew up with. Whichever side you’re on, there’s outlets ready to push your hot buttons and it’s all making a very tribal, divided media world. Have you seen the news today? Well, that’s a bad idea.
Believe me, there’s no better way to reinforce groupthink than a steady diet of internet, Facebook and Twitter.
Is that any mindset with which to run a business? Not a successful one.
But we do need to pay attention to trends that affect our business environment, the marketplace – or so we think. And with a steady diet of inflation, Afghanistan, Covid Porn, borders out of control, gas prices rising with pipeline cancelations, the healthcare system imploding under vaccination layoffs of frontline responders…..do I need to continue?
How do you make business decisions in an era of so much uncertainty?
Easy. You create more internal certainty.
I can point you to a dozen past podcasts that document companies that have prospered incredibly over the last year – home furnishings, consumer goods, food and beverage, golf and sporting goods, bicycles, anything outdoor, homebuilding, home remodeling, shades and awnings – the list goes on.
In many of those situations, new consumer patterns emerged and the companies who could pivot grew faster than they could have ever imagined. Companies that could recognize new markets and see the signs of growth in existing customers exploded.
But here’s the thing, ERP systems that were designed to enable JIT inventories and focused around MRP or materials planning also grew in certain segments, but their systems tied their growth to so-much-and-no-more. They couldn’t scale.
Traditional ERP needed to implement new systems. Made for cloud ERP spun up new apps. Traditional ERP meant building ecommerce systems from scratch. Made for Cloud ERP needed a phone call to provision the ecommerce module.
And it was all driven by analytics. By seeing any number in a made for cloud ERP, you can report on that number. Advance analytics that draws data from multiple databases and operational systems. Managers could see where the growth was coming from and react quicker.
And if you’re underlying systems are giving you better data, that’s information that makes business decisions more certain. Look you can’t control the outside world – you can tune it out but you can’t control it. You can increase certainty within your four walls.
Earlier I said – It’s Easy, you create more internal certainty. OK, that’s not always easy. We just wrapped up a situation where we evaluated software system after software system for a client – month after month – nothing worked well, it kinda sorta…but not really. Finally we found the right ERP and it was just about double the original budget. We did some work and created a Cost Revenue Model based on savings and revenues we delivered in past clients. We saw the software would pay for itself within 2 years. But it was still out of budget. We moved some users to an operational app, switched to internal CRM and finally architected a solution that worked and were back nearly to the original budget, Saving our client hundreds of thousands of dollars. Many times multiple of our billable hours. Now that’s ProfitFromERP – And we can do the same for you. When you’re ready, an email to, Info@ProfitFromERP.com gets the ball rolling. For the ERPodcast, I’m your host and Director of ProfitFromERP encouraging you to stay profitable my friends.
It’s the ERPodcast and we’re changing with the times too – broadening the scope of our discussions and direction…..
You know, certain critics or commentors to the ERPodcast have said, Hey Gene, whatever the problem is, your answer is always new ERP. OK, they have a point, even if it’s backwards.
Hey, it’s all ProfitFromERP –
But today’s news is around the Supply Chain problems affecting almost everyone and how the whole world focused on JIT – just in time distributed supply chains, which worked really well, until they didn’t. Now what’s happening? Also – hiring – we recently worked to source some supply chain recruitment positions – and what we found out, is that old technology is driving younger workers away – and by younger – we’re talking 20 somethings and 30 somethings – as the labor market gets tighter, with fewer people returning to work, finding and keeping good people is going to be key – you don’t want to alienate half the workforce just now. We’ll also talk about the uncertainty of today’s business environment. One thing about uncertainty – it stops innovation dead. Often, the answer to uncertain times
It’s all here in Episode 28 – The ERPodcast version 2.0