ERPodcast Episode 10
Step by Step DIY ERP
ERPlanner (Will the ERPuns never stop?)
Hey – it’s the DIY- Do it Yourself – Profit From ERP with the ERPlanner
(MFX Up and under)
So, the secrets behind Profit From ERP – how do we do it? Well, we’ve collected the winning methodology from over 400 ERP implementations over the years. From our first ERP project where a company that quote – totally embraced change – unquote had half the staff quit because change…wasn’t what they were expecting – – all the way to the on demand manufacturer who paid for their ERP system many times over within three months.
There are lessons to be learned in all of them.
I’m Gene Hammons, Practice Director for Profit From ERP and host for ERPodcast and today we’re going to give you a step by step checklists of the steps you should take, to Profit From ERP on your own – it’s a checklist – what we’re calling the ERPlanner which we’ll tell you how to download the template and exactly how to follow each step on your road to Profit From ERP as you select and implement an ERP system on your own.
Now the disclaimer – we can tell you the steps and give you a whole podcast’s full of coaching – and you might say, well, Gene, if you tell everyone all the steps, why would anyone hire you as an ERP selection consultant in the future? Your secrets are already out of the bag.
Well, here’s the thing. If you follow these steps, you’ll do just as well, probably better than I did on my very firstERP project – some 25 years and 400+ projects ago. You’ll do better than 95% of the companies who go about selecting ERP as if it were a capital purchasing effort.
But things happen in ERP projects – things you, I, the software vendors – things no one anticipated. Crazy unrealistic deadlines, massive underestimation of how much effort a ERP project demands, massive under-budgeting – then twists and turns – your business model has a little twist that similar businesses don’t do – and this little twist is what differentiates you, makes you cost less or have better service, or better quality – and there’s no ERP product on the market that anticipated your secret sauce. Crazy things happen – and that’s when our expertise really shines – that’s why companies hire us to consult during the entire process.
And I’m afraid that’s not in the checklist.
But – we hear from many companies all the time – usually smaller firms, who don’t have much budget for consultants and even less budget for software – and if this sounds like you, this podcast and the ERPlanner are perfect for you.
A – they’re both free, the ERPodcast and the ERPlanner.
B – It will give you an important leg up and put you ahead of the game.
Even if you’re not a smaller business, these are the same steps we’ll recommend to a global multinational company looking for a new ERP – of course there’s more detail, and instead of one guy with a clipboard walking around your office it’s a team of business analysts, software architects, project planners – but it’s the same proven methodology that’s worked now hundreds of times.
Of course the Do-it-yourself version not going to revolutionize your business like a full blown digital transformation and mobile cloud company-wide connectivity – but it’ll at least get you on the road to growth – and in a couple of years, after your company has implemented it’s first ERP and grown some more – you will be in the market for a full blown digital transformation – and you’ll be back with the budget to really take things stratospheric – with Profit From ERP
Eide Bailly Endorsement
V 2.0 Under Budget
Today’s Podcast is being brought to you by Eide Bailly Technology Consulting –
If you’ve been listening to the podcast for any time now, you know that an ERP project is bigger than a plug and play software implementation.
There’s planning, business analysis, business consulting, project valuation, and all that happens up front.
Managing the actual implementation project is reworking how your company does business – can you think of anything more critical?
When it’s done right, it means huge returns for your company for years to come – greater efficiencies and better productivity.
With all this at stake, you need to work with top talent – and Eide Bailly Technology Consulting has been NetSuite Partner of the Year for several years running – As well as WorldWide Partner of the year – they are definitely a top 5 NetSuite Global Consulting Partner
We work with a lot of technology partners in a lot of ERP programs – But when it comes to NetSuite, Eide Bailly is unmatched in how they approach and deliver an implementation program – and while you’d think working for the top talent is expensive, we’ve found our customers actually save money working with Eide Bailly – you know cost overruns are the norm in the ERP industry? Over 70% of our Eide Bailly projects come in under budget. Really.
The Profit From ERP team cannot afford a failed implementation, that’s why we trust Eide Bailly with NetSuite projects large and small. There are a million things to go wrong in an ERP project – but working with Eide Bailly is just not one of them.
NetSuite doesn’t absolutely fit every company everywhere – but when NetSuite is the right ERP, Eide Bailly is the right partner.
If NetSuite is the direction you’re going, you need to turn to Eide Bailly give us a call and we’ll bring the team from Eide Bailly in to put things right. Eide Bailly – that’s E I D E B A I LLY.com
Welcome back to today’s ERPodcast I’m your host Gene Hammons, Practice Director for Profit from ERP – just a little backstory my early career was as a turnaround specialist and consultant – I started seeing all of my productivity gains through large software projects to help companies become more efficient and profitable – this was in the late 90’s – and I finished my MBA at Arizona State University – we were one of the first MBA cohorts to both study and graduate in the internet era – which was an exciting time, the dot-com boom and Y2k. I ended up joining the Epicor channel, then Sage, followed by Ross Enterprise, then Lawson which would become Infor – along the way working in the Microsoft stack of products, SAP, Oracle – and becoming an independent ERP consultant back in 2011 – where we’ve worked with everything, but specialized in cloud ERP beginning with NetSuite, but also Intacct, Acumatica and many others.
I’ve been privileged enough to work on Global Multi National ERP projects and I’ve worked with small startups, mom and pop shops, regional manufacturers and I can’t walk through Costco without seeing a lot of old friend’s products or turn on the TV and see a pharma group I’ve helped.
Through all this, the amazing thing I learned was – you can take two seemingly identical businesses – same industry, same size. Both can purchase the same ERP software. Both can use the same ERP implementation team. And one will be wildly successful and the other, while they’ll say they’re doing OK and things are ‘much better’ with the new ERP – they really aren’t lighting things on fire so to speak.
And meanwhile that first company is now super profitable and productivity is skyrocketing, which drives more efficiencies – and they’re making great strides with the software – and next year, they’re at the annual ERP users convention giving seminars and presentations on how to best use ERP.
And my question is Why – – -why one and not the other.
So I started studying what the top adopters were doing and started quantifying how they did things and what I found out is that the difference is the internal ERP team – how they do things, how they structure things, the methodology that they use and that can make all the difference.
Now, are all my clients top performers? No, but the average Profit From ERP client is so much higher than go-it-alone companies with an undefined process – and I also will naturally attract the clients that strive to exceed – that’s why they hire consultants in the first place. And by setting and measuring goals we do quantify results – which is always a better story than – well just saying ‘things are much better now’.
So anyway let’s dive in.
The ERPlanner – I’ll tell you how to get your own free spreadsheet template download– basically just send an email to info@ProfitFromERP.comand include your name, phone number, company info, and tell us a little about what you’re using for accounting software now, what industry you’re in and we’ll email you a copy of the spreadsheet – in the meantime – let’s jump into the ERPlanner – what top companies do to select and implement ERP software.
Step One – Bring in Outside ERP Expertise– and I can hear you now, saying “wait, I thought this was a DIY project – well it is. But I’m not letting you go into it blind and the top companies bring in outside ERP experience.
Here’s the thing.
You might have someone on staff that went through an ERP project a few years ago. Well, that’s one project and I have no idea what methodology that company used – if they even did anything other than asking the purchasing manager to do the selection process. The thing is, selecting software to run your business is different that capital expenditure acquisitions. It’s not a desk or office furniture, it’s what you base your productivity and efficiency on over the next 5 to 7 years.
And based on an ERP project a few years ago?
A few years ago is two generations of technology in the past.
So it’s Podcast Date 2019 and you have a guy on staff that went through a Sage ERP project in 2013. Not to pick on Sage but insert any common ERP vendor the math is the same. If that company was looking at software in 2013, they were evaluating software that was probably 10-15 years old, yes, updates, new versions released and new features added – but basically 10 year old software.
So you got one guy on staff who went through a state of the art minus 10 years ERP project five years ago.
There’s been a lot of development in ERP in the meantime. Mergers. Acquisitions. The cloud. Heck, 15-year old software was pre-internet never mind pre-cloud.
So, know you have a knowledge deficit going here – and your purchasing manager isn’t the answer – find who you can for advice even if it’s only for a short engagement or a few conference calls. Talk to others in your industry. Check the trade mags…
And keep listening to the ERPodcast….
Step Two – Project Planning– You need a Project Plan detailing all the steps you’re going to do and all the phases you’ll go through to get to where you need to be.
Small Company? Figure 4 to 6 months to go through the selection process and get to the final ERP licensing purchase. Plan for 4-5 months to implement a made for cloud ERP solution or 6-9 months for a traditional ERP – even if it’s hosted via cloud.
So at this point you’re likely a year away from go-live. Most companies get a start in May/June if they think they want to be live January One the following year – and that’s a push.
But here’s the thing. Get a project plan. It tells you what you need to do and by when. The ERPlanner Template will have some date calculations for you based on how long things take our clients in past engagements.
And your takeaway – looking at the overall plan, you can see that you need to have software demos in week three of month two – so today, you contact the software companies and say “We’re holding demos in 6 weeks – that’s week three of month two” and you’re going to get pushback. Software vendors like to jockey so they’re first and you compare everything else to their example or they want to be last so they’re the last thing you see – whatever – but just understand that if you allow them to push beyond week three of month two, you’re project goes into a hold pattern until they can ‘free some resources up’ to schedule your demo. Schedule far in advance and if a vendor can’t make that schedule, find another ERP partner that can.
Also – Step Two Project Planning is where you set your committees. You need an Executive Committee – CEO, CFO, CIO or CTO – the guys and gals who’ll make the final decision and sign the checks. Your ERP Steering Committee – representatives from every department in the building – and HERE’s a huge pitfall. You’re likely replacing QuickBooks, which was only used by accounting. So controllers, accounting managers and analysts are easy pics for the Steering Committee – but ERP is not an accounting package – you need operations, supply chain, inventory, production, customer service – everyone needs to be at the table. Go back to Episode Three of this podcast and listen to Quickbooks to ERP – Common Mistakes https://profitfromerp.com/erpodcast-episode-3-quickbooks-to-erp-common-mistakes/
And below your Steering Committee, your User Committee is the actual users of the software.
And you might not have every person on this list in your company, but you have someone who plays every role – and some people will overlap duties and be on more than one committee – so keep the meetings short.
So we have Exec Committee, Steering Committee and a User Committee – each is more granular and down in the detail but all report back up and keep everyone on the same page – so schedule regular meetings and update methods and that takes us to
Step Three – Requirements– we’re going to start talking about what we need and focusing on our business requirements. Still no software. Not yet.
Again, you’re at a disadvantage because you don’t have someone who knows modern ERP and it’s harder to know what questions to ask – but let’s focus on what you currently do.
It’s time to take a fresh look at your internal operations. From start to finish, top to bottom. Every department. Here’s where you find out that a quick report that finance thought might be useful is really ignored and it’s taking the warehouse guys a day and a half a week to put it together…but you’d never realize that unless you talked to both departments
So you’re going to every department
You’re aksing questions like, What’s a huge time waster? What do you really need in terms of system improvements.
Also, What works well in the current system? There has to be something that’s working well and it’s a requirement that the new software has to do this well.
What would you like to see in the new system?
And some form of – ‘You said filling out PO’s and walking around the building to get 7 signatures was taking too much of your time. If you didn’t have to do that, what other productive work could you be doing instead?’
Now with the time and inclination, here is where you’d map process. Step A someone fills out a Requisition – then Step B a manager approves it, Step C…and so on. Visio is a great tool to make this graphical.
In large ERP projects, process mapping may take a team of 4 or 5 and spend a few months documenting process. Smaller companies don’t get that detailed – but think – if there’s a process your business does constantly – your manufacturing or services deliver – quotes for prospective customers – if you’re doing something constantly and repeatedly – at least take the time to whiteboard the steps and take a photo. A tiny improvement in a process you repeat a few thousand times a year, or 100 thousand times – a tiny improvement can be very important to your future business.
Also, when we’re going department by department, we’re going to come across forms, spreadsheets and reports. Start taking a copy of each and putting it into a file or binder. ERP will replace many of these and if we’re making key business decisions on some value in a manual report, we want to make sure the future ERP report counts those same chickens or whatever.
Which Takes us to Step Four – Business Case Here’s where we look at all our requirements and start to rank and cost each. Now, while an ERP Consultant will have experience in this area – say one of your requirements is Needs to Control Inventory – he’ll have a similar past client who dropped inventory from $6m to $4m, so the cost of carrying that excess $2m is the interest cost of $2m plus the warehouse space, warehouse staff to move it around, shrink and outdating – and an ERP Consultant would add up all those costs and quickly come back with – We’re going to save $60-thousand a year…
But you don’t do that every day – still, you can ballpark some of these issues.
Remember we talked about mapping processes? You can start to see that you do a million of those transactions and if you could eliminate two steps by automation, and start doing the math from there.
What you’re looking for is a discussion – some will call it an argument – but let’s get the committee in a room and come up with some value for each of these requirements.
Bob in accounting may be going on very loudly about his requirement for the journal entries to have automatic batch reversing – and when you further talk to Bob you find out he only has to try and reverse a batch entry once or twice a year – still, it’s a pain and a nice feature, but just because Bob did that last week and it’s fresh in his mind doesn’t make the Requirement more important than other things that happen every day.
So we’re going to find savings in inventory, automation in accounting, we’re going to say if we continue to grow the company 20% per year, with the current system and 10 people in accounting, that means we’ll hire 20% more staff every year – maybe the new ERP system means we’ll only hire 10% more – now we’re saving a $50k salary every year.
You start adding these things up, and pretty soon, you see this new system might save you $100k a year. Or it might be $3m over 5 years. Whatever. This is your Cost Revenue Model.
Now we at least have some goals for the project – they might be realistic, they might be pie in the sky – but we have a target to shoot for – we’ll refine it as we go along, once we start seeing the software demos – we’ll at least know what to look for – and maybe, they’ll show us some things we didn’t even think of.
Budget! Now and only now do we start to think in terms of budget.
True story. We were called into a company 20 years ago and the owner told us he had $10k to spend on accounting software and not a penny more. Did a walkthrough of his plant and we had a Sage accounting package that would fit his budget and work well. As almost an afterthought we passed a door and asked what was in there? It was a phone room with 50 seats – that’s where they took orders from their multi-level marketing salesforce. Now, by increasing his software budget from 10-thousand to 50-thousand, we could offer him online web based order entry – he wouldn’t need 50 phone reps – maybe 5. Spending $40k more in software one time was infinitely better than employing 45 phone reps at $40k each.
And that’s what you’re doing here.
Taking your Cost Revenue Model and if this software saves you $100k a year, then an $50k software budget means it pays for itself in 6 months – pretty good investment. Now we get pretty detailed with these analysis, you won’t see savings in every area day one of go-live and you can get fairly detailed in cash flow analysis and payback – but generally, if a software project pays for itself within 18 months, it’s a go decision. Longer than that, good to know as well.
But at least you’re defining the economic reasons behind your budget decisions. Again – ballpark, high level, lots of assumptions – but this will help drive your project.
And now we move to Step Five, Engaging Vendors– Based on activities you started in the Step one Outside Expertise phase and Step Two Planning – you should be starting to get an idea of the types of software common in your industry – what similar vendors and clients are using, if their business model fits yours.
What you’re looking for is ERP that works in your industry with companies of your size. If Cisco Foods is one of your vendors and they use SAP, well that’s fine for a $5b nationwide company, but SAP is complete overkill for your emerging $50m company.
You want to match industry – you want to match company size.
Again, we have trusted vendors and implementation teams we use time and time again – and you don’t have that – but understand why you’ll pick the vendors you should.
What you’ll do next is put together a package of information on your business and what you’re doing, along with an RFP and send it out to several vendors.
What’s in Vendor Information Pac One? That list of Requirements we’ve been working on. Some narrative info on your company, size, industry and what you’re trying to accomplish with the project.
And RFP – Request for Proposal. Let’s talk about this really briefly. You can download an 800 question RFP from the internet – I know this because I’ve seen hundreds of clients do this and send it off to software companies. The software companies have also seen it 100’s of times. They have a stock reply answering this 800 question RFP – so, You didn’t write it, they won’t read it, and the response will be so thick and cumbersome your team won’t get through all of it either – it’s a total waste of time.
We use the 20 Question RFP – what’s really important to this client? Why will they buy one software package over another ERP? What’s really key? Try to boil it down into 20 questions. You’ll probably not get there, but you will have 40 or so really relevant things to focus on.
You also want to know the technology that the ERP is using – have your IT guys write those questions. You’ll want to know the financial stability of the software publisher and implementation team – how old is it, how new are they. How many times have they done this.
Just don’t waste 6 weeks compiling huge volumous responses that aren’t focused on what’s critical.
You’re also asking for preliminary pricing estimates in Vendor Pac One – but don’t be too alarmed by what comes back – it’s too early to really understand how to price the software exactly for your company
Which puts us into Step Six, Software Demos – You’re going to be taking several looks at several ERP packages.
Start with the overview demo. One hour long, web demos based solely on the Vendor Information Pac One you sent to the vendors. It’ won’t look much like your company and it’s not custom prepared for your data, but it will give you some feel for how the ERP vendor approaches the market.
From Overview demos, you’ll likely be able to narrow down your ERP choices to two or three.
Invite your shortlist to meet with you onsite a provide a fuller demo. They’ll have their own demo methodology – but you need to provide them with a ‘day in the life’ of your business – tracking Order to Cash, Plan to Make, Customer service and delivery – whatever processes are key to your business. Your demo script should contain some of your products, pricing, operational methodology – everything you need to see your process demonstrated.
And throughout this demo process – you’re grading by Requirements. Most companies identify 25 to 50 key Requirements – we typically define 100-125 for our clients – whatever the number
When you’re watching the Overview demo and one of your Requirements is Matching Invoices to PO’s – and they show you how to PO match Invoices – you scratch that requirement off the list.
You eliminate Requirements as you go.
After the Overview demo, the full demo, the day in the life demo – you should be down to very few Requirements remaining.
And these should be followed up with web demos addressing the specific issues – the Open Issues Followup.
Through it all, you’re learning more and more about a potential ERP software and partner.
And now our last stage is Confirmation.
I know you saw what you thought you saw. But more companies than not will say they didn’t end up with what they thought they were getting in the demo.
So let’s confirm. And let’s not start confirming until now.
Day One you thought certain Requirements were key. You quickly found out that everybody does those things – any one of the five contenders would satisfy what you thought were the most important Requirements.
But as you developed your Cost Revenue Model, as you cut your RFP down to the 20 Question level, and as the different vendors are showing their strengths and hiding their weaknesses, you realize – it pretty much comes down to Supply Chain – or whatever in your case it came down to, but for sake of discussion, let’s say by this time, you’ve come to the realization that it’s all Supply Chain – that’s what we do, where we can cut costs, how we make money – it’s the key.
It’s your Final Issue – (or issues).
So, what you’re saying to the ERP vendors is, “We want to talk to whoever is best at using your ERP for Supply Chain – who’s tops at Supply Chain efficiency?”
A couple of things will happen.
There may be another customer across the country that’s really good – they’re using the same ERP software but it’s another implementation team – that’s not optimal, but not a deal killer necessarily.
Or they may not be able to give you a good Supply Chain reference – and here’s a huge red flag.
What that probably means is the best Supply Chain companies in the nation are using some other ERP – and you need to find out why.
What you want to do is find out who is the absolute best using this ERP at Supply Chain and you want to do a site visit. Meet the company who’s knocking it lights out. Now here, the ERP company can’t take you to a direct competitor, but say you sell candles – they can find you a home goods Supply Chain reference – you sell to the same end customers, and have enough in common to be a great reference.
But take the time to make the road trip – because the next 5 years of your business’ productivity depends on it.
Also, let’s talk about training – and I know we’re running long here, but there’s a lot to do and seriously, each one of these steps, I generally do an hour presentation to the team to get to all the details covered – we start out each stage getting everyone on the same page to what we’re doing, why we’re doing it, and what our expected outcomes are – but that’s training for the selection project – what I need to talk about here is training for implementation and ERP use.
Alright. ERP is all about the efficiencies and productivity of your business for years to come. Worth literally millions to all but the very smallest of businesses, and even for small businesses, if you ever want to be in the millions – ERP is what will get you there.
And in the software industry, there’s this sales process called solution selling – very popular concept, in a nutshell it says if you can position your software as the solution to all the customers issues, they will buy it.
However, software is not a solution.
Software is a toolkit. Thinking of software as a solution is similar to a farmer buying a hoe and thinking all the weeds in his field are now gone. The hoe is an important part of getting rid of the weeds, but it’s gonna take a bit more work than that.
It starts before implementation and continues…forever.
The people on your staff who learn how to make the software work are the people who drive efficiencies, productivities, find better ways to do things and generally become very important people in the company.
So the day the contracts are signed for a new ERP, training needs to begin.
When you implement software, you’re going to be making decisions on how to configure the software – you need to know the impact of your decisions and the downstream affects of your decision.
So you need a training plan – today.
Are there videos and training materials online? YouTube videos? Workbooks? Training classes?
Your people need to be on this as soon as possible.
You’ll also get training in the implementation process – and while data entry is generally uploaded through Excel or .csv files, manually entering the last month’s transactions is a great training exercise.
There’s a formal end user training at the end of the implementation, right before go live – and that’s important. Just like a race car driver should have had driver’s ed in high school. – it’s not all he needs to know, but it’s a start.
Then there are regular training classes offered by the software companies – plan to have someone on your staff in these classes a couple of times a year.
There’s local user groups for most ERP software – plan to be an active participant there.
There’s national user group conferences for most ERP software – you should consider this mandatory.
Look, you’ve spent considerable dollars purchasing and implementing ERP. Your staff has spent endless hours on implementation, learning to this point and getting proficient with the software.
Shouldn’t you take the last step to insure you’re getting the maximum efficiency and productivity out of your ERP.
I can tell you that the most successful companies do, and the less successful companies don’t.
But of course it’s up to you.
And our last stage is your final Negotiationsto purchase your software.
So if this were a capital purchasing project for office desks – and you had competing vendors vying for the business, it would be relatively easy to compare the desks, material, design, number of drawers, quality – and you could easily compare on price.
Software is not like that.
There are no two identical ERP systems. By now, you should have a good grasp on this. You should know you really like ERP-A better than ERP-B. ERP-A really does a much better job on Supply Chain and Reports – but – but if we’re talking about $50k licensing price difference, does that matter?
So you can negotiate to a point. Software pricing is notoriously flexible and discounts, well, there’s year end discounts. Quarter End Discounts. Month End Discounts. If you promise to buy today there’s End of the Day Discounts.
But go back to your Cost/Revenue Model – if we’re talking about a software package that will increase bottom line revenues $5m over three years, is another $10k off the price really what we need to be focused on?
Also remember if you’ve been justifying this project by savings you’ll make in the Supply Chain area – well, in a few weeks, the burden switches from them proving they can do it, to you proving to your boss you can save those expenses in Supply Chain.
Do you want to be doing that with your second-choice software that you bought because it was $10k less than what you really wanted?
There’s a lot to an ERP Software Selection. A lot of work to do in your business and a lot of work to do with outside vendors, new software and new potential partners. But the payoffs can be high, if, and it’s a big if, you follow the Profit From ERP methodology.
Remember, these are not my genious rantings, these are things I’ve seen the successful companies do – and then tested them – by having subsequent client companies follow the exact methodology and watching them succeed too.
And like I said, we’re a 40 minute podcast into this – typically – we’re delivering this same content in 7 hour long blocks in the weekly Selection Committee status meeting as part of an ongoing ERP evaluation project. Of course there’s more detail we don’t have time for today.
But if you follow this plan – you too, can Profit From ERP – or at least get a lot closer to that profit than you would have otherwise.
And as your business grows, and you’re looking at rolling out your next ERP to offices all across the Midwest (or wherever) then give us a call and we’ll bring the team and help you do it right.
Profit From ERP. It’s what we’re all about.
Remember, to get your copy of the ERPlanner Template that goes along with this podcast – email us at info@ProfitFromERP.comwith your company name, contact info, what software you’re on now, what industry and anything else you’d like to include and we’ll get you the ERPlanner Template as fast as email can get there.
Even if you’re already in the middle of an ERP evaluation, use it as a checklist to make sure you’ve not skipped a step.
And you too, will be on the road to Profit From ERP –
I’m your ERPodcast host, Gene Hammons, wishing you a profitable day and don’t forget to Download the podcast from our website or subscribe on Apple iTunes or your favorite podcast site.