Plain Vanilla ERP Isn’t Good Enough

At Synergy, we get calls on a fairly routine basis from manufacturing companies that have hit the wall with their existing ERP systems. Many times, they’re frustrated at having selected a plain-vanilla ERP product that looked great when they saw the demo, but which ultimately lacked the depth and flexibility that the company really needed.

By the time they arrive at our doorstep, most of these companies have wasted a great deal of time and money; not to mention the opportunity-cost associated with delaying the benefits of having a truly robust manufacturing ERP system. When it comes to manufacturing software, details matter. This is especially true when it comes to managing the information that sits at the heart of the manufacturing process, – things like BOMs, serialization, scheduling, and costing.

The companies that sell plain-vanilla ERP solutions will tell you they can meet all of your needs. They’ll usually put together a demo intended to serve as evidence that their product can address the needs of manufacturing companies. It’s often enough to close the sale, but unfortunately most manufacturing customers don’t realize what they’re really getting until they have invested significant time, energy, and a good deal of money into the implementation process. By then, it’s too late. Most of them end up writing off their “investment” and starting over from scratch.

A Few Examples

One manufacturer we spoke to recently had invested heavily in NetSuite, which is a great ERP product, before they called us. During the sales process, they were told that their manufacturing specific functional requirements could be met using that company’s inventory module. This particular ERP vendor is notorious for introducing change-orders after the initial sale, and this case was no different. When the company found that the system didn’t meet their needs, the NetSuite sales team responded by recommending another module, Bill of Materials.

Fortunately, the customer had learned their lesson; they approached the new proposal with skepticism. They dug into the details of the vendor’s BOM module and found that it didn’t synchronize the scheduling of the lower-level assemblies to their parent. It also didn’t allow clear visibility for planning. For example, they weren’t able to tell whether they could “kit complete” an item or if there was a missing part several levels down in the BOM that would prevent them from delivering the finished product on time. They couldn’t effectively look at long lead times on those kinds of multi-level BOMs and figure out what was achievable, by when.

Instead they had to run MRP and peg the lower level assemblies to each parent manually, then drill down on each planned order to its component BOMs to determine which parts might be short on inventory. That’s an ugly workaround; in fact, it’s exactly the kind of tedious, time-consuming process that ERP is supposed to help you avoid in the first place.

A deficiency in good warehouse management features can often create similar problems. Plain-vanilla ERP may cover the basics, but if you want to add functionality that is critical to your business; you may need to look to third party add-ons to get what you need.

There is nothing inherently wrong with third-party products. In fact, they can add quite a lot of value, and we often recommend third-party products to our customers to address very specific business needs; but there are certain capabilities that simply must be part of the core ERP system because they so are integral to the whole process.

Consider how most plain-vanilla ERP vendors handle costing, for example. In fact, most of them don’t really handle costing per se; they simply manage inventory valuation. Typically they will accommodate the common inventory valuation methods such as FIFO, LIFO, average or weighted average, and specific identification. That generally meets the needs of wholesale distribution companies that are receiving inventory, warehousing it, and eventually selling it. Even if a company is doing some kitting or light manufacturing, that might be good enough.

But most manufacturers have far more complex requirements than that. They’re working with labor and machine costs, scrap, and other very significant factors that simply don’t figure into the requirements of a distribution business.

For manufacturers, visibility to production costs is critical, though; and because it’s so central to the business, it’s not something that you can bolt onto the system as an external feature. Imagine what happens to costing when you’re using a third-party manufacturing add-on that sits on top of a plain-vanilla ERP. Think about all the different areas in your ERP system that are somehow affected by costing. Inventory valuation, sales orders (including pricing), purchase orders, and production scheduling decisions.

Now think of all the reporting and analytics that flow out of those transactions. Third-party products must generally store information in parallel to core ERP data. If you bring other third-party products into the picture, are they designed with your third-party manufacturing software in mind? Are those products “aware” that a more sophisticated costing method is being applied? Will your off-the-shelf system reports reflect the right costs?

Most of the plain-vanilla ERP systems offer standard costing as a fallback. If you’re a manufacturer who uses standard costing, you might be tempted to think that this will solve your problems, – that in fact the plain-vanilla ERP will work for you after all. Unfortunately, costing is just one example of how generalist ERP software fails to offer the depth and sophistication that manufacturers require. The plain-vanilla ERP products fall back on the costing method that is easiest to implement (i.e. standard costing). They tend to take that approach in a number of other areas as well.

Beware of Plain-Vanilla Consultants

There is another major pitfall that customers should be aware of, – namely, that the plain-vanilla ERP systems are usually sold and serviced by plain-vanilla ERP consultants. Manufacturing software is sold, implemented, and supported by experts who thoroughly understand the industry. ERP generalists may understand debits and credits, inventory, and order-to-cash very well; but if you ask most of them about engineer-to-order, process collaboration, or machine metrics; you’ll find that many of them fall woefully short on expertise.

Some ERP companies, – including sometimes NetSuite, – have a reputation for introducing prospects to one or more consultants during the sales process, only to outsource the implementation to someone else as soon as the deal has closed. They employ low-cost overseas consultants to roll out templated implementations to their customers, often promising a low fixed-price contract for those services. Unfortunately, the one-size-fits-all approach turns out to be a poor fit for most companies. To make matters worse, employee turnover is high, so customers are often left to deal with a constantly changing team of consultants who don’t really know their business.

ERP is complex. It requires advice and assistance from people who speak your language, who understand the manufacturing domain, and who stay abreast of industry trends. When you roll out a new ERP system, you are not just buying software, – you are selecting a strategic advisor whose job it is to understand your unique needs, tailor information systems to fit the way you do business, and work with you as your organization evolves over time.

We urge prospective customers to dig deep into the details and understand exactly what they are getting. If your system is not designed and built for manufacturing companies (by people who truly understand manufacturing), then you risk spending a lot of time and money on a new ERP system, only to find yourself at a dead-end.

At Synergy Resources, we understand manufacturing, and we understand how to apply technology to solve the business problems in this industry. Synergy begins every customer relationship by learning about our clients’ specific objectives, unique processes, and measures for success. We’d love to work with you, too.

Contact us today to learn how we can help you.