January 7, 2025 • 24 mins
In this episode of "Growing EBITDA," hosts James Bandy and Mike McSweeney dive into the world of ERP (Enterprise Resource Planning) systems and their critical role in driving middle-market growth. From operational efficiency to scalability, they explore the key benefits and challenges of implementing and upgrading ERP systems. With a touch of dry humor, they share real-life anecdotes and expert insights to help business leaders, private equity professionals, and consulting clients navigate the complexities of ERP systems. Tune in to learn how to optimize your business processes and make informed decisions about your ERP investments.
Follow Mike McSweeney & James Bandy on LinkedIn
Learn more about TriVista
Highlights:
- Introduction to ERP Systems
- Common Questions About ERP Upgrades
- Operational Bottlenecks and Challenges
- New Technology and System Integration
- User Inefficiencies and Training
- Cost Considerations and Financial Benefits
- Selecting the Right ERP System
- Common Challenges in ERP Implementation
- Funny ERP Stories
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to the Growing EBITDA podcast, where we unlock the doors to management and technology
(00:08):
insights in the middle market.
Join us as we explore innovative strategies to drive revenue and EBITDA growth, interviewing
industry leaders and technology experts.
Whether you're looking to streamline operations, understand the latest tech trends, or lead
your company towards exponential growth, you're in the right place.
Stay tuned and let's grow together.
(00:32):
So James, to get started today, is it ERP or is it ERP?
It is ERP and it stands for Enterprise Resource Planner.
Got it.
I'm glad we clarified that.
Yeah.
I just want to make sure everybody continues to understand just how good a technology I
am, right?
And that I just want to reiterate how I'm not the technology expert here on the show.
(00:57):
Establish a nice baseline and throughout the season of listening to podcasts, we're just
going to see your skills and talents grow.
That's right.
That's right.
Thank you.
Thank you.
So James, today we're talking about ERP systems.
And to get us started, I think all of our listeners probably have an ERP system in place
in their business of some sort.
I'm sure we'll have a couple of listeners maybe still running their businesses on QuickBooks.
(01:21):
We certainly see that from time to time.
You can run a pretty big business on QuickBooks.
It's a function of whether you can do that efficiently or not as the business scales.
But a wide variety of ERP systems out there, we've kind of seen them all.
Probably one of the most common questions that we get when we're chatting with clients
is, is it time to upgrade my ERP system?
(01:42):
So how do you coach businesses when they're business leaders rather, when they're thinking
about an ERP system change, how do you identify when it's the right time to do an upgrade?
Or how do you decide whether or not you're going to continue to reinvest in the current
system?
When we start these conversations, I like where you began by saying when you're speaking
(02:05):
to the business, because they need to be business led conversations.
And that ERP needs to be driving business value and helping the business run successfully.
So I think when we talk about ERPs, there's a few different reasons that folks upgrade.
And one of them is around the operational bottlenecks and the challenges that systems
(02:25):
present when they're not adequate for the scale of the business or the needs of the
business.
And essentially the ERP becomes outdated.
There's a few reasons that happens.
You mentioned QuickBooks, which we do see a lot.
As my business starts to scale, everything else starts to scale.
If you think about it, as I scale my business, I buy more things, be able to do more.
(02:45):
I need to add more humans, be able to do more.
But sometimes we forget about those systems and hope or expect those systems spill the
keep up with us.
So those bottlenecks can be presented when the system isn't sufficient for the business.
The second that we see is we know that new ways of working, new technology to use, new
(03:06):
systems come along every day and making sure that we're still able to connect to those
systems.
You know, in our personal lives, we went from VHS to DVD to streaming.
And we want to be able to get those great things about streaming and seeing any show
at any time.
There has to be upgrades made in your technology within your home to help them enjoy that technology.
(03:27):
Same thing for the ERP.
New connections are made, the ability to tie to your bank, the ability to tie to systems
or automation within the warehouse requires a new core system there.
And the last one is really under, it's about user inefficiencies.
I have users that go into the system every day to accomplish work and complete tasks.
And if they're not able to complete those tasks in an effective manner, whether that's
(03:51):
the systems out there, the trainings out there, or it's too complicated, it can slow down
my business.
So it's a way to really help your users work quicker and more efficient in their day to
day jobs.
So how do you think though, you know, a lot of businesses start thinking about ERP upgrades
and one of the biggest hesitations is usually cost driven, right?
(04:15):
We've all heard horror stories from multi-year ERP system implementations, or maybe it was
supposed to take 12 months or 24 months.
We've heard of businesses on year five or seven, in some cases more of their ERP conversions,
so to speak.
I mean, it sounds like a very expensive thing to do.
(04:36):
How do you balance, you know, looking at costs versus efficiency pickups?
How do you think about that?
So the first thing we tell everyone is start with a charter and have an agreed upon plan
before you do anything.
The whole knowing where the end of the marathon is, so you know you finished the race, pretty
quintessential.
(04:56):
We see time and time again that folks begin their ERP journey with a loose plan of what
they want to do or saying something like, let's just get what we have today in a better
system.
Unfortunately, that lack of rigor creates a gap that's then filled in by some unfortunate
designs by technologists or unfortunate decisions by the business.
(05:18):
So we like to say all the time, prepay the pain, put together a plan, have an agreement,
understand where you're going, set a budget to it.
The next part of that is having the conversations and picking somebody from your team that's
ultimately accountable and responsible that's focused on the success of the ERP.
When nine people own the success, zero people really own the success.
(05:40):
Having a focused resource with that budget they're aligned to and a trusted partner,
we see folks be successful all the time.
And here's an easy question for you.
How much does it cost to upgrade an ERP system?
Yes.
So it's amazing.
It's a dollar 99.
The challenge is it's expensive and you don't know how expensive it is depending on your
(06:01):
business and what you're trying to do.
It's a big delta.
You can have folks that have ERPs that cost $100,000 to implement, and then you have folks
who cost $100 million to implement.
In our space and the space that we work in every day, we typically see folks anywhere
from $200 to $1 million during their ERP implantation, depending on scale, size, and complexity.
(06:25):
So let's move off cost.
I think we could probably spend a lot of time talking about costs of different systems.
I'm sure you've got a bunch of horror stories and maybe a couple of, it was a little easier
than we thought stories that maybe we'll save for a different episode.
But let's talk about, let's dig a little bit more deeper into the benefits.
(06:46):
So let's make the assumption that somebody has decided they've outgrown their current
system.
They definitely need to upgrade to a new one.
What kind of benefits do you see people in 2024, for example, experiencing when they're
upgrading to some of the latest and greatest systems that are out there?
When folks today work in an ERP that's underperformant or could be improved, we see that they have
(07:10):
to go to multiple systems to accomplish their job and get it done.
The most common that we all know is Excel.
So I do some stuff on paper, I go into the system, I do some stuff, and then at the end
of the month, maybe I do some other things in Excel to be able to get it done.
So having that integrated system where everything's together, everything's aligned, and everyone's
working towards the same thing, big benefit.
(07:33):
Number two, if we remember on the green sheets of paper that used to print and the dot matrix
printers and at the end of the week, you would get your sales report and they'd rip it off
the printer and they'd run it down.
Everyone knew, hey, here's how I did this week.
We're pretty far from that generally, but we're not far from that in some systems.
That delay could be 24, 72, or we see people with 15 day, 20 day closes.
(07:55):
The ability to get that data in and be able to make decisions that can affect your business
or help your business in a timely fashion is affected by not being able to have access
to real time data.
The last one is scalability.
In this space we work in, we see businesses every day start double digit, single digit
million and grow to triple digit million.
Is that system able to scale with you?
(08:17):
That's a huge benefit because if I'm not re-implementing the system every time I buy a new company,
I'm really in a position of power to go to move quickly, absorb them, derive that business
value, have a continuity between my processes and the way I work, really driving a lot of
benefits.
What factors should companies consider when selecting an ERP system?
(08:39):
I think we all have a tendency to go for the banner name.
When you think the Costco method, the Costco method is better best.
When you go to Costco, there's no good.
I think that idea that is this ERP the right ERP and can I use a different ERP?
There's a tendency to go after the banner names and we all walk through airports.
We see names in airports.
(09:00):
We see ERPs all around us.
Friends tell us about it.
The unique thing about ERPs today is there's a lot of purpose built ERPs in the world today
that are right for you.
So selecting a purpose built ERP, for example, family of five, probably not going to buy
a two door sedan.
How do I find that vehicle that's appropriate?
(09:20):
The other one that you should consider is the vendor.
So if I go and get this really niche ERP that I just mentioned, but there's four people
in the world that use it and there's nobody that can implement it and there's nobody that
can support it, I'm going to end up spending exponentially more to be able to make that
ERP successful than I would have chosen, than I would have choosing a better ERP.
(09:41):
So how do I strike that balance of an ERP that's built for me and that has the support
structure around it that can help people be successful?
So James, how do you pick the right system?
Yeah, I think businesses, it's a challenge because unless you have that broad view to
be able to do that, it becomes a bit of a challenge.
I'll tell you how we at Trivista have approached it.
(10:02):
We've built a template that allows us to ask questions to understand your business for
your business needs.
And then we have a proprietary template because we don't resell software, our ERPs at Trivista.
So we were able to partner with these folks, ask questions.
And so we created an Excel sheet that gives us all the features and functions of common
ERPs and we map those to what you need and we help you down select.
(10:24):
Now that's nice to say for me, because we do about 150 transactions a year, so I have
very rich data to go to.
As a business owner, if you're not going to engage someone like a Trivista, I would encourage
you attend the conference and don't attend the conference to speak to the technical folks
or the salespeople.
Talk to the other folks that are at the conference, ask what kind of business they run, ask what
they're doing, get out and get involved, make some trips, go see folks.
(10:49):
Don't just read websites.
So James, expensive, you threw around hundreds of thousands to maybe a couple million dollars.
Estimated financial benefits.
What are you typically seeing when you're helping clients go through an ERP system upgrade?
Yeah, Mike, this is a struggle, honestly.
We struggle and the industry struggles on really putting in numeric value to implementing
(11:15):
an ERP.
So when you think about CapEx spend, when you work on a CapEx request, you really focus
on what that value back is.
So I need a new piece of equipment.
I'm able to do XYZ and thus the dollars are, I guess, A in this example.
So the challenge we have is that financial benefit changes for everyone.
(11:35):
So if I'm a business services organization, getting my field reps better aligned, working
quick, more quickly and being able to get out there in the field and be more efficient,
I'm driving down those turns per day.
I'm sorry.
I'm driving down the labor for those turns per day.
I'm increasing my revenue just based on my same staff.
So that's one example of how that is.
(11:57):
Then the other side of benefits is for a manufacturing organization.
The ability to procure in a thoughtful manner, the ability to think about seasonality, the
ability to have access to that real time data we mentioned earlier really affects and helps
the business.
What that looks like is some variable based on what they're doing, but we always really
partner with our clients to understand how we can show that value, whether it's reduction
(12:18):
of cost by human time or reduction of cost on materials.
And so that's kind of a conversation every time.
And we partner with a lot of CFOs every year to work on those calculations to really drive
to something that's measurable by the organization.
And it's not just some funny numbers we made up.
So tell me about some of the common challenges people face when selecting and maybe implementing
(12:43):
for the first time or changing out one ERP system for another.
Talk to me about that for a few minutes.
Let me tell you about maybe not directly with ERP, but one of the major challenges we see
is I go to an individual and says, tell me how your business runs today.
Map out every single process you do.
That's tough for an organization.
(13:04):
There's a lot of pockets of knowledge within an organization and companies grow over time,
become more complex over time.
And so you organically grow into this complex, tightly woven bunch of different processes
and we have to tease those out to be able to do the ERP.
So the first challenge is who are you, what do you do?
Second challenge is really aligning the team to be able to have resources to get it done.
(13:30):
Very rarely do I go into an organization and they say, hey, my folks have really nothing
to do.
They've got plenty of time to focus on the ERP.
It's I have a job I run day to day.
I have a day to day responsibility and I need to be able to continue to focus on that responsibility
and work on the ERP.
So it's tough to be able to have those resources aligned.
(13:51):
And then the last one that I think is really a challenge is during the implementation, how
do I know it's going well?
How do I know I'm on track and how do I know I'm delivering a product that works for me?
If you have a good partner or an outside group that's guiding you, you can leverage their
tools.
But if you've never experienced the CRP, used the CRP or done something at this scale, how
(14:12):
does your team know what's the measure of success?
And so those can be some challenges along the journey that create some tension, implementing
the wrong thing, falling behind, budget going over, employees threatening to leave, poor
training.
And those are victims of kind of these buckets of challenges that can be easily solved with
the right preparation and partners.
(14:34):
What's the single most common failure in ERP implementations?
Well, can I say it's a tie between two things?
Go for it.
Number one, trying to replicate the system you had before in the new system.
Failure number one.
(14:54):
Failure number two is poor planning and documentation of the desired deliverables.
And sometimes those go hand in hand and it's a mix.
But really when we get called in and like the helicopter rescue situations, we get called
all the time, hey, we're struggling with ERP.
Can you come in and help us?
When we land, those are the two major buckets we see.
So tell me a little bit more about the first example, trying to recreate what you already
(15:19):
have.
I imagine a lot of people start off saying, this is the way we do it now.
We need to be able to do it like this in the future.
So what's the, and seems like a reasonable request.
What's the rub?
Yeah.
I'm going to use an example from you, Mike.
You and I were talking today and you gave an example of you retooling the way you ran.
(15:40):
Do you want to talk about that for a second on your retooling of how you ran?
You want to hear about how poor of a long distance runner I am?
Sure.
Let's get at it.
Well, the example that I shared was one where I went to a physical therapist who helped
me understand why my knees hurt so much when I ran and I was just running the wrong way.
(16:01):
And as I'm saying this now, I'm realizing what you're probably going to tell me about
ERP systems, but by changing some of the mechanics of my run, some slight adjustments that were
easily compromised, I completely changed the outcome where my knees no longer hurt and
distance was no longer an issue.
There's a huge unlock, right?
(16:22):
And those incremental changes, you probably could have run the other way forever at a
lower scale, not at the same performance.
And I think that really ties the ERP.
It was a great example that we just so happened to be talking about today.
It's those little incremental changes.
It's those little things and tweaks that people are afraid to do because organizational change
management or OCM for the acronym lovers out there is a challenge.
(16:43):
Getting your folks to work different.
I've been doing it this way for 15 years in the real world.
Don't make the system slow me down because in the moment, it feels like the system's
holding me back.
You're redoing my gate.
I'm not able to run while I rework on my gate.
But once you get through that and that unlock, it's exponential the results you can drive.
And so I think it's the same thing with your run.
(17:04):
Take that pain out of the business, do a couple pieces of work and to you, high five to you,
just taking a moment to think about how to do it differently and think about it differently
to be able to move forward.
And now people will know that I'm a world class distance runner.
Correct.
I may compete occasionally and usually I come in last place, but participation trophies.
(17:25):
Your knees feel great.
My knees feel like I'm 39.
James, I got one more line of questioning for you.
Let's talk about how the ERP system impacts the broader business.
We work a lot in industrial environments.
(17:46):
We work a lot in other environments as well.
But let's talk about supply chains for a minute.
How does an ERP system optimize supply chain management?
How does it interface with vendors?
Are there new technologies?
Supply chain has been a really big challenge for the last several years coming out of COVID.
(18:06):
What are your thoughts on ERP systems and supply chain?
Yeah, I love that you chose that one because a lot of times folks will come to us when
the ERP is not performing or there's some kind of really core issue.
But this is one that's how do I fine tune my system to be better?
And I'd like to say, our opinion is, can my system today allow me to be successful?
(18:28):
The last thing I want to do is change out your ERP.
I think it's quite essential to make sure your ERP can do what you need it to do today
and then just make the enhancements.
So some of the enhancements and some of the things that helps with is inventory control.
How do I have better real time back to the real time data?
Real time data and visibility into my inventory levels and what I have, really great to have.
(18:50):
Next is demand forecasting.
So not only do I have, but what's coming.
So what do I have coming and what do I have is what do I need?
So now I can derive what do I need in the system.
And the last one is supplier management.
Gone are the days of having to do supplier scorecards outside the system where you sit
in a room, have a conversation, pull out eight reports, do that scorecarding and send it
(19:12):
off.
And by the way, most of the folks don't do that today.
Most folks are actually not doing supplier scorecards, supplier reviews, because it's
such an arduous process to get done.
If you think about the future, one click being able to get that done, now I know inventory,
I know my demand and I know who can provide it to me, really helps that supply chain tip
to tail.
(19:33):
So we're going to wrap it up here in a couple of minutes.
But before we do, funniest ERP story.
Oh yeah, great question.
Can I tell you my funniest ERP story?
Yes.
My most embarrassing.
So I worked for a regional paint company doing ERP implementations as my first job coming
(19:56):
out of owning my own software organization.
I mean, why, why did you ever leave that?
That sounds like an invigorating opportunity.
Yeah.
When you have a business and you sell it, it's amazing how quickly they exit you when
you're a young person.
They get someone, had I known now, then what I know now, different ballgame friend.
I worked for this regional paint company.
And by the way, I worked with my best friends.
I went there and I never worked internationally.
(20:17):
I had like, I'd worked out of Mexico, but did domestic type work.
And so we're sitting there and we're setting up this ERP and we were going to Oracle and
we're going from a custom ERP that the business ran to Oracle.
And I was loving it.
It was the greatest project ever.
So we were a company in Florida, ran out of Mexico using the Mexican ERP.
(20:39):
So Mike, you're a smart guy.
Is the measurement system from the U S the same as the measurement system from Mexico?
I actually can't say that I know what the measurement system in Mexico is, but I'm going
to guess no.
You are correct friend.
We may use gallons and they may use liters.
And so in paint, you have five gallon buckets.
So we set up this paint automation line that was tied to the ERP.
(21:01):
It automatically filled buckets on the assembly line in an automated fashion.
We were amazing.
Except for one little fact.
We didn't realize the system was set up in liters.
And so it filled five liters in every bucket and not five gallons.
For those listening at home, that's a pretty empty bucket.
So I don't like this podcast.
(21:22):
Yeah.
Empty souls, empty buckets.
So we, I run this assembly line, we're so proud of ourselves and they had an automatic
palletizer.
No one's going over to lift the buckets.
So the ownership group comes in the next day like, yeah, man, this is awesome.
You guys got to come out and see this.
We tied it to the ERP.
It's built into the system.
We're great.
And so I remember the owner just like quietly walked over the assembly line and like just
(21:44):
grabbed a bucket, just, you know, like a moment.
Cause I don't know, maybe a photo.
I don't know why.
And realized it was pretty light.
Yeah, that was a rough day for me.
That was a rough day.
So that moment of like flying high photos, great job.
We did it.
Maybe we shouldn't get into why you don't work there anymore.
Sneaking suspicion over here.
The funny thing is they moved me to Mexico and I did it globally for many years.
(22:06):
For the next eight years, I did ERPs globally.
I did such a bad job.
They said, let's do that around the world.
They said, no one's smart enough to do that again.
So that was the funniest moment of like the celebratory, we're killing it to the, uh-oh,
we're in trouble the next day.
So that's my favorite ERP story.
Excellent.
Excellent.
What's the worst ERP environment you've ever seen?
The worst implantation I've seen was this custom application that was built for a business
(22:30):
and it was designed and implemented by one individual who worked at the business.
And it was designed using a very old code base, but it all kind of lived in the brain
of this one individual.
And so, uh, this person had kind of set it up in the way that they thought.
And so like we're used to things like customer master where all the customers are stored.
They had a table where customers and product were mixed together and just some very unique
(22:51):
decisions I would say.
And so this business sold, it transacted and people found out the number of what the business
sold.
And so the first thing that this individual who built this ERP did was go knock on the
owner's door and say, Hey, I need a two X-rays tomorrow or I'm out.
Well he got his two X-rays and then we were brought in to help reduce the spin for that
(23:12):
organization and get that ERP out of there.
It was the most convoluted, complicated detangling of ERP I've ever worked on to get out of the
system.
And so we trusted that one person that really locked them in because they didn't have that
broad vision.
And so when we see IT professionals without a broad vision or a vision to the future,
like we said, at the top of the call, right?
(23:32):
Or the top of the podcast, excuse me, is people focused on business needs and not just solving
IT because it's cool, gets you in a pinch.
That's probably the worst I've seen.
But by the way, three year implementation for a hundred million dollar business for those
that are listening at home.
Interesting story.
I'm sharing those.
So I think we're going to wrap it up for today.
(23:54):
You know, I think we're trying to do every other week episodes of the cast.
Are we calling it the cast or is it the podcast?
I like the cast.
We're going to be casting every couple of weeks here and trying to live by that agenda.
And we're going to talk a lot more about ERP systems, I think in the coming months ahead.
(24:16):
A lot of companies going through that every year, lots of companies are thinking about
ERP changes and system upgrades, et cetera.
So we're going to spend a lot of time on that.
We know it's a hot topic.
So thanks for sharing your thoughts today, James, and look forward to the next time.
Thanks Mike.
Appreciate the time.
Thanks for tuning into this episode of Growing EBITDA.
If you liked this episode, hit subscribe or follow us on LinkedIn for updates.
(24:40):
Got a topic you'd like us to cover?
Drop us a message.
We'd love to hear from you.
Welcome to the Growing EBITDA podcast, where we unlock the doors to management and technology
(00:08):
insights in the middle market.
Join us as we explore innovative strategies to drive revenue and EBITDA growth, interviewing
industry leaders and technology experts.
Whether you're looking to streamline operations, understand the latest tech trends, or lead
your company towards exponential growth, you're in the right place.
Stay tuned and let's grow together.
(00:32):
So James, to get started today, is it ERP or is it ERP?
It is ERP and it stands for Enterprise Resource Planner.
Got it.
I'm glad we clarified that.
Yeah.
I just want to make sure everybody continues to understand just how good a technology I
am, right?
And that I just want to reiterate how I'm not the technology expert here on the show.
(00:57):
Establish a nice baseline and throughout the season of listening to podcasts, we're just
going to see your skills and talents grow.
That's right.
That's right.
Thank you.
Thank you.
So James, today we're talking about ERP systems.
And to get us started, I think all of our listeners probably have an ERP system in place
in their business of some sort.
I'm sure we'll have a couple of listeners maybe still running their businesses on QuickBooks.
(01:21):
We certainly see that from time to time.
You can run a pretty big business on QuickBooks.
It's a function of whether you can do that efficiently or not as the business scales.
But a wide variety of ERP systems out there, we've kind of seen them all.
Probably one of the most common questions that we get when we're chatting with clients
is, is it time to upgrade my ERP system?
(01:42):
So how do you coach businesses when they're business leaders rather, when they're thinking
about an ERP system change, how do you identify when it's the right time to do an upgrade?
Or how do you decide whether or not you're going to continue to reinvest in the current
system?
When we start these conversations, I like where you began by saying when you're speaking
(02:05):
to the business, because they need to be business led conversations.
And that ERP needs to be driving business value and helping the business run successfully.
So I think when we talk about ERPs, there's a few different reasons that folks upgrade.
And one of them is around the operational bottlenecks and the challenges that systems
(02:25):
present when they're not adequate for the scale of the business or the needs of the
business.
And essentially the ERP becomes outdated.
There's a few reasons that happens.
You mentioned QuickBooks, which we do see a lot.
As my business starts to scale, everything else starts to scale.
If you think about it, as I scale my business, I buy more things, be able to do more.
(02:45):
I need to add more humans, be able to do more.
But sometimes we forget about those systems and hope or expect those systems spill the
keep up with us.
So those bottlenecks can be presented when the system isn't sufficient for the business.
The second that we see is we know that new ways of working, new technology to use, new
(03:06):
systems come along every day and making sure that we're still able to connect to those
systems.
You know, in our personal lives, we went from VHS to DVD to streaming.
And we want to be able to get those great things about streaming and seeing any show
at any time.
There has to be upgrades made in your technology within your home to help them enjoy that technology.
(03:27):
Same thing for the ERP.
New connections are made, the ability to tie to your bank, the ability to tie to systems
or automation within the warehouse requires a new core system there.
And the last one is really under, it's about user inefficiencies.
I have users that go into the system every day to accomplish work and complete tasks.
And if they're not able to complete those tasks in an effective manner, whether that's
(03:51):
the systems out there, the trainings out there, or it's too complicated, it can slow down
my business.
So it's a way to really help your users work quicker and more efficient in their day to
day jobs.
So how do you think though, you know, a lot of businesses start thinking about ERP upgrades
and one of the biggest hesitations is usually cost driven, right?
(04:15):
We've all heard horror stories from multi-year ERP system implementations, or maybe it was
supposed to take 12 months or 24 months.
We've heard of businesses on year five or seven, in some cases more of their ERP conversions,
so to speak.
I mean, it sounds like a very expensive thing to do.
(04:36):
How do you balance, you know, looking at costs versus efficiency pickups?
How do you think about that?
So the first thing we tell everyone is start with a charter and have an agreed upon plan
before you do anything.
The whole knowing where the end of the marathon is, so you know you finished the race, pretty
quintessential.
(04:56):
We see time and time again that folks begin their ERP journey with a loose plan of what
they want to do or saying something like, let's just get what we have today in a better
system.
Unfortunately, that lack of rigor creates a gap that's then filled in by some unfortunate
designs by technologists or unfortunate decisions by the business.
(05:18):
So we like to say all the time, prepay the pain, put together a plan, have an agreement,
understand where you're going, set a budget to it.
The next part of that is having the conversations and picking somebody from your team that's
ultimately accountable and responsible that's focused on the success of the ERP.
When nine people own the success, zero people really own the success.
(05:40):
Having a focused resource with that budget they're aligned to and a trusted partner,
we see folks be successful all the time.
And here's an easy question for you.
How much does it cost to upgrade an ERP system?
Yes.
So it's amazing.
It's a dollar 99.
The challenge is it's expensive and you don't know how expensive it is depending on your
(06:01):
business and what you're trying to do.
It's a big delta.
You can have folks that have ERPs that cost $100,000 to implement, and then you have folks
who cost $100 million to implement.
In our space and the space that we work in every day, we typically see folks anywhere
from $200 to $1 million during their ERP implantation, depending on scale, size, and complexity.
(06:25):
So let's move off cost.
I think we could probably spend a lot of time talking about costs of different systems.
I'm sure you've got a bunch of horror stories and maybe a couple of, it was a little easier
than we thought stories that maybe we'll save for a different episode.
But let's talk about, let's dig a little bit more deeper into the benefits.
(06:46):
So let's make the assumption that somebody has decided they've outgrown their current
system.
They definitely need to upgrade to a new one.
What kind of benefits do you see people in 2024, for example, experiencing when they're
upgrading to some of the latest and greatest systems that are out there?
When folks today work in an ERP that's underperformant or could be improved, we see that they have
(07:10):
to go to multiple systems to accomplish their job and get it done.
The most common that we all know is Excel.
So I do some stuff on paper, I go into the system, I do some stuff, and then at the end
of the month, maybe I do some other things in Excel to be able to get it done.
So having that integrated system where everything's together, everything's aligned, and everyone's
working towards the same thing, big benefit.
(07:33):
Number two, if we remember on the green sheets of paper that used to print and the dot matrix
printers and at the end of the week, you would get your sales report and they'd rip it off
the printer and they'd run it down.
Everyone knew, hey, here's how I did this week.
We're pretty far from that generally, but we're not far from that in some systems.
That delay could be 24, 72, or we see people with 15 day, 20 day closes.
(07:55):
The ability to get that data in and be able to make decisions that can affect your business
or help your business in a timely fashion is affected by not being able to have access
to real time data.
The last one is scalability.
In this space we work in, we see businesses every day start double digit, single digit
million and grow to triple digit million.
Is that system able to scale with you?
(08:17):
That's a huge benefit because if I'm not re-implementing the system every time I buy a new company,
I'm really in a position of power to go to move quickly, absorb them, derive that business
value, have a continuity between my processes and the way I work, really driving a lot of
benefits.
What factors should companies consider when selecting an ERP system?
(08:39):
I think we all have a tendency to go for the banner name.
When you think the Costco method, the Costco method is better best.
When you go to Costco, there's no good.
I think that idea that is this ERP the right ERP and can I use a different ERP?
There's a tendency to go after the banner names and we all walk through airports.
We see names in airports.
(09:00):
We see ERPs all around us.
Friends tell us about it.
The unique thing about ERPs today is there's a lot of purpose built ERPs in the world today
that are right for you.
So selecting a purpose built ERP, for example, family of five, probably not going to buy
a two door sedan.
How do I find that vehicle that's appropriate?
(09:20):
The other one that you should consider is the vendor.
So if I go and get this really niche ERP that I just mentioned, but there's four people
in the world that use it and there's nobody that can implement it and there's nobody that
can support it, I'm going to end up spending exponentially more to be able to make that
ERP successful than I would have chosen, than I would have choosing a better ERP.
(09:41):
So how do I strike that balance of an ERP that's built for me and that has the support
structure around it that can help people be successful?
So James, how do you pick the right system?
Yeah, I think businesses, it's a challenge because unless you have that broad view to
be able to do that, it becomes a bit of a challenge.
I'll tell you how we at Trivista have approached it.
(10:02):
We've built a template that allows us to ask questions to understand your business for
your business needs.
And then we have a proprietary template because we don't resell software, our ERPs at Trivista.
So we were able to partner with these folks, ask questions.
And so we created an Excel sheet that gives us all the features and functions of common
ERPs and we map those to what you need and we help you down select.
(10:24):
Now that's nice to say for me, because we do about 150 transactions a year, so I have
very rich data to go to.
As a business owner, if you're not going to engage someone like a Trivista, I would encourage
you attend the conference and don't attend the conference to speak to the technical folks
or the salespeople.
Talk to the other folks that are at the conference, ask what kind of business they run, ask what
they're doing, get out and get involved, make some trips, go see folks.
(10:49):
Don't just read websites.
So James, expensive, you threw around hundreds of thousands to maybe a couple million dollars.
Estimated financial benefits.
What are you typically seeing when you're helping clients go through an ERP system upgrade?
Yeah, Mike, this is a struggle, honestly.
We struggle and the industry struggles on really putting in numeric value to implementing
(11:15):
an ERP.
So when you think about CapEx spend, when you work on a CapEx request, you really focus
on what that value back is.
So I need a new piece of equipment.
I'm able to do XYZ and thus the dollars are, I guess, A in this example.
So the challenge we have is that financial benefit changes for everyone.
(11:35):
So if I'm a business services organization, getting my field reps better aligned, working
quick, more quickly and being able to get out there in the field and be more efficient,
I'm driving down those turns per day.
I'm sorry.
I'm driving down the labor for those turns per day.
I'm increasing my revenue just based on my same staff.
So that's one example of how that is.
(11:57):
Then the other side of benefits is for a manufacturing organization.
The ability to procure in a thoughtful manner, the ability to think about seasonality, the
ability to have access to that real time data we mentioned earlier really affects and helps
the business.
What that looks like is some variable based on what they're doing, but we always really
partner with our clients to understand how we can show that value, whether it's reduction
(12:18):
of cost by human time or reduction of cost on materials.
And so that's kind of a conversation every time.
And we partner with a lot of CFOs every year to work on those calculations to really drive
to something that's measurable by the organization.
And it's not just some funny numbers we made up.
So tell me about some of the common challenges people face when selecting and maybe implementing
(12:43):
for the first time or changing out one ERP system for another.
Talk to me about that for a few minutes.
Let me tell you about maybe not directly with ERP, but one of the major challenges we see
is I go to an individual and says, tell me how your business runs today.
Map out every single process you do.
That's tough for an organization.
(13:04):
There's a lot of pockets of knowledge within an organization and companies grow over time,
become more complex over time.
And so you organically grow into this complex, tightly woven bunch of different processes
and we have to tease those out to be able to do the ERP.
So the first challenge is who are you, what do you do?
Second challenge is really aligning the team to be able to have resources to get it done.
(13:30):
Very rarely do I go into an organization and they say, hey, my folks have really nothing
to do.
They've got plenty of time to focus on the ERP.
It's I have a job I run day to day.
I have a day to day responsibility and I need to be able to continue to focus on that responsibility
and work on the ERP.
So it's tough to be able to have those resources aligned.
(13:51):
And then the last one that I think is really a challenge is during the implementation, how
do I know it's going well?
How do I know I'm on track and how do I know I'm delivering a product that works for me?
If you have a good partner or an outside group that's guiding you, you can leverage their
tools.
But if you've never experienced the CRP, used the CRP or done something at this scale, how
(14:12):
does your team know what's the measure of success?
And so those can be some challenges along the journey that create some tension, implementing
the wrong thing, falling behind, budget going over, employees threatening to leave, poor
training.
And those are victims of kind of these buckets of challenges that can be easily solved with
the right preparation and partners.
(14:34):
What's the single most common failure in ERP implementations?
Well, can I say it's a tie between two things?
Go for it.
Number one, trying to replicate the system you had before in the new system.
Failure number one.
(14:54):
Failure number two is poor planning and documentation of the desired deliverables.
And sometimes those go hand in hand and it's a mix.
But really when we get called in and like the helicopter rescue situations, we get called
all the time, hey, we're struggling with ERP.
Can you come in and help us?
When we land, those are the two major buckets we see.
So tell me a little bit more about the first example, trying to recreate what you already
(15:19):
have.
I imagine a lot of people start off saying, this is the way we do it now.
We need to be able to do it like this in the future.
So what's the, and seems like a reasonable request.
What's the rub?
Yeah.
I'm going to use an example from you, Mike.
You and I were talking today and you gave an example of you retooling the way you ran.
(15:40):
Do you want to talk about that for a second on your retooling of how you ran?
You want to hear about how poor of a long distance runner I am?
Sure.
Let's get at it.
Well, the example that I shared was one where I went to a physical therapist who helped
me understand why my knees hurt so much when I ran and I was just running the wrong way.
(16:01):
And as I'm saying this now, I'm realizing what you're probably going to tell me about
ERP systems, but by changing some of the mechanics of my run, some slight adjustments that were
easily compromised, I completely changed the outcome where my knees no longer hurt and
distance was no longer an issue.
There's a huge unlock, right?
(16:22):
And those incremental changes, you probably could have run the other way forever at a
lower scale, not at the same performance.
And I think that really ties the ERP.
It was a great example that we just so happened to be talking about today.
It's those little incremental changes.
It's those little things and tweaks that people are afraid to do because organizational change
management or OCM for the acronym lovers out there is a challenge.
(16:43):
Getting your folks to work different.
I've been doing it this way for 15 years in the real world.
Don't make the system slow me down because in the moment, it feels like the system's
holding me back.
You're redoing my gate.
I'm not able to run while I rework on my gate.
But once you get through that and that unlock, it's exponential the results you can drive.
And so I think it's the same thing with your run.
(17:04):
Take that pain out of the business, do a couple pieces of work and to you, high five to you,
just taking a moment to think about how to do it differently and think about it differently
to be able to move forward.
And now people will know that I'm a world class distance runner.
Correct.
I may compete occasionally and usually I come in last place, but participation trophies.
(17:25):
Your knees feel great.
My knees feel like I'm 39.
James, I got one more line of questioning for you.
Let's talk about how the ERP system impacts the broader business.
We work a lot in industrial environments.
(17:46):
We work a lot in other environments as well.
But let's talk about supply chains for a minute.
How does an ERP system optimize supply chain management?
How does it interface with vendors?
Are there new technologies?
Supply chain has been a really big challenge for the last several years coming out of COVID.
(18:06):
What are your thoughts on ERP systems and supply chain?
Yeah, I love that you chose that one because a lot of times folks will come to us when
the ERP is not performing or there's some kind of really core issue.
But this is one that's how do I fine tune my system to be better?
And I'd like to say, our opinion is, can my system today allow me to be successful?
(18:28):
The last thing I want to do is change out your ERP.
I think it's quite essential to make sure your ERP can do what you need it to do today
and then just make the enhancements.
So some of the enhancements and some of the things that helps with is inventory control.
How do I have better real time back to the real time data?
Real time data and visibility into my inventory levels and what I have, really great to have.
(18:50):
Next is demand forecasting.
So not only do I have, but what's coming.
So what do I have coming and what do I have is what do I need?
So now I can derive what do I need in the system.
And the last one is supplier management.
Gone are the days of having to do supplier scorecards outside the system where you sit
in a room, have a conversation, pull out eight reports, do that scorecarding and send it
(19:12):
off.
And by the way, most of the folks don't do that today.
Most folks are actually not doing supplier scorecards, supplier reviews, because it's
such an arduous process to get done.
If you think about the future, one click being able to get that done, now I know inventory,
I know my demand and I know who can provide it to me, really helps that supply chain tip
to tail.
(19:33):
So we're going to wrap it up here in a couple of minutes.
But before we do, funniest ERP story.
Oh yeah, great question.
Can I tell you my funniest ERP story?
Yes.
My most embarrassing.
So I worked for a regional paint company doing ERP implementations as my first job coming
(19:56):
out of owning my own software organization.
I mean, why, why did you ever leave that?
That sounds like an invigorating opportunity.
Yeah.
When you have a business and you sell it, it's amazing how quickly they exit you when
you're a young person.
They get someone, had I known now, then what I know now, different ballgame friend.
I worked for this regional paint company.
And by the way, I worked with my best friends.
I went there and I never worked internationally.
(20:17):
I had like, I'd worked out of Mexico, but did domestic type work.
And so we're sitting there and we're setting up this ERP and we were going to Oracle and
we're going from a custom ERP that the business ran to Oracle.
And I was loving it.
It was the greatest project ever.
So we were a company in Florida, ran out of Mexico using the Mexican ERP.
(20:39):
So Mike, you're a smart guy.
Is the measurement system from the U S the same as the measurement system from Mexico?
I actually can't say that I know what the measurement system in Mexico is, but I'm going
to guess no.
You are correct friend.
We may use gallons and they may use liters.
And so in paint, you have five gallon buckets.
So we set up this paint automation line that was tied to the ERP.
(21:01):
It automatically filled buckets on the assembly line in an automated fashion.
We were amazing.
Except for one little fact.
We didn't realize the system was set up in liters.
And so it filled five liters in every bucket and not five gallons.
For those listening at home, that's a pretty empty bucket.
So I don't like this podcast.
(21:22):
Yeah.
Empty souls, empty buckets.
So we, I run this assembly line, we're so proud of ourselves and they had an automatic
palletizer.
No one's going over to lift the buckets.
So the ownership group comes in the next day like, yeah, man, this is awesome.
You guys got to come out and see this.
We tied it to the ERP.
It's built into the system.
We're great.
And so I remember the owner just like quietly walked over the assembly line and like just
(21:44):
grabbed a bucket, just, you know, like a moment.
Cause I don't know, maybe a photo.
I don't know why.
And realized it was pretty light.
Yeah, that was a rough day for me.
That was a rough day.
So that moment of like flying high photos, great job.
We did it.
Maybe we shouldn't get into why you don't work there anymore.
Sneaking suspicion over here.
The funny thing is they moved me to Mexico and I did it globally for many years.
(22:06):
For the next eight years, I did ERPs globally.
I did such a bad job.
They said, let's do that around the world.
They said, no one's smart enough to do that again.
So that was the funniest moment of like the celebratory, we're killing it to the, uh-oh,
we're in trouble the next day.
So that's my favorite ERP story.
Excellent.
Excellent.
What's the worst ERP environment you've ever seen?
The worst implantation I've seen was this custom application that was built for a business
(22:30):
and it was designed and implemented by one individual who worked at the business.
And it was designed using a very old code base, but it all kind of lived in the brain
of this one individual.
And so, uh, this person had kind of set it up in the way that they thought.
And so like we're used to things like customer master where all the customers are stored.
They had a table where customers and product were mixed together and just some very unique
(22:51):
decisions I would say.
And so this business sold, it transacted and people found out the number of what the business
sold.
And so the first thing that this individual who built this ERP did was go knock on the
owner's door and say, Hey, I need a two X-rays tomorrow or I'm out.
Well he got his two X-rays and then we were brought in to help reduce the spin for that
(23:12):
organization and get that ERP out of there.
It was the most convoluted, complicated detangling of ERP I've ever worked on to get out of the
system.
And so we trusted that one person that really locked them in because they didn't have that
broad vision.
And so when we see IT professionals without a broad vision or a vision to the future,
like we said, at the top of the call, right?
(23:32):
Or the top of the podcast, excuse me, is people focused on business needs and not just solving
IT because it's cool, gets you in a pinch.
That's probably the worst I've seen.
But by the way, three year implementation for a hundred million dollar business for those
that are listening at home.
Interesting story.
I'm sharing those.
So I think we're going to wrap it up for today.
(23:54):
You know, I think we're trying to do every other week episodes of the cast.
Are we calling it the cast or is it the podcast?
I like the cast.
We're going to be casting every couple of weeks here and trying to live by that agenda.
And we're going to talk a lot more about ERP systems, I think in the coming months ahead.
(24:16):
A lot of companies going through that every year, lots of companies are thinking about
ERP changes and system upgrades, et cetera.
So we're going to spend a lot of time on that.
We know it's a hot topic.
So thanks for sharing your thoughts today, James, and look forward to the next time.
Thanks Mike.
Appreciate the time.
Thanks for tuning into this episode of Growing EBITDA.
If you liked this episode, hit subscribe or follow us on LinkedIn for updates.
(24:40):
Got a topic you'd like us to cover?
Drop us a message.
We'd love to hear from you.
Popular Podcasts
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.