In this episode, we have our guest Paul Van Metre, who discusses how machine shops can use their business processes as a sales tool in their sales and marketing collateral. He also describes the nuances of running a machine job shop efficiently from his own machine business experiences. Finally, we have had a chance to discuss several scenarios and ProShop implications on your efficiency and profitability, including the most realistic timeline and practical strategies for an ERP implementation for a machine shop.
Chapter Markers
- [0:56] Intro
- [2:53] Personal journey and current focus
- [4:09] Perspective on Growth
- [5:03] Machine job shop process vs other manufacturing industries
- [6:37] The unique precision and quality needs of a job shop
- [8:06] The job shop process as a value prop
- [15:23] Job costing and tracking of a job shop
- [18:36] Automation vs increased admin efforts in data collection
- [21:53] The appropriate candidates for data collection on a job shop floor
- [24:56] The competitive advantage of automated and paperless job shops
- [28:36] The realistic implementation time for a job shop
- [35:19] Closing thoughts
- [36:53] Outro
Key Takeaways
- When you have really excellent business processes, it’s actually what sets you apart from your competition from even the sales perspective.
- When you pull back the curtain, and you look deep into an organization, it is just rife with chaos and the things that aren’t actually as good as they sound on their website, and buyers can sniff that stuff out very quickly when they really start digging into the bones of a company.
- Job shop business is typically such slim margins, you have to be able to uniquely identify the actual costing of every job, because you have to make sure they’re as positive as possible because one negative job can just wipe out your whole month’s worth of profit if it really goes south.
- By eliminating paper by asking people to track time digitally, right at their workstations, it’s not a cost driver. It’s actually a considerable cost saver.
- A paperless system is somewhat essential. So you can always have real-time information on exactly where a job is at, who’s working on it, what are the quality measurements they’ve been checking so far? How can you guarantee that the parts are good and they’re going to be delivered on time and because most companies don’t go into that level of detail in their sales process, the buyers are still going to be skeptical that this is a company that they can really trust.
- A manufacturing company does not make money in the office. They make money on the factory floor. That’s where they’re taking raw materials and turning them into finished goods that are adding that value.
The 2024 Digital Transformation Report
Thinking of embarking on a ERP journey and looking for a digital transformation report? Want to learn the best practices of digital transformation? Then, you have come to the right place.
Subscribe and Review
Apple | Spotify | Stitcher | Google Podcasts | Deezer | Player FM | Castbox
About Paul
Paul is the president of ProShop ERP, a fully paperless ERP/QMS/MES system for contract manufacturers in the metalworking industry. He got his industry experience from founding and growing an aerospace machine shop that was listed 5 times on the INC5000, twice voted as a best company to work for, and he was awarded Young Alumni of the year from his Alma Mater, and he had an 8 figure exit from that business. ProShop is now quickly becoming recognized as the premier ERP provider for companies in the metalworking industry.
Resources
Full Transcript
Paul Van Metre 0:00
The shop will need to accurately estimate how much time it will take how much material it will take any external processes that need to buy or have the parts sent to special tooling or work holding they’ll need. If they don’t get those things all right or as close to right as possible, then that’s just starting out to be potentially a recipe for disaster.
Intro 0:21
Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.
Sam Gupta 0:56
Hey everyone, welcome back to another episode of the WBS podcast. I’m Sam Gupta, your host, and principal consultant at a digital transformation consulting firm, ElevatIQ.
Running a machine shop is complicated, with complex parts, heavy possession needs, and tricky material handling requirements. With cost pressures from customers, rising material costs, and shrinking margins, one inaccurately estimated job could wipe out the profits for the whole month. Also, customers are savvy with their evaluation, as they now want to vet your end-to-end business processes to validate the claims on your sales collateral.
In today’s episode, we have a guest, Paul Van Metre, who discusses how machine shops can use their business processes as a sales tool in their sales and marketing collateral. He also describes the nuances of running a machine shop efficiently from his own machine business experiences. Finally, we have a chance to discuss several scenarios and their implications on your efficiency and profitability, including the most realistic timeline and practical strategies for an ERP implementation for a machine shop. Let me introduce Paul to you.
Sam Gupta 2:08
Paul is the president of ProShop ERP. A fully paperless ERP and MES system for contract manufacturers in the metalworking industry. He got this industry experience from founding and growing an aerospace machine shop that was listed five times on the INC 1000 twice, voted as the best company to work for, and he was awarded Young Alumni of the year from his alma mater, and he has had an eight-figure exit from that business.
ProShop is now quickly becoming recognized as the premium ERP provider for companies in the metalworking industry. With that, let’s get to the conversation. Hey, Paul, welcome to the show.
Paul Van Metre 2:51
Hey, Sam, it’s great to be here. Thanks for having me.
Sam Gupta 2:53
Of course, it’s my pleasure. Do you want to kick things off with your personal story and current focus?
Paul Van Metre 2:58
Yeah, absolutely. Sure. So I have lived and breathed machine shops, my entire professional career. I started one actually right out of college, which is an unusual thing to do. But my buddies and I went through an engineering program. It’s very hands-on. We learned a lot about machining and manufacturing, and just fell in love with it, and decided to start a shop straight out of college.
So one of my buddies took out a second mortgage on his house. And that was enough money for us to buy a CNC machine and start our business. So I did that for 17 years, actually. We grew that company from zero to about 75 employees and 30 plus machines. It was just an incredible journey, just an incredible learning experience along the way.
During some of that, during most of that time, actually, we decided to start developing an ERP type of product just exclusively to run our own business because we couldn’t find anything on the market we thought was worth buying. So we did that. And it then turns out other shops wanted to buy it. So we pivoted 17 years later, sold the business, and are now full-time selling ProShop ERP software.
Sam Gupta 4:09
That’s great. And I think there are going to be a lot of lessons for our listeners in terms of your growth journey and growing that from zero to 75. I think that’s what you said, right? That’s an incredible journey.
So we are going to dig deeper into that. But before we do that, we have one of the standard questions that we ask all of our guests, and that is going to be all your perspective on business growth. When you think of the word growth, what does it mean to you?
Paul Van Metre 4:34
Well, it starts with being sales-driven. All organizations have to be sales-driven. If they want to grow, if they’re not, they’re just not gonna have the customers to do so yet. Once they have those customers because they’re sales-driven, they really need to build business processes. You can’t scale or grow with just a mishmash of random people doing random things. You’ve got to have solid rock-solid business processes and systems in order to manage that scale and grow smoothly and efficiently.
Machine job shop process vs other manufacturing industries
Sam Gupta 5:03
Okay, amazing, so let’s go back to your comment about the machine shop, so obviously, you were running your machine shop, but now I don’t know if you basically work with any other businesses, but my question to you is going to be what are some of the nuances that you have seen from the business process perspective of a machine shop that does not exist in the other manufacturing sub-industries so if you can take an example of certain industries and if you could compare them that will be very helpful
Paul Van Metre 5:34
So most machines, I mean, there are many different types of machine shops. The most common ones would be considered a job shop. They are taking customer specifications in the form of 3D models and engineering drawings, and they are machining manufacturing precision products to deliver to their customers. It’s a high mix, low volume business. It’s always something new, and because of the nature of machining, they’re dealing with incredibly precise tolerances, very difficult, challenging materials sometimes.
And it’s a very hard kind of business to run. The margins are generally slim, and the chance of losing money even as a business is really high. So you kind of got to be running on all cylinders. You got to be dialed into efficiency all the time really focused on process, and I think it’s just because of the precision nature it’s more challenging than a lot of other businesses that are even a job shop type of thing where things are coming in new all the time.
A paperless system is somewhat essential. So you can always have real-time information on exactly where a job is at, who’s working on it, what are the quality measurements they’ve been checking so far? How can you guarantee that the parts are good and they’re going to be delivered on time and because most companies don’t go into that level of detail in their sales process, the buyers are still going to be skeptical that this is a company that they can really trust.
Paul Van Metre, President, ProShop ERP
The unique precision and quality needs of a job shop
Sam Gupta 6:37
Okay, so that’s a very interesting comment, right. So, if we are talking about precision here, obviously, the quality requirements are going to be there in this business that may not be as important as some of the other businesses where precision is probably not going to be as important.
So in this particular case, can you touch a little bit more on from the precision perspective how the business process change because of the precision requirements?
Paul Van Metre 6:59
Yeah, well, there have to be very careful steps to review the contractual requirements from your customers, particularly with the types of customers that we work with and the type of shop that we work with before, a lot of Aerospace and Defense or Medical industries.
So a lot of flow down requirements, quality requirements, security requirements, and even federal types of requirements for cybersecurity and defense types of things, so there’s got to be a lot of checks and balances to make sure you’re not forgetting something or missing a small detail that will just absolutely kill that job.
So very, very stringent focus on review, and quality and checklists, we think checklists are really an important way to do that. And ultimately, this when you have really excellent business processes, it’s actually what sets you apart from your competition from even the sales perspective. And that’s something that we always focused on in our shop, and it was really was a formula that worked for us.
The job shop process as a value prop
Sam Gupta 8:06
so tell us some of the ingredients, and this is a very interesting comment especially using the business process as a tool. I don’t know how many shops and the manufacturers are really thinking that I don’t know if that is going to be part of the value prop, but it seems like you are suggesting here that you know that could be used as a very broad marketing messaging.
So let’s say if you were running your own shop Paul, so what will be the areas that you will be highlighting from the business process perspective, and you can talk slightly more in the ERP language as well? That will be amazing because that will actually help connect the dots together, right?
So let’s say I don’t know whether you are going to specify that we have higher quality, but that could mean a lot of different things. So how would you position your value prop so that you are differentiating with your competitors and being slightly more specific?
Paul Van Metre 8:56
Sure. Well, I’ll start by saying that every company out there that is buying precision machine parts, you had someone on your show just recently, Matt Guse from M.R.S. incredible shop, great guy. So every and I’m sure he can tell you this as well. You know every customer when they come to a shop, they will have had horror stories in the past of other vendors that didn’t perform well.
Maybe they accidentally made something out of a wrong variant of a material, or the machine-made, they made the entire batch of parts, and they missed this one little dimension or feature that has to scrap the entire job, and because of the critical nature of the type of work, you know that a machine shop does there are often mistakes made, and that causes really catastrophic results for the client.
Paul Van Metre 9:45
So every shop out there says they have great quality, they have great on-time delivery and they put that on their website, and they try to tout that but buyers these days, buyers of you know of any kind, but really, in this case, buyers of machine precision machine products are extremely sensitive, and maybe a bit skeptical, rightfully so that these vendors are actually as good as they say they are.
Because generally speaking, when you pull back the curtain and you look deep into an organization, it is just rife with chaos and the things that aren’t actually as good as they sound on their website, and buyers can sniff that stuff out very quickly when they really start digging into the bones of a company, so we believe, and we did we practice this ourselves that by really focusing on selling our business process and our quality management system, which are really quite interconnected with each other, that was a real differentiator for our client.
And it proved to be the case we grew tremendously over many years, and I think got a lot bigger than the average machine shop out there. And so we’re now using this same concept to help our customers grow their businesses.
Sam Gupta 10:59
Let’s talk about a little bit more of the ERP right because if you think from the ERP perspective, an ERP that is going to be relevant for the job shop is going to be slightly different than your generalized ERP, because as you correctly pointed out, that the needs of a job shop are completely different from the business process perspective.
And that typically drives the ERP features that a business is going to need. So let’s say if you are saying that I’m just high quality or whatever generalized pitch in your value prop, that’s not gonna cut it because everybody says so, right. But let’s say if you can translate that in slightly more ERP language, and that could be a differentiator in my mind.
So let’s say if you were to talk about a little bit of ERP language here, right, also how our job shop ERP is different from your generalized ERP. And how, let’s say, job shops can use some of that verbiage in differentiating, because if they are going to say in your sales collateral. I’m using jobs or ERP, and I’m using these specific features that are only relevant for a job. And because of that, this is going to be helping you with respect to quality and with respect to precision. Now, that’s a strong pitch, in my opinion, right? So if you were to design this pitch, what would be your recommendation?
Paul Van Metre 12:18
Great question. And I appreciate your asking that. So I mean, it can start as early as the quoting and estimating process, right? Most business transactions with a job shop start with a customer saying, here’s my drawing my model, please give me a price on 1000 of these or on 20 of these or 100 of these.
And a shop will need to accurately estimate how much time it will take how much material it will take for any external processes that need to buy or have the parts sent to special tooling or work holding. And if they don’t get those things, all right, or as close to right as possible, then that’s just starting out to be potentially a recipe for disaster.
So they can certainly talk to their clients about how they estimate accurately how they make sure that when they quote, an accurate lead time that they can commit to that lead time, that customer will get those parts in four weeks, or six weeks or eight weeks. And they won’t need to come back to the customer to say, Oh, I’m sorry, we made a mistake, we need to raise the price or the parts are going to be late, we’re not going to be on time. So starting as early as that is, I think, a really important step.
Paul Van Metre 13:25
And then, going past that, when they receive an order from the customer, they should be talking about their contract review process. They should be talking about their manufacturing, planning, and engineering process, how they are going to set that job up for success to ensure that they can execute as they estimated in the first place.
There’s nothing that is worse for a shop that is going to fail on a job and fail for their customer when they go to manufacture those parts. And they realize that there’s something that they didn’t consider, and its code totally derails the project. So the more thorough their contract review and planning and engineering processes, the more likely that job will be set up for success in the shop.
And then when it hits the shop floor, they need to have accurate tracking, accurate job costing, the accurate status of exactly where all their jobs are at any one point in time. Are they on machines?
Paul Van Metre 14:24
Are they at a vendor? Are they being inspected? And are they already on the truck to be shipped? Right? It’s amazing how many companies have no idea where their jobs are unless they actually physically walk out to the shop and look.
So we believe that a paperless system is somewhat essential. So you can always have real-time information on exactly where a job is at who’s working on it. What are the quality measurements they’ve been checking so far? How can you guarantee that the parts are good and they’re going to be delivered on time and because most companies don’t go into that level of detail in their sales process, the buyers are still going to be skeptical that this is a company that they can really trust?
So if they can demonstrate with no uncertain terms about how they guarantee that they are more likely to win that customer, they’re more likely to win more business with that customer. And we’ve seen this time and time again, with hundreds of shops that we’ve worked with, including, of course, originally our own business.
When you pull back the curtain, and you look deep into an organization, it is just rife with chaos and the things that aren’t actually as good as they sound on their website, and buyers can sniff that stuff out very quickly when they really start digging into the bones of a company.
Paul Van Metre, President, ProShop ERP
Job costing and tracking of a job shop
Sam Gupta 15:23
Okay, so let’s talk about this see job costing and tracking of the job through the shop floor. So in some cases, when we work with some of the customers, let’s say they have never used any ERP system. And now they are super excited that they want to actually switch to an ERP system.
So I’m actually referring to a recent story that we were involved with. And in this case, I mean, and I’m pretty sure you have experienced this as well, that a lot of folks have this notion of technology is sort of the binary switch, where they feel that the technology is sort of the automated switch, and once you actually switch it on, then all your problems are going to be solved, right.
So let’s say if they have never used an ERP system, so initially, everything was manual. But now, if they are buying, let’s say, ERP systems, what they want to do is they want everything to be automated. They don’t want to do much work. So in this particular case, when we started talking about, let’s say, your delivery tracking, or the material tracking, as the job actually moves through the process, that is super important.
Now, you could also, let’s say backflush; I don’t know if you guys do backflushing or not. That could be an automated way of doing that.
Sam Gupta 16:35
But I mean, then you are actually going to lose a lot of trackability from the material perspective. So there are two scenarios here. Number one, you could have this completely automated. Hey, I have released my BOM to my production floor.
Now my workers should not be touching the ERP. Now I should have my job costing them in an automated fashion without any data entry required. So let’s say if you will explore an implementation based on this customer, what would be your recommendation? Is it a good idea to sort of automating everything? What is going to be the implication?
Let’s say they backflush everything, including your material and labor, meaning everything is going to be automated, your labor is going to be reported as it was, let’s say put on the BOM, the material is going to be reported as it was put on the BOM. So there is not going to be any sort of room for variation, right? So what would be your thoughts on this process? Do you agree with the customer? Do you see any implications here in this scenario?
Paul Van Metre 17:32
I think for a job shop, that’s actually a terrible idea. Standardized costing, like that, is just not the reality of the job shop business. So you can’t take the standard material cost and labor cost that was on the bottom and just use that because that has no basis. In reality, what we really need to know is how much it actually took in labor, how much we actually spent on all of our materials. And compare that to our original estimate and what was what we had priced the part up.
Again, because the job shop business is typically such slim margins, you have to be able to uniquely identify the actual costing of every job, because you have to make sure they’re as positive as possible because one negative job can just wipe out your whole month’s worth of profit if it really goes south.
So there has to be some manual input. But you have to try to make that as easy and simple as possible for the user. But collecting actual hours collecting the real purchase cost of everything you’re buying, I think is incredibly important for a job shop.
Automation vs increased admin efforts in data collection
Sam Gupta 18:36
Okay, so let’s define some, right? So when you say some of that needs to be entered. So I’m actually looking for some sort of best practices here because my role in this conversation is to be a CFO. And if I were to think from the perspective of a CFO, so in my mind, what I’m thinking is, let’s say sure I get the idea that let’s say if I might lose in a specific job just because there was a variance in either material or labor Rate but at the same time let’s say if I asked my guys to report on every single step, every material, every job, obviously that’s going to be a cost overhead in reporting that is what so the CFOs like to think from the complete perspective right?
So you are actually increasing the actual cost because you are increasing the admin effort. So what would be your recommendation? How would you define the best practices? What should be automated, what should not be automated?
Paul Van Metre 19:27
Sure. So first of all, let’s mention that a traditional ERP has what we call job travelers, right? They physically they’re paper documents that get pushed out onto the shop floor. Generally speaking, they have barcodes on them, and the employees would if they’re tracking time on an operation or on a job, they would scan the traveler, they would scan maybe their employee badge, they would scan the operation they’re working on, and they’d scan, maybe an activity, maybe They’re setting up or they’re running, or they’re inspecting.
And just the very practice of having someone scan four or five or six different barcodes, yeah. And they’re doing this at a centralized terminal out on the shop floor, say a typical company with 50 people out on the shop floor, they might have six or seven computers scattered inside the factory that is somewhat centrally located to their equipment.
Paul Van Metre 20:26
So the employees can relatively easily walk over there and do that, just that alone. You were having it be on paper. Having it be centralized computers rather than work center-specific computers is an incredibly expensive cost driver. And you’re right, if you’re asking them to track that much of their work, using that method, they’re gonna be spending a lot of time walking back and forth across the shop.
And everyone that’s been in the shop knows, it’s not just a two-minute walk is a 32nd walk from your machine over to this station, you’re going to have to wait for someone else, you’re going to get sidelined by a co-worker that says, hey, can you come to take a look at this with me, you might go to the bathroom, you might go to the watercooler and grab some water every time you’re leaving your equipment to track time that is costing the company money.
It’s costing potentially throughput. So we are advocates of putting devices right at every single machine. Yeah, there is a cost to that. But you can get them fully dialed in for three or $400. And the ROI of putting a device at every workstation is actually very, very short, probably in the matter of just a few weeks when you add up the cost of people walking and traveling and looking for paper documents and things of that sort.
So I would say that by eliminating paper by asking people to track time digitally, right at their workstations. It’s not a cost driver. It’s actually a considerable cost saver.
The appropriate candidates for data collection on a job shop floor
Sam Gupta 21:53
Okay, so let’s make this situation a bit more complicated. So let’s say if you are not using the barcodes, okay, and you are completely paper drawer in which you have to actually do the data entry, and you don’t necessarily have a centralized computer as well.
So basically, what you’re doing is you are actually collecting data on a paper, okay, if you have a patient, there are some reasons and let me see, let’s say the executive does not feel comfortable in bringing the computer on the shop floor just because they are afraid of the cybersecurity risk.
And we have seen those scenarios as well. So they simply want to use paper on the shop floor, and they want to send back a paper. So if that was the case, and we have to consider the cost of inputting this data as well, in this particular case, what would you be automating? And what would you not be automating in terms of data entry?
Paul Van Metre 22:43
So basically, you are collecting all the data on the paper. You already have your BOMs, right? That is printed on the job traveler, the job traveler is moving around the shop, and on the paper, you are literally inputting your, your labor hours, and you’re also inputting your, let’s say the if you have any variances in the material, let’s say if you plan for, I don’t know, 50 of the items, but then you ended up using 45.
So you will note that down, and then your supervisor is going to come, and then they are going to collect the paper, and they are going to actually do the entry. This scenario also happens in cases where let’s say if you have workers who are not as computer savvy because there are going to be cleaning costs and trimming them.
But I mean, they obviously know how to write on paper. So some businesses are comfortable doing that. So if you were doing this, would you still automate? Would you not automate? What would your recommendation be in this scenario?
Paul Van Metre 23:38
Yeah, and I can definitely empathize with shops that are fully on paper. We work with many of them. That’s true, there are definitely people that work out on the factory floor that have been doing it the same way for 40 years, and they tolerate doing it by paper, but they definitely are not going to tolerate doing it on a computer.
That’s the reality of our world every day. And we have to through training and advisement and coaching and supporting these clients and trying to make software that’s intuitive and easy as possible try to make it so that even the most sort of grumpy you know shop for machinist will actually see an incredible benefit to them in their job on a daily basis by learning a few basic, mouse clicks to try to help track their time and provide the company with more real-time information.
So we try to just put the positive spin and what the ROI will be both for the company in general and for the individual employee who might be frustrated with certain things that the company hasn’t done or isn’t taking their feedback or their input enough and they have ideas and how to improve the process. And there’s a lot of ways that you can help open up that flow of information in a general pure eliminating paper.
Job shop business is typically such slim margins, you have to be able to uniquely identify the actual costing of every job, because you have to make sure they’re as positive as possible because one negative job can just wipe out your whole month’s worth of profit if it really goes south.
Paul Van Metre, President, ProShop ERP
The competitive advantage of automated and paperless job shops
Sam Gupta 24:56
Yeah, so let’s look at this scenario. From the perspective of The customer, let me see the original topic that we were discussing was really creating sort of the value prop and also from the to strengthening our sales pitch.
So as majority of the machine shops are really contract manufacturing shops, right? They are working for a customer. They are serving a customer, right? So nowadays, I mean, obviously customers are not just going to be happy with the sales pitch when they are probably going to come to visit your shop, they are going to be asking a lot of questions.
So let’s say if they are exploring two different shops, let’s say you are in a competitive situation, and one shop is completely automated with the centralized screen or whatever. And then the second one is really running on the paper. So let’s say you have run the shop yourself, Paul, what do you think? Are you going to lose the business? Are you going to win the business? Let’s say if you are paper-based, can you do anything to strengthen your pitch if you are going to be paper-based, and you have to include that as part of your value prop?
Paul Van Metre 25:52
Well, I will give you an actual story, okay, and your listeners can even read about this. There’s an article published about it. We had a customer, they were in Connecticut, a small contract manufacturer, and their customer got bought out by a larger firm. And that larger firm decided to pare down the vendor base right there. We’re gonna go visit all the suppliers and cut on some number of suppliers.
So our customer was dual sourced on a number of part numbers, a number of programs with another shop that was in that same area, and their audit team came out to visit our customer. The audit team went to visit the other competitor. And when they visited our customer, the first thing they did was they sat them down in their conference room. They pulled up their system on the big screen TV right there. They went through their entire system digitally of how are they manage their projects, how they make their contract, review how they verify quality, how they make sure they’re on-time delivery.
And they even looked at a job that was running on the shop floor right at that moment in time for that customer. They could see exactly how many parts were made; they could see the inspection results that the machinists and inspectors were typing at that moment.
Paul Van Metre 27:11
And then they walked out on the shop floor, and they saw it happening in real-time. And they saw the work instructions on a screen right next to the machine. They saw them entering in their inspection results. And the auditors were just absolutely blown away.
And when they visited the other supplier, they could show them none of that they had paper documents. They said, well, I don’t know, let’s go look in the shop and see how many parts are made. Right? They had paper records of inspection, perhaps, and that it was just not nearly as impressive and confidence-inspiring.
Our customer won all the business, the other vendor was cut entirely from the supply chain, and then that customer went on to more than double the business. So it actually went by 4x, what it originally was. Just I think it’s a prime example of how using your business process can really differentiate you from a company that is not that doesn’t have as robust a good business process.
Sam Gupta 28:07
Okay, so let’s talk about one more scenario since you had the comment about putting your, let’s say, terminal right next to your machine. And typically, with ERP implementation, I’m pretty sure you would agree with this one that the ERP is just more than the software.
It’s going to be your people’s process and technology. Whenever you’re exploring any sort of ERP initiative, it’s going to be much bigger than just the software. It’s not going to be as simple as, hey, give me your data dump, I’ll put it in my system. And you you are ready to go in like two weeks, three weeks, whatever.
Having a system that has sort of deep functionality to increase overall effectiveness on the shop floor, reducing setup times, increasing machine utilization, and allowing those employees to be much more effective with their time has got to be a part of the consideration for job shops.
Paul Van Metre, President, ProShop ERP
The realistic implementation time for a job shop
Sam Gupta 28:36
So I’m actually going to ask you one of the interesting trends that I typically see in the enterprise software market. There is this sort of rat race going on in the ERP community that the implementations can be done, let’s say in two weeks, three days, four weeks, that is just unreal.
In my experience, what would you say to that, especially for job shops, when you have to carefully analyze your processes, when you have to carefully analyze your processes from the efficiency perspective as well, for example, putting, let’s say, devices right next to a machine and looking at how your workers are operating all your individual processes are now this requires careful planning, careful analysis, and careful implementation as well.
So would you actually hire this implementation consultant just because they are claiming that they can do it in three weeks versus the other one who is probably claiming that six months? What is the realistic amount of time that any implementation will take in a job shop?
Paul Van Metre 29:38
it all depends on the size of the company. It really, really does. We have had clients that have had to have been a live system of record change in less than four weeks, but they were relatively small, probably under ten people. I would say something more on the in the order of eight to 12 or 16 weeks is more realistic for maybe a 20 to 100 person company, something like that.
And but it can, it doesn’t need to be six months, nine months, a year, or more, it definitely does not, at least in our case, but yeah, but quite honestly, we don’t have a ton of experience with companies with hundreds or 1000s of employees. That’s just not the market we serve.
Paul Van Metre 30:14
Yeah, and I certainly understand that big organizations it’s often a multi-year process. But yeah, whether with a relatively intimate team that has and the biggest variable that we’ve seen, quite honestly, regardless of size, is just how dedicated that company is to moving ahead without reservations without people digging in their heels.
And that comes from the top that comes from the leadership saying, we are doing this, there are no ifs, and, or buts about it, you either are with us, or you’re against us. And I’ve had similar my most successful clients say that they say, if you fight me on this, I will fire you, right.
But once we’re done, then I want all your feedback. I want to hear what you like and don’t like about the system. But you just kind of reserve judgment until you really understand how this is going to work. Fear of change is huge. Everyone has it, or most everyone has it, and rightfully so. So it does require that sort of steady hand and leadership to make sure that it goes smoothly.
Sam Gupta 31:13
Yeah, what 100%, but I mean, things are not typically as binary as in the real world, right? So in our case, I mean, see, when we tried to do, let’s say, the implementation in the short time, typically the biggest challenge is going to be the business priorities.
So I know that you made a comment that the business needs to be committed and dedicated. That is great. But at the same time, these are the same people, especially with the smaller organization, they have to run their business. That is the top priority always. Yes, sure. ERP implementation is great.
But that cannot be the main priority. Running your business today is the main priority for any executive for any CFO or anything you write. So if I’m the manufacturing CFO, my first priority is always going to be how can I sell to my customer today? Because that’s how I make money.
Sam Gupta 31:59
Yep, implementation is great. I mean, see, that is going to be, let’s say, in next three months, six months, five months, whatever. I’m cool with that. But that is going to be tomorrow’s benefit. So sometimes, when we try to rush in the implementation, it just sort of creates this environment of panic that nobody wants to see, especially during ERP implementation.
You want to make sure that the actual users have enough training and testing clients. And as ERP systems are extremely complex, designed to be complex, because it’s a very cross-functional knowledge that you have to learn. And you are learning a new process. You are learning a new system that requires time, right?
So yes, have you seen these implementations being successful, let’s say in three to six months, or the four weeks implementations that you have mentioned? What do you still recommend based on the scenario outlined here?
Paul Van Metre 32:48
I guess I have fairly limited experience, and that we’ve only ever implemented our own product, I don’t have any experience implementing other ERP systems. But I do know that when we are, and we have a very, very defined process that we go through, and we actually use ProShop to manage the project manage it, we have what we call an implementation process, work order, and we run it just like a job, actually.
So when we start, say, something it’s very easy to understand when we start at the beginning of the process, where we’re training on estimating, estimating, and quoting then after they’ve learned how to estimate and quote, we expect that they will start estimating and quoting in ProShop, immediately, right, so the week after they learn it, they are using ProShop to estimate and quote, so they are running their business, at least in estimating on ProShop immediately, then the orders that they start to win from that activity will be the training folder for doing order entry, contract review, and so on down the line.
So in the best-case scenario, you are using the ERP almost immediately, and at some point, you will start to ramp up more and more use of the new system. And you will start ramping down, and at some point, you will no longer put any new jobs in the old system.
Paul Van Metre 34:05
And there will sometimes be a natural progression depending on your lead time of where you just quietly turn off your old system and the new one has become the system of record formally.
So now maybe I should preface this or add this little detail ProShop from a financial perspective and an accounting perspective. It is not accounting software. We have integrations with QuickBooks and Sage, and a couple of other products. And so very often, our clients are either maintaining their financial system that they had before, or they’re making a separate switch of as to where invoices and bills are coming from and where they’re doing their AR and AP, but so it’s worth saying that in the case where say they were using QuickBooks enterprise and they want to keep using QuickBooks enterprise, there is never a switch over from that side of things, right?
That’s just continuous, which is nice. It’s nice that they’re not they don’t have to change that. So that allows from the execution, the manufacturing side has this sort of slow or not even that slow, pretty quick ramp up and ramp down of their old system in a relatively smooth and seamless way. So it can absolutely be the case that a 100 person shop in three months could be turning off their old system.
Sam Gupta 35:19
Right, amazing. Paul, that’s it for today. Do you have any last closing thoughts, by any chance?
Paul Van Metre 35:24
Yeah, I think it’s just really important that when companies are looking to switch ERP, they are thinking a little bit more broadly about the entire organization, and especially on the manufacturing floor, right? A manufacturing company does not make money in the office. They make money on the factory floor. That’s where they’re taking raw materials and turning them into finished goods that are adding that value.
And having a system that has sort of deep functionality to increase overall effectiveness on the shop floor, reducing setup times, increasing machine utilization, and allowing those employees to be much more effective with their time has got to be a part of their consideration.
And when you do that, that’s really where you can impress a customer and their quality auditors. When you show them, you have this deeply embedded, robust business process that goes from front to back that can ensure that your service will deliver as you promise it will.
Sam Gupta 36:28
And my personal takeaway from the conversation is going to be the need for a job shop is going to be fairly unique. So make sure you understand those needs and evaluate against the solution that you are exploring before you commit to software. On that note, Paul, I want to thank you for your time. It’s been a very insightful and fun conversation.
Paul Van Metre 36:46
Thank you, Sam. I appreciate all the tough questions. I really do. Of course, brother All right, my friend. Thank you, sir.
Sam Gupta 36:53
I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Paul or ProShop, visit loveYourERP.com or proshoperp.com. Links and more information will also be available in the show notes.
If anything in this podcast resonated with you and your business, you might want to check the related episodes, including the interview with Dave Hataj, who describes the role gears play in our society. Also, the interview with Matt Guse from M.R.S. Machining, who discusses the challenges associated with manufacturing complex parts in short runs.
Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help. Thank you, and I hope to get you on the next episode of the WBS podcast.
Outro 37:54
Thank you for listening to another episode of the WBS podcast. Be sure to subscribe on your favorite podcasting platform so you never miss an episode. And for more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.
Related Posts:
