I have been delivering ERP implementations for over 20 years. Until recently, most of them were Visual Manufacturing (now an Infor product) or Microsoft Dynamics NAV. During the time that I have been implementing ERP many things have changed. The old “traditional” way was for very intense workouts; following through gaps for clients to “do homework”; followed by more intense sessions.

This article is probably as much for my competitors as it is for any end user company that is interested in implementing ERP. This is the technique we have developed. I help people who want to do this (as long as they choose a different target market) because I believe the market is big enough for much, much more than just me.

It’s been a major challenge for me to figure out a new way to do this kind of implementation. In particular, I have wanted to apply LEAN thinking and principles to ERP for many years. It has taken a long time, but I think we have created a new and better way to implement an ERP.

My experience now is with Microsoft’s Dynamics 365 Business Central. I’m going to use that for most of my examples, but these approaches should work with almost any modern ERP. A cloud ERP system may be required as there are some elements that work better because Business Central is cloud based, but hopefully you can apply these methods to any system.

I was able to refine and eliminate waste from typical ERP implementations in such a way that I now exclusively use a flat fee for our Business Central projects. This is pretty radical. The methods I discuss below are the “secret sauce” we’ve determined to make this work.

First, a little history.

Traditional ERP Implementations

Traditional ERP implementations carry extremely high risk, both for the implementing partner and the customer. That’s why hardly anyone offers the elusive fixed fee. The risks are too much.

The costs of the old Dynamics NAV project were high because legacy methods are expensive. The typical implementation follows a series of phases originally established by Microsoft in a waterfall project framework. Waterfall project management has been shown to be more costly than the modern “agile” approach, which is based on LEAN techniques.

The approach that has been used by virtually everyone for as long as ERP has been around is to bill “Time and Material”. This means clients pay for consultants’ time, no matter how good or bad they are. This shifts the risk from the implementor almost entirely to the client.

The reality is that there are still massive partner risks with these cascading projects. I have seen MANY cases where partners were sued or threatened when these projects go horribly wrong.

I started thinking about how we needed to change this after reading a LinkedIn post that shared an article on why “Billing for time and materials is unethical.” The arguments really caught my attention. The author asked a question that I think he summed it up fantastically well:

If a restaurant charged you for the time and supplies it takes to cook your steak, how would you feel?

This probably sparked my first real thoughts about how to stop being a time and material business.

ERP costs are incredibly unpredictable

One of the first videos I uploaded to YouTube was my explanation of why traditional costs for ERP implementations were grossly inaccurate. I’ve spent the years since figuring out ways to eliminate that inaccuracy.

Obviously, the best way to give accurate estimates was to set the rate. The problem is that the traditional approach is high risk for the partner. It is very scary to offer a fixed rate. if you don’t do it right, you’re in a lot of trouble. I have worked very hard to develop an approach that I believe is unique.

Apply LEAN thinking to ERP implementations

There is a movement to apply LEAN thinking to service activities. In general, LEAN is about removing waste from a physical product, but it can also be applied to projects.

I came up with my own variations of waste in ERP projects.

First: there is time invested by the wrong resource.

This usually happens when someone who costs too much does something that someone who is paid much less can do, or can do it faster.

Second – there are unnecessary steps

I find this happens when people take steps to “cover their butts”. Much of project management falls into this. It also happens when consultants (paid on billed hours) push unnecessary work.

Third: there are wasted tasks

Sometimes clients want to do things that we as ERP consultants know won’t work. In a traditional implementation we have no economic motivation to stop it.

Finally, there is a “bleeding” of knowledge

This is usually on the client. Usually, this is when the customer doesn’t remember his training because he doesn’t spend enough time working on the system.

Why ERP Implementations Have to Change!

When we started doing cloud-based ERP implementations with Microsoft Dynamics NAV, it was common for customers to pay $100,000 for the software and $200,000 for its implementation.

Once you get into the world of the cloud, where Microsoft Business Central costs $100 per month per user, things change. It’s hard to tell a customer that they’ll spend $2,000 a month on software and still pay $200,000 for implementation.

So we did what our customers do. We set a price, thought the market would support it, and worked backwards to control our internal costs and make money doing it. Our clients are manufacturing companies. They need to estimate a cost and then stick to it. You can’t go to your customer and say “we need to bill you more because we were inefficient in our production process.” They would go bankrupt overnight.

The new approach to ERP implementations.

I’m more of a manufacturing expert than a technology expert. Few manufacturing companies think in terms of projects with project managers (Custom Engineer is the exception). They typically think in terms of operations managers and standard work instructions.

I applied this thinking to ERP projects. It helps that all we do is implement ERP for manufacturing companies.

These are the main steps that helped us drastically reduce the risk (and cost) of ERP projects.

1. We only do one type of project.Focusing exclusively on manufacturing and small facilities meant we could refine and improve with each project. We see the process as a repetitive and repeatable process. This eliminates the initial design of the project plan, etc. Project management disappears and we reduce that waste tremendously.
2. We make up for the easy but tedious work for the clientWhen a $200 an hour consultant does what amounts to an administrative task, that’s a waste. We train clients to do some of the tedious tasks. It turns out that these are also made much better by the client. Business Central makes this a lot easier because it has great tools for end users to do tasks that used to be difficult. There are 2 of these in particular that are key: Reports and Data Upload
3. We train clients to edit formsCustomers know how they want their bill to look. They know where they want the expiration date on their purchase order. It is much easier if we teach them to change these things than to do it for them.
4. We train clients to upload data into the systemData upload is a task we assign to a cooperative student after a few hours of training. The fact is, when clients “understand” how this is done, they do a much better job of cleaning up their data and things go much better!
5. We keep training sessions shorter and VideoPeople forget what they are taught. It is a fact of life. You have a lot on your plate. In addition, the more time a person spends training, the more he “distracts” and begins to lose focus. We keep training sessions short and record all of them as videos. People absorb more and can easily review what they have forgotten. This means we absolutely must train remotely. Travel time is a killer (and a total waste), which is why we can’t travel.
6. We hold the project steady and discourage change.Traditional ERP partners encourage additional work. Extra work means extra profit. Not for us. When doing a Business Central project, we discourage any changes to the original project. Our projects are not very restrictive, but they do limit the features we will implement in “Phase 1”. By keeping the plan tight, there is much less “drag” and the boss is usually much happier.
7. We still charge for customizations, but we also discourage them. Customizations are the only thing we can’t predict, so we also discourage them. Given this new model, we find that customers are asking for much less as well. They trust us more to know what we are doing. Occasionally a customization is just a no-brainer, and in those cases we support and even encourage them. Even so, we have less than half the customization that we used to.

Conclusion

We do a lot of Business Central implementations, all in manufacturing. For our size, we probably do more than any other partner in North America. This has really helped us practice and refine these steps. We were wrong in the first few, but we respected our quotes and we lost our jerseys. We’ve now refined the process to the point where virtually every customer provides us with a testimonial (often in video form).

We hope this article can help you work with your ERP partner to figure out how to save costs and improve the project. Even if you are a company doing a time and materials project, many of these ideas can still be applied. Get ERP consultants to teach you how to edit reports and upload data. Avoid customization. Insist on short training sessions and saved videos.

If you are a member, feel free to steal these ideas. If you want to contact us and ask for advice, do not hesitate to do so. We share these techniques openly and honestly. If you want to sell to manufacturers, you might have to buy me a beer or two.

We’ve been doing this approach for a number of industries.

With Business Central out of the box

• manufacturing work shop
• Production manufacturing (make-to-stock, make-to-order)
• engineer to order
• Project manufacturing (a more integrated on-demand engineer)

With the PrintVIS MIS plugin

• Commercial Printing
• Flexible Packaging
• Folding Carton
• label manufacturing

And it has been working very well. There are still areas we need to work out, but overall it’s been incredibly successful.