Anchor Group Podcast: Episode 16
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- Caleb Schmitz, CRO at Anchor Group
- Michael Mueller, eCommerce Account Executive at Anchor Group
- Anchor Group (Company Page)
Podcast Transcript
Caleb (00:00)
So, beginning off here, I wanted to start talking about the NetSuite process for manufacturing, really focusing on that specific vertical.
NetSuite has a lot of features when it comes to manufacturing across order to cash, procure to pay, accounting, work orders and assemblies, WIP and routing. What does it look like connecting with lots of different vendors? That’s really how I'm gonna focus the rest of this conversation—for that specific audience. So if you are someone involved in any one of those departments or flows, then we'll cover them from a high level to get you a little bit more educated on what NetSuite is capable of doing.
I kind of want to go into, as this conversation progresses, a little bit about how to customize ERP environments specifically for manufacturing, because there are a number of things in the manufacturing industry that they need to have tailored for their use case and automate a bit more. And I'll speak to that during the process too, when it comes to engineering and working with CAD files and generating those BOMs. I'll speak to that too.
Michael (01:03)
Caleb, so as we kick things off here, where do you think, out of all those different parts of an ERP that you just listed off, where do you think is the most important part for a manufacturing company to really focus on as they start to investigate the process of maybe acquiring NetSuite as their ERP of choice?
Caleb (01:26)
Well, it's going to be probably pretty different from what they've ever experienced before. A lot of times, people in the manufacturing space have never had a cloud-based ERP. So I'll just assume for now—I see a lot of people that are on a 20-, 30-, 40-year-old system. It's an on-premise solution. It's not cloud-based. So it's really changing the frame of mind and the mindset on how to manage. They have a lot more concerns because it's all new to have a cloud-based ERP at that point.
What this does is it means that they don't have to deal with servers and having to handle those and manage them. They don't have to deal with doing a virtual desktop to be able to work remotely when they're traveling. Now you are able to just access the ERP through the browser to do all your operations. And that's really valuable for these companies to start understanding and knowing that it's going to be different.
Now, NetSuite does follow your normal manufacturing processes. And we'll start there. I always like to start at the very beginning—at the sales order—because it all starts with sales. So that's probably what I'm going to start and focus on to begin with.
Michael (02:33)
That's right.
Caleb (02:37)
So let me walk you through that a bit. Let's visualize for a moment what it looks like. You've got somebody that is sending you a purchase order, which means you have to enter that into your ERP as a sales order. You may accept orders in a few different ways—maybe you have ecommerce, maybe you have a sales rep manually taking the orders over the phone or email, maybe you receive it via email as a purchase order, or maybe you have large big box retailers that need to be able to send it to you via EDI.
All of these are options, and you can do anything, but I'm just calling those out. Yes, those are all covered and all something we help scope during the implementation. A lot of times, manufacturers will have EDI. We'll bring in an EDI provider, ask if they have someone already, so we can tie it together and connect it with NetSuite. That's a great way to handle large batches of orders that are coming through consistently.
And many times, some of these big box retailers will require that you connect via EDI, because that's all that they'll do. And being able to have open APIs, cloud-based REST APIs, be able to access it—that's really valuable—and then via EDI too. So that is one method of getting the sales order in.
Michael (03:52)
Caleb, on that point of EDIs, how challenging is it to really start setting up systems according to that for the first time? So if I'm a manufacturing company and I have this opportunity for the first time working with one of these big box stores, and they want to connect through EDI, how challenging is that from a practical perspective to get that set up?
Caleb (04:18)
It's not super challenging. I like to set maybe a six-week timeline from the beginning, getting it configured. There are multiple rounds of testing to go through, and then to the production deployment.
Assuming you're already live on an ERP like NetSuite, we would first build it all in a sandbox environment and then test it and deploy it so that it's all working as expected and not going to impact any of your operations by testing in sandbox first.
So I like to give myself, call it a six-week timeline, but it's pretty straightforward to set up and relatively affordable—certainly more affordable than manually entering in sales orders, having sales reps manually enter in each sales order, and paying those people's salary. Certainly more affordable than that. So hopefully that gives some context.
Michael (05:08)
That's right. Good to know.
Caleb (05:12)
So let's say now we've got the sales order in the system through a number of ways. At that stage, maybe there's a deposit. You may have a customer deposit that you apply to that sales order. Maybe it's prepaid with a credit card—you're selling small batches and make-to-order product, you might sell just an individual quantity.
And in those scenarios, you're going to be doing batch builds and stocking it as inventory. You could technically have a cash sale, which would indicate that you've already collected the money to impact your accounting. From there, if you have customers on terms, then you'd skip the customer deposit or the cash sale—those would be handled later, I guess, at the invoicing stage.
Normally, you're gonna go into the fulfillment. It's called the item fulfillment record in NetSuite, which means that this is where you would actually perform the shipment.
Now, if you're in a manufacturing organization and you don't have inventory available—“inventory available” meaning already committed inventory—so if you have already committed quantities on other orders, then you have to initiate the purchase or initiate the work order process.
This is the next step with the work orders and assembly module, part of the manufacturing edition inside of NetSuite. What you'll do is generate the work order so that you can go do the assembly.
And when you complete the assembly build process, which contains the bill of materials, you can go through that process. You can have work orders, work in progress—that WIP and routing as part of this process too.
At that stage, when the build is completed, you are now consuming the individual components and then creating that finished good—that final assembly.
So what's happening within NetSuite—and it's impacting accounting right away too—is it's deducting that inventory from that raw material and increasing the inventory of the finished good.
From there, you have the finished good that is available to actually perform the shipment and finish the item fulfillment.
So that's really the key process to go through—up through that manufacturing process—and then get to the fulfillment stage.
Now we're at fulfillment. At this stage, you've got all your inventory available to be able to add to the fulfillment and ship the product out.
You can do an integration with FedEx, USPS, UPS. Typically, the native integration is going to be mostly stronger at the parcel level. There’s some other pallet build functionality on Ship Central, which is available within NetSuite.
If you want to do freight or LTL, there's a number of apps that install and integrate to do rate shopping there.
I also have clients that just manually go into FedEx or something like that, put in the from address, ship-to address, the weight—all those dimensions—and they'll manually override the shipping price on the item fulfillment.
It gets shipped. What that means is that once that inventory has left your warehouse, it impacts accounting right away.
And item fulfillment is GL-impacting, because at that stage, the inventory—the finished goods that you've created—is no longer on your books. It actually belongs to the customer at that moment of shipment.
And that all happens live, all at the same time. And this is why an ERP is so important—because automatically, accounting is getting their information impacted and updated. The warehouse and the fulfillment is.
You've also got the sales team on that CRM and the sales order. You've got the manufacturing. Everybody is connected, and automatically, these processes are completing.
You don't need to go integrate them 100 different times. Okay, that's hyperbole a little. But you don't have to integrate a ton of different warehouse solutions. You don't have to go and integrate a manufacturing solution, a CRM, an order management, an accounting.
A lot of times, without an ERP, you're integrating to all these different systems, and they're just not talking to each other like NetSuite does. And that's really the main processes.
Michael (09:34)
And I agree, Caleb. I think what you're saying and explaining—how everything's essentially already integrated—is very important. That's where companies can really maximize their return on investment, because it's not going to be so clunky to manage. The management is truly going to be streamlined.
Now, one question I have for you, Caleb, is: as you just spoke about that process, anytime a company undergoes implementation of a process like that, there are certain elements that usually need special attention. Because if you don't, things can get a little out of hand or might not be fully set up the right way, and you might have to iron out some kinks down the road.
So, based on the process you just described, where do you think is the one area that people need to pay special attention to, just to make sure they really keep a pulse on that part of the implementation and get it right? Any thoughts on that?
Caleb (10:38)
Yeah, in the manufacturing industry it's particularly important because there's usually people that aren't very technical in that space. They only have a handful of people who are tech-savvy because they've been on a system from 30 years ago. No one really knows how to use typical software.
There are some people that just struggle with Outlook in that industry—which is okay, it's just where they're at. You'll have a couple of people who will be very tech-savvy and able to be your subject matter experts, and that's great. You'll need those.
But the most experienced people will say that the most important thing is change management. The most inexperienced people will pay no attention to change management, especially in the manufacturing space.
So, if you're coming to an implementation thinking that “Nope, change management will be easy,” you should question that. Ask yourself—really inquire—why you believe that. Because when it comes to an ERP environment for manufacturing, it historically has always been one of the hardest to implement. Not because the software processes are hard to set up and configure in NetSuite—it’s the training and getting things to click.
I've observed that a lot of clients in that space don't take as much initiative. They don’t have people that are taking the initiative and really need a lot more hand-holding. And that slows the process down. There's just a further gap in their technical abilities—understanding business processes and how they relate to software. That gap—that delta—is what slows down projects and makes them harder.
So that's why I like to focus on training, but also assessing their ability, even during the sales evaluation. I like to have a conversation and gauge—I can tell whether a client’s team is tech-savvy or not.
And if a client only has one or two people on the evaluation, I can't gauge the ability of their team members. It's important during an evaluation that I get a sense of their abilities on the call and witness it myself.
I can speak to it more directly—maybe it's the CFO or the CEO, president, whoever is leading the charge. If they're not bringing in key stakeholders across all departments, I can't gauge risk. That means I can't guide them and say, “Hey, we're going to need a little bit more change management time here.”
That’s something I've seen happen: we don’t have the key stakeholders in those departments throughout the demonstrations or evaluation, and it really can impact the implementation.
Michael (13:22)
Yeah, getting as much buy-in as possible from the internal team, as you're saying, Caleb, can be a critical step in managing that change management.
Caleb (13:30)
Yeah, buy-in is one factor. There are really a couple of factors.
There's buy-in, so that people are excited for the change, which helps them be motivated to make the change. But the other part is whether they even have the abilities in the first place, even if they have the right attitude.
You can have the right attitude and be someone who's excited for change, but that person also needs to be able to work through the challenges and frustrations of change with a positive attitude and have the technical ability to actually do it.
That’s the secret sauce—all those factors together.
Michael (14:07)
Yeah, I could see how that's important.
Now, at this point, we've gone through the order process. You spoke a little bit about the manufacturing process, but what we didn’t really touch on—and what I’m curious about—is once the products are actually manufactured, how about the warehouse portion of this?
So the merchant has a warehouse, they store products—what does that look like in NetSuite? How native is that when a merchant signs up for NetSuite? Can you kind of talk to us about that?
Caleb (14:24)
Yeah.
I've lightly touched on it with the item fulfillment process, but I didn’t go into any depth there at all.
There are a couple of different phases or ways that we’ll evaluate what you actually need. Within that manufacturing edition, there’s going to be advanced inventory management, which includes things like reorder points that impact your demand planning.
It also has serialized and lot functionality for traceability of the item to the customer, if you're in a space that requires that.
And it’s also going to have things like the pick-pack-ship processes throughout fulfillment. You can have different stages there. It has the ability to have bins and locations, and you can do inventory transfers between them.
There’s some scanning functionality.
Then there’s one more layer beyond that called NetSuite WMS. And there are other third-party WMS solutions that integrate with NetSuite, too. But NetSuite WMS is a product by NetSuite. It’s an add-on on top of the primary SKU or edition that would be purchased.
That’s going to be full warehouse functionality. This would get into more in-depth wave picking, put-away strategies, more in-depth cycle counting—all of that is core functionality.
There’s also more functionality when it comes to scanning on receipt as well as shipment. That whole process is where that comes into play, because then you unlock more scanning functionality for higher volumes.
But that’s not always needed, depending on the volume.
Let’s say you’re doing more freight and LTL, and you’re a manufacturing company with higher-ticket items, not doing massive volume. Like, I don’t know, if you’re sub-$30 million in annual revenue as a manufacturing company, you often don’t need WMS. You can just use the pick-pack-ship processes and handle those.
And I’m also assuming that maybe you’re shipping by the pallet or in larger quantities at a time, so the total order value is higher.
If you’re a manufacturing company that sells a product as well, and it's like $50 orders, that's going to be higher volume. That changes my opinion. Then you're going to need a WMS.
Most of the time, that’s the difference.
Michael (16:55)
Yeah. So Caleb, you would say that it really comes down to volume—whether or not you're going to need that WMS right off the bat, right?
Now, if, say, for example, a company doesn't get the WMS right off the bat, how easy is it to grow into that down the line? Say you're a year or two in—is that a module you can grow into easily, or is there going to have to be a lot of reworking of stuff you've already set up?
Caleb (17:04)
Yeah, that's a key factor.
No, it sits on top of the inventory management processes, and that item fulfillment record is a core record. It's a very important transaction record for any type of inventory management. So that all remains the same. WMS sits on top of those existing processes—it's adding additional functionality. You don’t have to rework it.
That's kind of the nice thing about it—it’s easy to add in later.
Wherever I find opportunity in the evaluation, I try to tell a prospective client, “Let me challenge you on what your inclinations are. Let me challenge you a little bit to help you think bigger.”
A lot of times, people want to get everything, and I really try to challenge them to phase it out. It helps with change management. It also helps phase out the cost, because you can't implement everything on day one.
Well, you can go live day one with everything, but your implementation timeline is impacted.
Michael (18:18)
Right.
Caleb (18:23)
There's value in getting on a new system, going live, and making improvements from there, adding things on. Phasing is an important step.
Michael (18:31)
That's right. That's a great call-out.
So WMS sits on top of the standard NetSuite instance, but also—I know we haven’t gotten into this yet—e-commerce. I know NetSuite has SuiteCommerce, an e-commerce platform that you can stack on top of NetSuite.
It sounds kind of similar to WMS in that way, but can you talk to us, Caleb, from your experience—what does SuiteCommerce, what does the e-commerce portion of NetSuite, look like for manufacturing companies today?
Caleb (18:59)
Well, manufacturing is going to be B2B e-commerce normally. So if you have SuiteCommerce and want to implement that, it’s a good solution because there are no transaction fees—it’s just straight licensing.
So if you're selling a $5,000 order, it's just straight licensing fees—you're not paying transaction fees. That can make a nice difference.
SuiteCommerce really focuses on B2B-only businesses. I think it's the strongest there.
Now, some of these manufacturing companies have a component of B2C, or really want to expand into it as part of their overall strategy. And SuiteCommerce can do B2C—that direct-to-consumer functionality—even on the same domain.
That’s when I start thinking, well, if you start having more than 10% direct-to-consumer, I like to start introducing BigCommerce as a really good way to phase into that B2B space for manufacturing.
Sometimes I’ll lead with BigCommerce, because between BigCommerce and SuiteCommerce, those are going to be the best ecommerce solutions for manufacturing companies.
And after vetting a lot of them, I’ve reconfirmed that over and over again. There are pros and cons between each one too.
Michael (20:18)
Yeah. And just to add a little bit more color to the BigCommerce side of things, BigCommerce is truly an external e-commerce hosting platform that is not built on top of NetSuite.
So, in order to make that work, you're going to need an integration or a connection between the two. That’s one of the major things that separates them. There’s an added expense and time needed to set that up.
Now granted, sometimes BigCommerce truly is the better play for a manufacturing company. But sometimes, SuiteCommerce is better—in that case, you’re pulling right from NetSuite data. You don’t need an integration because SuiteCommerce is sitting right on top of the NetSuite environment.
Caleb (21:05)
Yeah, and sometimes people are just trying to figure out which one's best by themselves, through their own research.
And I'm like, I could have a 30-minute conversation and tell you very quickly which one's going to be best for you and why. You can ask all your questions, and we can do rapid-fire Q&A. I can help guide people in the right direction there.
I think people spend a lot of time doing research and are afraid to talk to people. I just encourage people to talk to people who know multiple solutions and can help guide you through the pros and cons of each.
I've seen people spend hours and hours researching without having anybody who can give them an agnostic view between both solutions.
I really enjoy doing that—just providing good advice throughout an evaluation. My thought process, my reasoning why, and putting myself in their shoes—that’s probably my favorite thing to do.
Michael (22:00)
Yeah, and that's important. I’ve also seen people research for hours and hours, and within a 15- or 30-minute conversation, they can get some good direction just based on our experience.
Caleb (22:13)
Yeah, sometimes people are just scared to talk to someone, or they're worried they'll be bugged—and I get it. I'm pretty respectful of that. I always ask, “Hey, what's a good next step for you?” or “What's a good time for me to follow up that doesn't seem annoying?” Because that's the worst. I think people just get scared to have a conversation, but that's okay.
Michael (22:30)
Yeah, scars from the past—you know, there’s probably been other people that have just never left their email inbox for the next year. That sort of thing.
Caleb (22:41)
Yeah, that's true. But I mean, honestly, we've covered most of what manufacturing and NetSuite is.
We didn’t really talk about the accounting side that much, but we did cover the core process areas—at least that order-to-cash process, WIP and routing, work orders, and assembly.
We didn’t really cover procure to pay that much, but that’s okay. We can go into more of that purchase order and vendor payment process in a later podcast.
I think NetSuite’s just a great solution for companies that have that level of manufacturing. There are some companies that have really advanced manufacturing—beyond work orders, assemblies, WIP and routing—where we need to introduce a couple of apps to install.
But for what I just described there if you fit those particular process areas in manufacturing, that's who's a solid fit.
So that's all I’ve got to cover today. Thanks for the discussion here, Michael. Maybe on the next one coming up, we’ll cover more of that procure-to-pay process and even some other industries, too.
Sweet. See y’all.
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