On Thursday, March 20, 2025, the Sunrise Sip Club, hosted by Expandable Software and Mirador Software Group, invited its regular facilitator, Jeff Osorio, Consulting CFO at Engine Room, to answer this question. Walter Salame, VP of Customer Success at Expandable Software, was the guest facilitator.
What is the meaning of “Parts is Parts”? Setting aside the classic Wendys commercial from the 1980’s, https://www.youtube.com/watch?v=OTzLVIc-O5E it relates to simplifying the discussion when it comes to analyzing business flows in general or manufacturing flows specifically.
When evaluating a company for a new (or improved) ERP system, a logical first step is to understand the fundamental flow of the business. Oftentimes, the User response is “We’re different”, followed by a detailed discussion of the miraculous and awe-inspiring technology that is used to produce the product. They are focused on how it is done as opposed to what is done. The harsh reality is that they’re not different. In manufacturing environments, they buy things, they assemble things, and they sell things — the rest is just detail. “Parts is Parts.”
Clients can get caught up in the manufacturing technology and lose track of the flow; from a Systems and Financial perspective, we really don’t care how it’s done. We just need to understand the production flow. “Parts is Parts.”
Clearly, outside processing steps — a business process where one or more operations of a production process are outsourced to a supplier who provides specialized manufacturing services – impacts the production flow, how it’s done isn’t necessarily important.
Expandable and Engine Room collaborated on an implementation in central Washington state. The Client made prototype printed circuit boards, with a complex flow involving many work centers – some with multiple pieces of processing equipment. In this case, the Process Routing determines steps and time collection points, but the material flow is simple; they buy parts, they process and assemble parts, and they ship parts. Time collection and yield data by process step is important and in this case was complicated (and captured by an MES system), but the material (and cost) flow were simple. “Parts is Parts.”
KEY CONCEPT 1: Financial Follows Physical
One of Walter Saleme’s mantras is Financial Follows Physical. This means that to accurately track and capture cost, systems and processes need to follow the physical flow of materials rather than some more complicated or arbitrary flow. If we understand how the material flows, we can appropriately account for it.
KEY CONCEPT 2: Everything has a Process
Financial Follows Physical doesn’t just apply to systems implementations — it works for any new process. It is also important to note that everything has a process. When you get up and get ready for work every day, you have a process. You may not realize it, but you do things in a certain way and sequence, every time; that’s a process, even though it is undocumented. And when you violate that process, something happens – you forget your phone or keys or glasses or have mis-matched socks, or whatever.
KEY CONCEPT 3: Focus On Actionable Reporting
ERP Systems can generate mounds of reports and data, but if it’s not actionable – provoking someone to take actions that provide benefit – what’s the point? Synthesize data into information that someone can use to take corrective actions.
The Bottom Line
If you are trying to evaluate your manufacturing business for systems or process changes , use the KISS Principle – Keep It Simple, Sam. The technology behind and integral to your product may be fascinating, but it may not be critical to understanding the underlying fundamental process you are reviewing. Remember, all manufacturing companies buy things, they assemble things, and they sell things — the rest is just detail. Don’t let technology and tools distract you from the fundamentals of your manufacturing business. “Parts is Parts.”
“Management is the art of distinguishing the truly important from the merely ego-satisfying”
Steven W. Berglund
With thanks and credit to Walter Saleme for his contributions and insight for the Sip Club.
Jeff Osorio is a Consulting CFO with over 30 years of experience in operationally oriented companies ranging from pre-Revenue to $4B with over 40 ERP implementations in his portfolio. He is also an Adjunct Professor in the MBA program of the Leavey School of Business at Santa Clara University.