Manufacturing Inventory Software – What to Look For

June 2, 2012

manufacturing-inventory-software

This post outlines functionality one should expect from Manufacturing Inventory Software.

Manufacturing is a broad term that can apply to a variety of business types and is often used interchangeably across industries. “True” manufacturing consists of converting raw materials into a finished, or partially finished, product (see manufacturing definition), but in practice the term has come to encompass assembly, kitting and light production. While these secondary processes may be seen as a type of manufacturing (light manufacturing, as we call it) the software requirements for these are very different from true manufacturers.

Manufacturers who employ extensive machinery to convert raw materials into finished product require specialized functionality that can only be found in expensive manufacturing software packages. However, many light manufacturers can find a perfect fit for their business with standard inventory ERP software that includes the required production components such as: Bill of Materials (BOM), assembly, production control, and kitting.

Manufacturing Inventory Software

Unlike a full-blown manufacturing software package, manufacturing inventory software (ERP software) presumes that the primary requirement is inventory control – often wholesale or distribution – with a production element to your operations. If you do not have complex machine scheduling processes or intensive labour components to the creation of your products, manufacturing inventory software is likely what you are looking for. This type of software contains the primary ERP elements like accounting, order entry, invoicing etc. combined with specialized production elements such as:

          Bill of Materials (BOM)

  • The ability to define a list of components necessary to assemble a particular item used to track production that is able to be accomplished depending on which components are available.

          Assembly / Production Control

  • Given a defined bill of materials and available inventory, determine what products can be assembled. This functionality will allow you to assemble product, disassemble product and assign costs to the labour components of assembly.

          Kitting

  • Allows for inventory to be sold as pre-defined kits – groups of items sold as a single item. For example, you might sell keyboards and mice separately or together as a keyboard + mouse combo.

Many wholesalers and distributors that assemble product believe they require manufacturing software only to discover that its cost is prohibitive. Now you know that you can find ERP software with manufacturing inventory functionality for far less than full-blown manufacturing software.

1 Comment | Business Technology | Permalink
Posted by Mark Canes

“We Don’t Need Lot Tracking In Our Company”

May 28, 2012

lot-tracking-software-traceabilityFor many years, lot tracking inventory has not just been good company practice. In a number of industries, regulating agencies such as the FDA, CFIA, and ISO are now mandating that products be lot-tracked from the time they are received until the time they are delivered to the customer. In the Food Industry, there is a huge push to force all Food Manufacturers and Food Distributors to be able to lot track the products they distribute. With the signing of the Food Safety Modernization Act by President Obama in January of 2011, the FDA now has far more authority than ever to force these requirements.

In the event of a product recall it is the responsibility of all Distributors and Manufacturers to inform their customers that they may have been shipped potentially harmful products. The information provided should indicate what products and lot numbers of the products need to be removed and the appropriate action to be taken.

Let’s assume that a product you are distributing has been recalled. What happens next? There are basically three methods to proceed.

  1. If you do not track products, you manually look at all the orders you have shipped with that specific product over the past few weeks. You then call all the customers you shipped that product to and tell them to remove the entire product quantity as you do not know what you shipped them. This could potentially be a very large financial loss to your company as all the products are being removed. If you cannot determine who you shipped the product to, there could even be legal ramifications.
  2. You manage the traceability of your products by manual processes or using software such as Excel. When the recall is announced, you can track back to the specific products and determine who they were shipped to. Although you were able to manage the recall, were all the hours you spent over the days and months keeping your manual processes up to date worth it?
  3. As part of the software to manage your business you have the built-in ability to have the software automatically manage Lot Tracking for you. At the first sign of a recall, you perform a quick search, generate a report of those customers who have received the specific product and contact them to take appropriate action.

Lot Traceability is like having life insurance. You buy it but you hope that you never have to use it.

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Posted by Mark Canes

Import & Export Software – What to Look For

May 18, 2012

import-export-softwareThis post outlines functionality one should expect from Import and Export Software.

There are so many software packages out there these days that it can feel like you’re drowning when searching for information.  So we try to break things down by identifying specific functionality that is important for your type of business, to help you narrow down your search. Today we’re focusing on functionality important for wholesalers and distributors, where importing or exporting make up a significant part of the business.

Landed Cost Tracking

Landed cost tracking is extremely important for importers to allow for accurate inventory costing. Proper landed cost tracking will allow you to accrue costs associated with bringing items into inventory, such as brokerage, duty and freight. Without taking landed costs into consideration you may be selling items at what appears to be a profit, only to later discover that they were sold at a loss (or a significantly smaller margin). Software with robust landed cost tracking is vital for importers.

To learn more download our Landed Cost White Paper.

Automated Customs Processes

ERP software vendors with experience dealing with importers and exporters can usually offer the advantage of automated systems to streamline the process of dealing with customs documents. For example, the system should be able to generate a Customs Declaration Form upon entering a purchase order automatically. If your organization spends significant time creating and dealing with customs documents, consider including this as an important part of your evaluation.

Multi-Currency

When dealing with customers and vendors in countries all over the world, multi-currency capabilities are important, for properly incorporating exchange differences into your product costs and prices. A multi-currency system will allow you to specify different prices for each item depending on the customer’s currency, and automatically account for differences in exchange rates between transaction and settlement dates. It’s important to always know how much your customers owe you in the currency in which they’re going to pay (and vice versa for suppliers).

This list is by no means exhaustive, but is meant to serve as a starting point for some of the most important features that importers and exporters should be looking to get from their software system.

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Posted by Mark Canes

Stop Losing Money! Landed Costs Revisited…

May 15, 2012

landed-costs-avoid-losssesSometimes telling a prospective customer the truth can offend him / her, but not doing so can ultimately do both of you a disservice. If you’re thinking of buying my company’s Inventory Accounting Software, I believe it’s best for both of us that we address any inaccurate or inadequate business processes up front, to ensure that if you do implement our system, you’ll realize the maximum benefit.

Here’s a summarized version of a conversation with a business owner:

Me: “Tell me about your suppliers.”

Owner: “We mostly buy directly from the manufacturers, in Thailand, South Korea and India.”

Me: “Ah, so you’ll need to track landed costs.”

Owner: “Huh?”

Me: “You’ll want to factor costs like duty, brokerage, freight and insurance into your inventory cost and cost of sales.”

Owner: “Not really. We just expense those items based on our broker’s invoices, and shippers, etc.”

Me: “Then how do you establish selling prices and track your gross margins?”

Owner: “We just use the price we pay the supplier as our cost, and mark that up by the target percentage.”

Me: “So you’re OK with potentially losing money on certain products without knowing it?”

Owner hung up.

Hopefully you already see what the business owner was missing. Those additional costs, incurred solely to get saleable product into your warehouse, are part of your inventory cost. If you buy a widget for $100, and sell it for $125, you’ve made a $25 gross margin. Seems worthwhile. But if you paid $12 in duty, $5 in brokerage and $9 in freight costs to get the product, did you still make money on it?

Many people confuse this with covering general business expenses. But costs such as rent and wages would exist anyway. However, the only reason you paid those duty, brokerage and freight costs was to get the product in so you could sell it. Therefore if you don’t cover those costs in your selling price, you’d be better off not having purchased it in the first place.

So why do so many small business owners continue to ignore these landed costs? Is it because their existing software does not support landed cost tracking? Is it because they’ve not thought this out? Or is there some other reason?

1 Comment | ERP Software, Inventory Management, Accounting | Tagged: | Permalink
Posted by Mark Canes

Good ERP Software Support

May 1, 2012

Good ERP Software SupportYou have just implemented a system that seems like a good fit for your business. It was a fairly cheap solution but seemed to check out just fine.

You are now experiencing some problems, and need software support. You’ve called in for assistance, and one of the following happened:

  • You were re-routed to a representative in another country
  • You waited on hold for a long time before speaking with someone
  • When you finally reached someone they spent a considerable amount of time looking up your account and orienting themselves around your business and problem

Does this sound familiar? It does not have to be this way. The good news is that good ERP software support does exist; you just have to look for it. When evaluating a software system, do not ignore tech support; it is just as important as other decision criteria.

Specialized software support may cost more, but having your questions and issues dealt with swiftly and resolved completely is of itself valuable to a degree that’s often underestimated – at least until you encounter your first serious problems. Sometimes smaller and more specialized software companies can provide a level of personalized support that just isn’t available from the so-called “brand names” of the ERP world. With off-the-shelf horizontal software vendors, you and your business are just numbers – numbers among many others.

Let’s take a moment to examine what good software support looks like:

  • You call in to one number to handle all problems
  • After selecting a single menu option, you are immediately connected with a support representative located in the company’s head office along with the rest of the team
  • This “support representative” is, in fact, one of the people that assisted you with your software implementation. They know your business inside and out and you will continue to deal with them for support requests going forward

They help you work out your issue on-the-spot without having to determine who you are and how your business operates

Believe it or not, some software solutions offer support in this way. If you are not getting this level of support, you should know that you should be – that there are options out there.

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Posted by Mark Canes

Cheap Inventory & Accounting Software

April 27, 2012

cheap-inventory-accounting-softwareDoes cheap software exist? Absolutely! However, the term cheap has a negative connotation for good reason: it does not mean the same as good value. Instead, “cheap” defines the compromise on quality for reduced cost. In selecting inventory or accounting software for your business, should you be looking at what offers the best value, or simply looking for cheap software? I guess it depends on how you value your business.

Cheap is a relative term, and means something different depending on who you ask. For example, to a Fortune 500 company, cheap software might come with a multi-million dollar price tag, while a small home-run business might cut and run at the sight of a $1,000 price tag.

The amount of money to spend on good and appropriate software depends on a number of factors including:

  1. How big and complex is your business? It is appropriate for a small mom & pop pizza shop to run on QuickBooks whereas it would not be appropriate for most distributors and wholesalers to do so. It is appropriate for small and simple businesses to use introductory systems while those managing inventory, accounting, a warehouse, product costing and sales require software in an entirely different segment. Learn more about the different segments of software and their relative pricing.
  2. Do you require specialized capabilities? Introductory software systems may include the basic accounting or inventory management pieces required by many small businesses, but when it comes to advanced functionality such as Lot Tracking, a more robust and comprehensive solution is required. As your business needs grow, you may have to advance to the next level of software functionality to accommodate your businesses processes.
  3. What are your business objectives? Are you trying to grow your business or cut costs and hold steady? A business that is looking to grow will use technological innovations to remain competitive and acquire new customers from competitors. For example, eCommerce is growing at an astounding pace and those that do not implement an eCommerce system may be left behind by those that are. On the other hand, if you are not looking for business growth you may be content sticking with your old system. However, bear in mind that a robust inventory and accounting system can help you reduce costs as well. An investment in new software may allow you to eliminate a salary or two – something that can provide significant savings year over year and cover the costs of a new system many times over.

In summary, yes you can find cheap software. The question is: do you want to? Just like any other strategic investment (such as new staff or equipment), a new software system may seem expensive, but is often long overdue. Consider your priorities, the level of functionality you require and the size of your business to make an informed decision, attempting to avoid looking at nothing but the sticker price.

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Posted by Mark Canes

Online Ordering (eCommerce) for Distributors & Wholesalers

April 24, 2012

online-ordering-ecommerce-distributors-wholesalersThe benefits of an online ordering system or web store for distributors and wholesalers are significant, as Mike Schmidt of Industrial Distribution magazine outlines in his article Strictly for Sales. With eCommerce “you are open every minute of every day and customers can buy from you at any time”. For many, this means automated sales that can reduce strain on order entry staff and result in increased sales over time.

In a previous post, we addressed 4 eCommerce implications for distributors.  Several of these points relate to today’s discussion on “Strictly for Sales”. Due to the increasing prevalence of eCommerce, customers (both B2B and B2C) now want quick and easy ways to place orders. Your customers are no longer satisfied with out-of-date product sheets; they expect real-time pricing and inventory information when making purchases and will go elsewhere if they cannot find it with you.

These changing dynamics have led to the following pressures for you, the wholesaler and distributor:

  • Not only are you expected to deliver the right quantity to the right location but also deliver product immediately and at the right price
  • Customers demand diversity in ordering options, including traditional methods and online ordering systems – not to mention the desire to order from anywhere at any time (mobile ordering)
  • Customers have also come to expect superior product selection including multiple delivery options
  • eCommerce itself can increase order volume to such an extent that you may require a more sophisticated accounting and inventory software system

The easiest way to deal with these pressures is to implement an integrated eCommerce and ERP software solution. Implementing a web store lacking proper back-end integration with a sophisticated inventory management system is a recipe for failure. As orders roll in from the web store at a blistering pace and business begins to expand exponentially, you may end up falling behind with order fulfillment. In addition, inventory discrepancies result in dissatisfied customers, creating manual work when you must notify them that you do not have the product in stock that you promised them on your website.

Many wholesalers and distributors find themselves doing “too well” after implementing an eCommerce solution, and as a result feel like they are drowning. Thankfully, avoiding the problem is simple: do your research, find an appropriate integrated solution for eCommerce as well as a robust and integrated inventory & accounting solution. Finding the right partners is the most important piece of the puzzle – a team with experience offering integrated ERP and eCommerce solutions will help you ensure success.

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Posted by Mark Canes

Pricing Software for Distributors

April 17, 2012

pricing-software-distributorsA recent article in Industrial Distribution Magazine, Stuck in the Middle, outlines the importance of pricing for distributors. The article specifically addresses the need to manage your margins to ensure maximum profitability – for which the appropriate software can be a big help.

A number of factors can impact your bottom line and it is important to keep a close eye on each factor. Direct product costs may increase; pushed along by vendors (be they manufacturers or other distributors). Indirect costs may also rise – such as landed costs or carrying costs. Whatever the reason for thinning margins, the fact remains that to maintain profitability you need to keep a close eye on your margins and this is made much easier with the appropriate software system.

Entry-level software systems may not offer the accurate and granular data obtainable from a sophisticated inventory and accounting system. Ask yourself how long it takes you to get information out of your current software system and add that to the costs we discussed above. Okay, so now you’re thinking that your software system might not cut it. Your next question is “how would an appropriate software system allow me to keep an eye on my costs and appropriately price my products?”

Software features that are vital to these processes include: customer specific pricing / contract pricing on the revenue side and landed cost tracking and automated reports on the cost side.

Customer Specific Pricing / Contract Pricing

Customer specific pricing cannot be more straightforward; it is simply the ability to specify pricing on a per-customer basis. Some customers may receive discounts or specific preferential prices on all products they purchase, while others may receive discounts (or contract prices) on particular items. Pricing rules should also be able to be applied at a per-item level for all customers and for varying volume levels. Appropriate software will also allow you to set prices based on different units of measure (each, box etc.) as well as in different currencies.

Landed Cost Tracking

Landed cost tracking may be most relevant for distributors that import their product, but is still an important part of identifying the true costs associated with a product; right up until it is sitting on your shelf. These costs may include brokerage, duty, freight and more. Without proper landed cost tracking your inventory costs may be inaccurate or may require an abundance of manual work to arrive at accurate costs.

Automated Reports

Sophisticated systems will allow for the automated delivery of reports to key decision makers in your organization. These detailed reports can be scheduled to be sent on a daily, weekly or monthly basis and will allow you to pin-down exactly where your money is going and identify problem areas.  In particular, exception reports delivered automatically facilitate timely and focused action to deal with these problems.

In this post I have only scratched the surface of how appropriate software can help you manage your business. For more information, read our post on What Distributors Want Out of Their ERP Software.

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Posted by Mark Canes

Eliminate Errors: Wholesale Distribution Software Success Story

April 13, 2012

ERP-software-errorsToo many people try to apply simplistic solutions to complex problems – like politicians at election time. However, sometimes a simple solution actually works out well.

A great example of this was a wholesaler that was experiencing a very high level of errors in outbound orders. More than 15% of orders they shipped out had one or more errors, resulting in customer dissatisfaction as well as financial loss – these were perishable products and mostly non-returnable, so they’d have to credit the customer and write off the cost.

The first attempt at dealing with this involved adding a level of checking after orders were picked and before they were packed, followed by bar code scanning for pack verification. The good news: this eliminated almost all picking errors. The bad news: turns out many of the errors were discrepancies between what was entered into the order entry system, and what the customers had ordered (or thought they’d ordered – most orders are by phone).

The solution to this turned out to be dead simple: have the ERP Software system automatically email an order confirmation immediately after each sales order was entered, asking the customer to review the order and notify the wholesaler of any discrepancies immediately. This eliminated both genuine key-punch errors, and customers changing their mind after the fact. They key here was the automated part – no-one has to think about sending these confirmations, they go automatically.

Now, after these two steps, fewer than 2% of outbound shipments result in any query from customers. (Fortunately for this company, their existing Inventory Management / Accounting / ERP Software was already capable of generating automated emails.)

1 Comment | Business Technology, ERP Software, Inventory Management | Tagged: , , | Permalink
Posted by Mark Canes

Service and Repair Software – What To Look For

April 9, 2012

This post outlines functionality businesses should expect from their Service and Repair Software.

service-and-repair-softwareI previously wrote a post on what you should expect from Wholesale Inventory Software. This week, we’ll focus on the features that are important to most service & repair businesses.

By “service and repair businesses”, I refer to any business that employs technicians who perform repairs or maintenance work on a recurring or scheduled basis. These businesses may be primarily wholesalers or distributors and provide these additional services as complimentary offerings, or service may be the primary business offering.

Service & Appointment Scheduling

Being able to schedule technicians for repairs or maintenance is one of the most commonly requested areas of functionality in this space. Whether the work is being performed on-site or at the client’s site, it is important to keep track of availability as well as when work has been performed. Not only should an appropriate software system allow you to keep track of these schedules, but it should also allow you to track customer details and notes in relation to these appointments throughout the system (these notes come in handy when accounting is trying to collect payment from customers).

Automated Communication

A requirement that often goes hand in glove with appointment scheduling is automated communication. I refer specifically to the ability to automatically send reminders for previously scheduled appointments, as well as notifications about upcoming maintenance requirements. An automated communication system can save hours of unproductive administrative time, and reflects well on your company in the eyes of your customers.

Job / Project Costing

Many service and repair businesses require the ability to track both revenue and costs incurred over a long period of time and tracked on a per-job or per-project basis. A proper ERP system in this space will allow you to associate revenue and costs on a per-transaction basis to a particularly job or project. This allows for effective ad-hoc reporting to determine the profitability of a finished project (or to monitor for cost overruns).

Integrated Quoting

Due to the complexity of certain repairs, detailed quoting may be required. Your software system should allow for tightly integrated quotes for both salespeople and technicians. The ability to turn quotes directly into sales orders should be a given.

In summary, ERP software for Service & Repair, at a minimum, should allow for the functionality outlined above. Other functionality such as accounting, order entry, invoicing etc. is a given for an ERP software system.

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Posted by Mark Canes

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