Inventory Management Myths and Software

June 25, 2012

Myths courtesy of Industrial Supply Magazine

inventory-management-myths-softwareIn this article we explore 4 common inventory myths that may be costing you money, and examine how to address them with proper inventory management software.

(Of course, the software will need to be properly implemented as well – but that’s another blog post.)

Myth 1 – We can’t have stock outs

The importance of being able to fulfill customer orders in a timely fashion is obvious – after all, if you can’t they will likely look elsewhere. However, this doesn’t mean that you need to carry excessive and costly levels of inventory. Any decent ERP inventory software system will allow you to manage purchasing, taking into account lead times and seasonality, to help forecast demand. Responding to customer demand is an ongoing worry, and as such, it is great to have automated purchasing to reduce this worry.

Myth 2 – If we buy more, we get a much better price

Buying more up front can save you money but it also comes with substantial cost. Giving up the cash up front for a discount means you could end up in a cash pinch if your cash flow is tight. You will also incur additional carrying costs with extra inventory that you won’t likely sell for a while. Here again, forecasting will aid you in determining how much extra inventory you should be willing to take on. If you know, for example, that it will take you 2 months to sell a large shipment of inventory, perhaps you will consider the discount. If, however, past sales indicates that it will take you 14 months, perhaps the discount just isn’t worth it.

Myth 3 – Inventory is an asset

Money tied up in inventory cannot be easily accessed – it has to be sold first. Having substantial inventory is not beneficial and serves no direct benefit. Using software to identify dead stock can help you get rid of inventory that’s taking up space on shelves which could be better used to temporarily house fast-moving products or for potential new products. Period inventory audits can easily be performed with a properly integrated inventory/accounting system to ensure you only put money into the products you are going to sell.

Myth 4 – Inventory variety appeals to a variety of customers

Having a variety of products allows you to serve customers across more industries/business types. However, doing so also greatly increases the amount of inventory that you carry. The question is: do you sell enough of these “other” products to warrant tying up money in your inventory? Specialization is often a better strategy to prevent trying to make everyone happy (hint: it’s nearly impossible to make everyone happy and remain profitable). Here again, in-depth reports can aid you in determining which products serve your business the best and allow you to make strategic decisions about your specialization.


Top 5 Reasons to Replace QuickBooks

June 18, 2012

replace-quickbooks-switch-softwareQuickBooks is a very popular introductory accounting system – and for good reason! The system is very simple to install, configure and get-going. It is also touted as a very simple system that is easy to learn, which is great for small businesses. However, a system of this type has its limitations. In this article we will discuss the reasons to start thinking bigger if you are to increase efficiency and grow your business.

To make this process easier, we have put together a QuickBooks Replacement Kit – Switching from QuickBooks.

1.       Limited reporting and transparency of your business health

Certain accounting reports in QuickBooks are very detailed and user-friendly, however, the nature of having a system that is not fully integrated means there may be data in other systems that are inaccessible. Certain warehouse or inventory data (not QuickBooks’ specialty) may be more difficult to combine in a meaningful way.

2.       Double entry and keying errors

If you use a separate system in conjunction with QuickBooks (even Excel or paper) you probably already know the troubles of double-entry and keying errors. Taking information from one system and manually transferring it to another is like walking a tightrope with accidents just waiting to happen. Keying errors are particularly common when data does not move automatically throughout the system. Ultimately this can lead to incorrect business information and data loss – impacting customer satisfaction and hurting your bottom line.

3.       Limitations with file size and data

Entry-level software is not built for substantial data requirements and may begin to slow as your business grows. To prevent this, it is common for a limit on data file size to be set, which forces you to purge your data on an ongoing basis.

4.       Generic and impersonal support

QuickBooks is extremely popular, but as a result the support you receive may not be personalized and specific to your business. The benefit of moving upstream is that you will receive specialized support by those that understand your business (some businesses more than others).

 5.       Standalone application Lacks integration

One of the most compelling reasons to move off QuickBooks is to have a single system to manage your business. No more paper, excel or inventory add-ons to worry about. Dealing with a single interface with interconnected data can do miraculous things for productivity.

 If your business is doing well and has grown significantly from when you first implemented QuickBooks, chances are you are in need of more robust and integrated software. Making the jump may not be easy, however, as the next step can seem prohibitively expensive. Read our article on ERP Software Pricing: Software Tiers to set realistic expectations in your software search.

Replace QuickBooks Download


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.


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