Inventory Management Techniques: Cycle Counting

August 18, 2015

cycle counting in the warehouseCycle counting often comes up in discussions surrounding proper inventory management, but what does it mean and how do you incorporate it into your business processes? In this article I’ll attempt to demystify the term and further explain how regular cycle counting is important for small and large companies, for better inventory management.

What is cycle counting?

Cycle counting is used as a tool to monitor variances in inventory.  It involves regularly counting a small subset of inventory at a specific location on a specific day, with the intent of cycling through the entire inventory over a period of time, and then repeating.   With any wholesale distribution company, there will often be some sort of variance between the inventory items you have on file vs. what you physically have in your warehouse.  This is a result of product getting misplaced, extra items being sent out with bulk orders, human error, shrinkage, etc.

Determining this variance only at the end of the year can result in greater discrepancies and therefore shock from management.  Regular cycle counts help your business keep a closer eye on this variance and make necessary process changes according to the results.  Ultimately, regular cycle counting should result in detailed procedures that yield very low variance levels and a high level of inventory accuracy.

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5 Questions to Ask Yourself before Speaking with Software Vendors

August 13, 2015

software search questionsSo you’ve decided it’s time to upgrade your business back-end accounting and inventory management systems to something more modern and sophisticated.  This can be a great opportunity for your business, and having all key stakeholders on board with the change is the first step in getting the system you need.  Other steps in the process include setting priorities, evaluating requirements, and searching for and speaking with vendors.  Before you even start the process though, there are a couple questions that should be evaluated internally before you hit the ground running. We have outlined these further below:

1. What do you perceive as your businesses greatest strength? Weakness?

Taking an internal look at the strengths and weaknesses of your business will help you identify areas where software can make improvements. Do you provide excellent customer service but frequently make shipping errors? Do you have a great eCommerce site, but it’s not integrated with your inventory system? Taking stock of these different strengths and weaknesses can also provide you with a benchmark for comparing processes once a new system is in place.  Make sure you question existing processes, and be open to making changes if there are benefits to be gleaned.  For those processes that are unique and beneficial to your business, find a software vendor who is able to accommodate them.

2. What are your buying criteria and success criteria?

This question ties in with the above, in that it gets you to start thinking about how the success of implementing new software can be measured.  Will you evaluate the software against number of man-hours a task previously took? Will you be looking at costs saved with better inventory management? Will you be analyzing employee morale? Starting with a list of goals you want to see accomplished with new software as part of your buying criteria will enable you to make comparisons down the road.  This type of information can also be analysed during the sales process.  A good software vendor will spend the time reviewing these specific processes and identifying ways that they can be improved with a new system, focusing on tangible values.

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Inventory and Accounting Software: Additional Tools for Your Sales Team

August 10, 2015

sales teamWe’ve all read a company’s “about” page on their website, claiming that their competitive advantage is their great customer service, and yet so many of these businesses are not taking advantage of software to better serve their customers.  Even with social media and the internet providing consumers with much of the information they need to make an informed purchase decision, a knowledgeable sales team is still a valued resource in many industries.  Traditionally, businesses have looked to back-end inventory and accounting software (ERP) with CRM or contact management tools as enough functionality for their sales team, but these tools often lack order taking features and analytics.  Whether interacting with customers on location, at tradeshows or in a showroom, equipping your sales team with the tools and information they need in a timely manner can make a positive impact on your bottom line.  To understand what functionality you need, first you need to understand your sales team.

Depending on the nature of your business and target market, you may benefit from using a small number of internal sales reps (employed and paid for by you) or an outside sales team (employed on a contract basis).  If you employ a small number of internal reps, than it may be worth it to give them full access to your back-end inventory and accounting ERP system. This way they have full autonomy to view available inventory, access customer information and place orders.  However keep in mind that many software systems charge based on number of users so this can become expensive.  In addition, you may want to restrict your sales team to only seeing certain information, and although this can be achieved with different permission settings, there are other options as well.  Consider implementing an online order portal or mobile sales application that is fully integrated with your back-end ERP system, as an alternative means of providing your sales reps the option to view inventory and place orders.

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Globalization and the need for Import/Export Software

July 30, 2015

globalization and softwareAs a result of major advancements in both policy and technology over several decades, international trade and foreign investment have become central to overall economic growth. Governments have successfully negotiated international agreements that are responsible for reducing many long-standing barriers to trade and foreign investment, ultimately promoting the flow of goods and services between nations. Due to the elimination of many different barriers to trade and investment, large corporations have established foreign factories as well as production and marketing activities with foreign partners, essentially creating a true borderless economy. In addition to foreign policies, emerging technologies have also played a key role in the globalization of the world’s economy by making it easier than ever to communicate with people across the world. Specifically, advancements in information technologies have provided many with access to a variety of tools for gathering information to help identify and pursue various economic opportunities. Consequently, globalization has made it attractive for businesses to establish importing and exporting operations. Exporting represents a major component of the overall health of a nation’s economy, where countries are rich with unique skills and resources. Importing is also important as domestic businesses often look internationally for resources that are either a) not readily available domestically or b) inexpensive elsewhere, that will help to drive down their cost of goods sold and increase profit margins.

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“I can’t afford wholesale inventory software, it costs too much”

July 14, 2015

wholesale-software-costsWith any major purchasing decision, budget is an important factor. When it comes to purchasing wholesale inventory software, sticker shock is common for those moving off of introductory systems or manual processes.  However, as with any capital expenditure, buying new software should be a decision made on more than just cost – if you want to make the right investment. The same principles apply as if you were such as seeking new warehouse space. So how come cost continues to be used as a deal breaker? Before you narrow down your software options based on cost, consider the following:

Too expensive compared to what?

Expensive is a relative term.  When it comes to software, make sure you think about what you’re comparing the cost to.  Most comparable Tier 2 systems will fall within a similar cost range, so it’s important to first identify which Tier will have functionality to meet your needs. Many companies start off with an arbitrary budget based on what they feel they should spend, and not on any real world frame of reference.  Are you comparing the cost to other systems? To hiring additional employees? To purchasing more equipment?

How much will it cost you to do nothing?

Another cost to consider is the cost of doing nothing.  Businesses who do not take this aspect into consideration are falling prey to omission bias – the tendency to judge harmful actions as worse than equally harmful inactions.  Not purchasing software can affect costs directly by resulting in a new hire or indirectly through lost productivity. When it comes to hiring employees, good software should replace the need for additional staff which will save you more than just the cost of a system in the long run.

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Why Accounting ERP Software Training is so Important

July 6, 2015

ERP training sessionThere is a reason that training is one of the most costly aspects of software implementations, namely that it’s also one of the most important aspects.  When upgrading to a sophisticated accounting ERP system from introductory software such as QuickBooks, there will be a significant learning curve.  This is not to say that such Tier 2 systems are all very complicated and difficult to use, but instead that the software necessary to help grow your business will require a better understanding of accounting principles and good business processes.  Without this kind of knowledge it’s tough to run a successful multi-million dollar company, and this is where good training comes into play – with regard to accounting functionality, inventory management and other areas.  To help you understand why training is so important, we have outlined some reasons below:

The better trained your employees are on a software system, the more productive they will be.  All things being equal, when employees feel confident using software they will rely on it more in order to perform their responsibilities. This in turn can help automate previously manual processes, therefore reducing the instance of human error.  This also means less time is wasted learning how to use a system every time you want to perform a task, and coming up with workarounds for managing certain processes.  ERP software is designed to improve and streamline processes in order to increase efficiency and reduce costs. A good vendor will work with you to evaluate existing internal processes and explore how they can be enhanced or improved upon with the help of software.

Proper training reduces costs. This may not seem like the case initially, however in the long run proper training reduces not only the costs of on-going support, but also the costs associated with lost productivity.  If you invest time and money on training up-front, employees will be better equipped to handle their daily responsibilities. This will also make it easier for employees to train new hires on the system, and to assist one another with software questions and issues.  If you’re upgrading from introductory accounting software, it is important that employees understand why the system works the way it does, not just how it works. Creating a strong internal network of system experts will make the transition to new software easier for employees, which can reduce the stress associated with such change.

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Food Distribution Software: What to Look For

June 22, 2015

food-distribution-wholesale-softwareThis post outlines specific functionality that one should reasonably expect from Food Distribution Software.

The food distribution industry is very unique in a number of different ways. With numerous standards and regulations set by governing bodies in place, as well as an overall level of quality that must be upheld to customers, it is important to employ a software system designed specifically for food wholesalers and distributors. Most software packages have similar standard inventory and accounting functionality that users have come to expect in a true ERP software system. However, it is the additional food industry specific features such as lot tracking, landed cost tracking, multiple units of measure, and flexible pricing that make a system optimized for the food industry.

Key Features:

  • Lot Tracking
  • Landed Cost Tracking
  • Multiple Units of Measurement
  • Flexible Pricing

Lot Tracking

This facilitates robust product traceability functionality in order to keep records of which customers received specific groups of items or shipments. The supplier and the date that items were purchased are also referenced, allowing managers to track an individual group of products throughout the supply chain, ultimately from supplier to end customer. This functionality is especially important to food distributors as it is a key competency in achieving FDA/ISO/CFIA compliance. Many companies in the food distribution industry rely on lot tracking to track internal and external lot numbers, manage best before and expiry dates, as well as simplify product recalls and warnings in case of an emergency.

Landed Cost Tracking

Landed cost tracking allows a food distribution company to account for all the costs associated with getting inventory from a supplier to their warehouse. This allows a company to arrive at its ‘true inventory costs’, which may include duty, brokerage, freight, insurance, and storage, in addition to the cost of the inventory itself. Landed cost tracking provides important information to business owners and decision makers when making purchasing and pricing decisions, as well as aids in maintaining target gross margins by accounting for the total inventory cost, and not just a sub-section of it.

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