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Use Your ERP Software Implementation to Clean Up Your Garbage Data

Tuesday, July 7th, 2009 by Alex Smith

A common concern many small business owners have when selecting a small business ERP software package is how they are going to be able to extract their existing data from their legacy software systems (QuickBooks, Excel, etc.) and transfer the data into their new ERP software solution. While migrating historical data into the new software package is important, the real question small business owners should ask is what historical data should be migrated over to the new ERP solution?

Within most small businesses, manufacturing and distribution operations use multiple software packages simultaneously, which leads to numerous instances in which data is duplicated, and, in many cases, inconsistent. Products are often times entered with one product description in one software package and a different product description in a second software package; the organization may also have a customer’s shipping address entered in one software package and the same customer’s billing address entered in a different software package. The software implementation process is an excellent opportunity for the organization to clean up its duplicated and inconsistent data and develop a single, cohesive data set for products, customers, ingredients and raw materials, suppliers, financial accounts, etc.

While the process of going through potentially hundreds or thousands of data records may be painful, it will prove to be highly beneficial to the small business during the initial system go-live and beyond. A sophisticated ERP software solution is only as good as its associated data. I recently spoke with one small business owner, and I believe his take on data migration was probably one of the most simplistic, yet most accurate statements I have heard when he said, “Garbage data in is just going to mean garbage data out.” This statement is just as true today as it has always been when using automated systems.

Establishing an accurate and consistent data set during software implementation is one of the first steps for the small business in realizing significant ROI for its software purchase and developing improved, efficient business operations.


Criteria for Selecting High Service Factor Items

Friday, July 3rd, 2009 by Alex Smith

Inventory management is a key element in any sophisticated distribution software or manufacturing software solution. In Enterprise 21, inventory levels can be maintained on a product-by-product basis using a variety of inventory control methodologies. These include a simple reorder point with minimum and maximum values, safety stock level (measured in days supply on hand), and service factor, with each methodology accounting for seasonal fluctuations in demand for a given product. Service factor, which is a number between 1 and 100, allows the organization to select a desired line item fill rate for a given product. An item with a service factor of 50, for example, means that for every 100 orders for that item, 50 orders will be able to be serviced directly out of available inventory. An item with a service factor of 95, however, means that for every 100 orders for that item, 95 orders will be able to be serviced directly out of available inventory. So, with this basic understanding of service factor, what criteria should the organization use in determining the products that should be set to have high service factors?

There are two key criteria for selecting products to have high service factors. First, items with a high order volume or high order frequency should be set to a high service factor. Items with a high order volume and high order frequency account for a significant portion of the organization’s business and revenue. Having the ability to fulfill orders for these items routinely out of available inventory will not only increase gross revenues, it will also lead to increased levels of customer service and satisfaction.

The second criteria for selecting items to have high service factors is high profit margin. Setting items that have a high profit margin to have a high service factor will result in increased bottom-line profits for the organization. Even if an item has a relatively low order volume or frequency, being able to fulfill orders for items with a high profit margin directly out of available inventory will decrease the likelihood of the customer shopping for the product elsewhere and increase the likelihood of repeat business from that customer.

For items with high order volume and frequency or high profit margin, using a service factor inventory management methodology can provide a powerful tool that can be leveraged to increase bottom line profits, improve customer service and satisfaction, and improve the likelihood of repeat business from a given customer.


The ERP Selection Process: Developing Your Initial List of Potential ERP Vendors

Wednesday, July 1st, 2009 by Alex Smith

Developing your initial list of potential ERP vendors is a critical step in the ERP selection process. Your initial list of potential ERP suppliers will serve as the basis for which suppliers you will send Request for Information (RFI) documents. Suppliers’ responses to the RFI will in turn help you to eliminate some ERP vendors and move forward with others to conduct initial remote software demonstrations. The vendors’ performance during these initial demonstrations will then help you to select which suppliers you will send a Request for Proposal (RFP), invite to conduct on-site scripted software demonstrations, and ultimately make a final supplier selection. In other words, your initial list of software suppliers should (hopefully) contain the supplier you will finally select as your software supplier. To help generate an initial long list of potential ERP companies (roughly 25 companies is usually a good start), there are a number of resources available to the software selection team.

Google – Google is a great place to search for potential ERP software vendors. For broad searches, use keywords such as “ERP software,” “ERP system,” and “ERP systems.” These search phrases will provide you with a large number of companies to consider. For manufacturers, “process manufacturing software,” or “discrete manufacturing software” are great phrases to search on when looking for potential software suppliers. You can also search on phrases that are more specific to your industry. Companies in the food and beverage industry, for example, can search for phrases such as “food ERP software,” or “beverage ERP software.” Pharmaceutical distributors can search on phrases such as “pharmaceutical distribution software.” You get the idea. Google is an incredibly powerful tool and provides highly-relevant information in its search results.

Industry Publications and Associations – Various industry publications and trade associations are also a great place to find potential software vendors. Members of the National Association of Manufacturers, for example, can check out the software section of the online NAM Buyer’s Guide. Cheese and dairy processers can look at Dairy Foods Magazine’s supplier guide or the Dairy Foods website, while organizations who specialize in plumbing wholesale distribution can frequently find potential software suppliers in The Wholesaler or at www.thewholesaler.com. No matter what your industry may be, your industry’s leading associations and publications are a great place to start looking for potential ERP vendors.

Independent Consultants
– Independent consultants are a great resource for not only developing a list of potential ERP vendors but providing assistance and guidance in other steps of the software selection process as well. If you decide to use a consultant throughout the selection process, be sure to select a consultant who truly is “independent” and does not have a partnership or financial agreement with any software provider. Selecting an independent and unbiased consultant will help you select the best ERP vendor for your business.

For more software selection resources from TGI, please see the “ERP Software Selection Process” within the “Resources” section on our website.  This area provides tools to assist in the software evaluation process, as well as an option for obtaining a list of ERP vendors based on your company’s industry, revenue, and manufacturing process where applicable.


SaaS as a Viable Solution for the Small Business

Tuesday, June 30th, 2009 by Alex Smith

When small businesses elect to implement an ERP software solution, they have a decision to make as it relates to hardware and operating platform. They can either purchase new hardware or move to a Software as Service (Saas) ERP platform in which businesses access their software application on the software vendor’s or a third-party service provider’s servers. The Software as a Service model, which has significantly grown in popularity over the last two years, can provide substantial cost savings to the small business.

First, by selecting a SaaS ERP solution, small businesses do not need to make a capital investment in the purchase of new servers. The cost of hardware and updates to the hardware is included in the service provider’s monthly fee. In addition, since the Software as Service model is essentially a lease on the hardware, businesses can take advantage of the ability to write off the cost of the service in full as a monthly business expense rather than to depreciate the new servers’ purchase as a capital investment.

Secondly, SaaS is a form of IT outsourcing, so small businesses that lack internal IT skills can enjoy the strong benefits of an ERP without bringing on new technical personnel. When one considers the cost of bringing on a new, full-time IT employee (i.e., salary, benefits, etc.), a Software as a Service solution can deliver thousands of dollars in cost savings each year.

Lastly, the Software as a Service model can provide small businesses with features that would otherwise not be possible if small businesses were to purchase and maintain their hardware themselves. Many Software as a Service providers have 24-hour backup mechanisms in place, so even in the event of a power outage at the service provider’s location, the small business can continue running with little to no impact on daily operations.

The Software as Service model can deliver significant time and cost savings to the small business. Any small business considering the purchase of an ERP solution should examine the many benefits of Software as a Service.


Leveraging Wholesale Distribution Software for Competitive Advantage – Delivering Value-Added Services

Tuesday, June 30th, 2009 by admin

Businesses across all industries strive to gain and sustain a competitive advantage in their respective marketplaces. And, this is certainly just as true for wholesale distributors. One of the ways in which wholesale distributors strive to gain a competitive advantage is to deliver value-added services in conjunction with the products they source for their customers. Strong wholesale distribution software must enable distributors to perform and record these activities just as they do purchasing, warehousing, picking, packing, shipping, and invoicing the products they distribute.

There are a variety of methods by which distributors strive to differentiate themselves to their customer base. Distributors may allow their customers to buy products as a kit, where by a series of items can be specified and ordered via one SKU or item number. Wholesale distribution software like TGI’s Enterprise 21 can enable distributors to sell both predefined kits to their customers and configurable kits where the customer can select those items which are included in the given kit being ordered. Distributors can elect to price these kits to their customers at the parent kit SKU level or by a combination of prices for those items making up the kit. The latter method is especially good for configurable kits. Furthermore, distributors may elect to perform kitting via simple picking operations or as a work order-based process when they desire to capture the costs associated with their kitting operations.

Another value-added service which distributors commonly perform is repacking. In this case, distributors may buy a given product in bulk quantities and repack it into smaller quantities for their customers to purchase. As was the case with kitting operations, some distributors will elect to capture the labor costs associated with these operations while others would not.

For wholesale distribution software that includes strong manufacturing functionality, distributors can perform assembly or light manufacturing operations. In these cases, the system’s traditional manufacturing bill of materials and routings (or bill of operations) can be used to define and execute the series of operations and associated components being consumed in assembly or manufacturing. As was true above with the kitting operations being performed via work orders, wholesale distributors can capture the associated costs of these operations. The actual material, labor, and overhead consumed at each point in the routing can be recorded with the associated costs rolled up across the various operations to produce an overall product cost in the system. Alternatively, the distributor may elect to record material, labor, and overhead at a standard rate of consumption via a simple backflushing method. Furthermore, distributors can elect to reflect product costs via their preferred costing methods including actual LIFO, actual FIFO, standard, or average.

In addition, distributors may have outside, third-party companies perform outsourced operations on their behalf. Strong wholesale distribution software will enable the distributors to source the components to be consumed for the outside processor, purchase and track the shipment of these components to the third-party, cut purchase orders for the performance of the outside operation’s services, receive the completed products back from the third-party, and pay the respective vendors for their products and services. Taking advantage of the manufacturing functionality within a strong wholesale distribution system, the material, labor, and overhead associated with the outside operations can be recorded just as it would be if the assembly or manufacturing were performed in-house by the distributor. These outside operations can also be daisy-chained in a manner that one third-party may receive certain components and perform specific operations, then ship the subassemblies to another third-party for secondary processing, and so forth, until the finished product is either delivered to the distributor or direct-shipped by the last third-party in the chain to the distributor’s customer.

Wholesale distributors may also elect to place consignment inventory at a customer location. In this case, the inventory is owned by the distributor until the customer consumes the given inventory. Strong wholesale distribution software will enable the distributors to place and manage the inventory at the customer location, receive the appropriate signal that the inventory has been consumed, trigger the appropriate customer invoice processing, and manage the level of consigned inventory based on the preferred replenishment methodology for that inventory at that customer location. Consignment inventory can also be used with third-party operations for managing component inventory until it is consumed in production runs.

Through leveraging strong wholesale distribution systems like TGI’s Enterprise 21, wholesale distributors can gain and maintain a strong competitive advantage in their industries by delivering value-added services to their customers.


Creating Certificates Of Analysis And Pedigree Documents For Process Manufacturing

Friday, June 26th, 2009 by admin

Safety and control – these are two words that are commonly heard when discussing key elements in today’s life sciences and food and beverage industries. Public and private sector entities alike are taking more action to make sure companies who do business in these industries are adhering to strong safety and control practices.

One of the ways in which businesses work to protect themselves and those with whom they do business is by receiving and making readily available certificates of analysis (commonly referred to as COA’s) from suppliers along with the ingredients they buy for use in manufacturing operations. COA’s are documents which provide a quantitative analysis across a series of properties for the associated item. For example, a COA for soya lecithin powder or ginger extract would generally include microbiology results for properties such as total plate count, E.coli, and salmonella levels, as well as a variety of other properties.

Life sciences and food and beverage companies will typically receive ingredients and automatically place them on quality hold upon receipt. Then, these businesses will alert quality control (QC) specialists that there are items that need to be inspected prior to their release for use.

The QC department will run a series of tests on samples of the given product received and verify that the properties on the COA match up with the properties of the product being tested. Assuming these tests pass muster, the product is then released for further consumption in a manufacturing process. Should the product not pass the QC tests, laboratory personnel will then run further tests while involving the supplier’s QC personnel to help evaluate potential issues with the ingredients before determining what to do next.

These same types of QC tests are performed on finished goods which are manufactured by life sciences and food and beverage companies prior to their release for shipment to their customer base. Again, a COA is created to accompany the specific lot of produced product to the manufacturing company’s customers.

Another document which is becoming more prevalent in the life sciences industry is a pedigree document. A pedigree document traces the complete chain of custody of the given end item from original manufacturer through various distributors until it finally reaches a retailer for sale. State governments such as Florida have a predefined prescription drug pedigree document which must be passed along the supply chain with each associated company adding its information and signing off on the document throughout the channel.

Strong business management systems like TGI’s Enterprise 21 ERP system can be used by life sciences and food and beverage companies to automate and maintain strong product safety and control procedures including the creation of certificates of analysis and drug pedigree documents.


The Specifics of Available and Capable to Promise Order Management for the Wholesale Distributor

Tuesday, June 23rd, 2009 by Alex Smith

A key functional element to any wholesale distribution software solution is order management. One’s ability to enter orders quickly and in an efficient manner can dramatically improve customer relations and service. As part of the order management process, a sophisticated distribution software solution should include both available-to-promise (ATP) and capable-to-promise (CTP) order management processes to ensure accurate commitment of shipment and delivery dates for customers at the time of order entry.

Available to promise means that when a customer places an order for a given item, the item is available in inventory (taking into account items that have already been allocated to previous orders). Available to promise functionality can go one step further to include a “commit to planned inventory” feature. This functionality is utilized when a sales order is placed for an item that is not currently in inventory, or is in inventory in insufficient quantity to satisfy the requirements of the customer. If there is already an existing open purchase order for that given item, the system can commit items on that purchase order to the existing open sales order based on the vendor’s delivery promise dates. Such a feature can dramatically improve anticipated shipping and delivery dates for the organization’s customers while simultaneously increasing inventory turns and lowering on-hand inventory levels.

In contrast to available to promise, capable to promise defines the ability of the organization to execute against a given customer requirement. For example, consider the situation when a customer places an order for a given item and the item is not in available inventory and there are no existing open purchase orders for the given item. In Enterprise 21, the system will alert the customer service representative in real-time that while the item is not in available inventory and that there are no open purchase orders for that item, the item is capable of being ordered, received into inventory, and shipped to the customer within a specific time frame based on the item’s lead time from a given supplier. While accounting for the item’s lead time, Enterprise 21 will immediately suggest an expected receipt date of the item into the warehouse, an expected ship date to the customer, and a final receipt date at the customer’s facility. In other words, at the time of order entry, the organization has the ability to identify its capability to fulfill the given customer order and provide an accurate shipping and delivery date for that order to the customer. Enterprise 21 can then generate a purchasing requirement and alert employees in the purchasing department that such a purchase requirement exists in the system. The purchasing manager can then analyze potential suppliers and look for discount opportunities from each supplier, submit requests for quotes to suppliers, generate purchase requisitions, and convert quotes into final purchases orders, all directly from within Enterprise 21.

By implementing available to promise, commit to planned inventory, and capable to promise functionality within the sales order management process, wholesale distributors can dramatically improve customer satisfaction, increase order and line item fill rates and inventory turns, and realize significant cost savings due to reduced inventory carrying costs.


Executive Dashboards: Analyzing Key Business Data for Decision-Making

Friday, June 19th, 2009 by Alex Smith

Executives at organizations of all sizes require key business data to make informed decisions for future business practices, focus, and growth. As part of Enterprise 21’s decision support system, executives can readily gain visibility to key data and make informed decisions that will affect the future of their organizations by leveraging the analytical power of their personalized executive dashboards. In my experience, most executives, at a high-level, are generally concerned with similar key performance indicators (KPI’s) for analysis and decision-making purposes. It is important to note that while dashboards are an excellent way to gain visibility to key data, they are not intended for executives to get “bogged down” in detailed data; executives’ time is best-spent analyzing data and making decisions at a much higher level.

One common, useful executive dashboard is a graph providing sales margin by product or product group. This dashboard allows the executive to see margin as a percent of sales for individual products or group of products in a visual manner. If a distribution company, for example, has dedicated significant sales and marketing efforts to a given product but that product has a significantly lower margin than another product, the organization can decide to direct more sales and marketing efforts to the product with a higher margin (this assumes that both products have relatively equal order volumes, as you would not necessarily want to dedicate significant sales and marketing efforts to a product with relatively low order volumes despite a high margin).

A second executive dashboard that is commonly used by manufacturing executives is one showing manufacturing output by product by facility. This dashboard allows manufacturing executives to analyze the facilities that have the highest production output for a given product compared to other facilities producing the same product (assuming equal resources are available across each facility). Comparing production output for a given product across multiple facilities allows the executive to gain insight into what facilities are operating more efficiently than others. This information can allow the executive to initiate potential business process improvements at the lower producing facility or reallocate resources across facilities in such a way that a given product is produced only at those facilities that produce the product with the most efficiency, leading to reduced costs and increased production output for all products and facilities.

A third executive dashboard that, while not used nearly as frequently as it should be, can lead to significant growth in profitability and customer service is a gross margin by customer dashboard. If I were to ask most manufacturers or distributors who their most valuable customer is, most would reply that the most valued customer is the customer who orders the most products with the highest frequency. While high order volume, high order frequency customers are certainly important, the executive should also carefully examine those customers who are providing the business with its largest sales margins. Focusing on the customers who are responsible for the organization’s largest sales margins is important because these customers deliver the most profitability at the least expense to the business. Ensuring that the products these customers order are always available in inventory and establishing these customers as “high priority” can lead to improved customer relations and increased profitability with minimal expense to the organization.

In sum, executives who leverage key business data dashboards are armed with the necessary information to make well-informed decisions for future business growth, output, and profitability.


ERP System Implementation Continues After Initial Go-Live

Tuesday, June 16th, 2009 by admin

OK – you’ve made it! After months of evaluating various ERP systems followed by more months of implementation, your business is now up and running on your new ERP software. Now you and your team can go back to business as usual and not give your software another thought – right? As Lee Corso, sports broadcaster and football analyst for ESPN, would say, “Not so fast, my friend!”

The only way this would be correct is if the following were all true:

  • You were able to take advantage of virtually 100% of the functionality the new software provided that was pertinent to your business day 1 at go-live.
  • The software vendor never produced any software updates and fixes that provided any business value.
  • Your personnel grasped and retained 100% of the possible knowledge through the implementation and training process.
  • Absolutely nothing ever changed in your business – there were never any new personnel or resources that moved into new positions, and your business and industry as a whole never changed.

Since these statements are never true, even after initial go-live with your new software, there is an ongoing need to evolve business strategy and tactics to gain and keep a compelling competitive advantage in one’s industry, to improve business processes to gain business efficiencies, and train and retrain personnel.

Project goals are established and baseline metrics are documented as part of the business’ justification to move forward with the software evaluation and implementation projects. Some 3-6 months after initial go-live with the new system, the current business metrics should be compared with the baseline metrics to gauge progress made to date. Ideally, all of the targeted business metrics will have been met; however, it may be that there are areas where these objectives have not been achieved.

Whether or not the initial targets have been met, the business should perform an ROI Workshop to determine what can be done to drive additional return on investment from the new business software. An ROI Workshop would typically produce 3-5 key actions where substantial additional ROI can be derived by taking further advantage of the software that has already been acquired and implemented.

Another recommendation is to establish quarterly objectives to take advantage of additional software functionality. This can provide a rolling 12+ month calendar stating what advancements will be made over time. As part of this process, businesses should evaluate new software releases produced by their software vendors to determine the value of upgrading to the latest software releases. Companies are encouraged to create a measureable business case for upgrades just as was done for the initial software implementation and to evaluate the results against those targets 3-6 months after the upgrade has been put into production.

We also highly encourage companies to establish an ongoing training schedule for their employees. This should include refresher and more in-depth functional training for personnel who have been using the software for some period of time so these resources can become more proficient in their current roles. Also, there will be a need for introductory training for personnel who move into new roles and for new hires. Establishing an ongoing training schedule along with budgeted funding is critical for a business to gain the maximum benefit from an ERP system.

Regardless of the ERP system ultimately selected and implemented, businesses are encouraged to adopt continuous improvement principles when it comes to their ERP software systems to maximize the business value derived from these systems long after the initial production go-live.


When is Your Small Business Ready for an ERP System?

Friday, June 12th, 2009 by Alex Smith

A common question small business owners ask themselves is when their business is ready to implement an ERP software application that will replace their existing small business software. Fortunately for the small business owner, there are a number of small business ERP software solutions on the market today that serve as a viable replacement for QuickBooks, Peachtree, and other small business accounting software packages. In my experience, there are three telling signs of when a small business is ready to migrate from its existing small business software to a more sophisticated ERP system.

First, the small business is operating in a multitude of software packages based on a given department within the organization. Accounting personnel make journal entries in QuickBooks; warehouse managers enter data into Excel; sales representatives use ACT, Goldmine, Salesforce.com, or some other customer relationship management software solution; and for production and scheduling, well, sometimes there are small businesses that abandon the concept of using software for production altogether and revert to more archaic methods – I recently visited a food processing company that had its production manager hand-write the week’s production schedule on a chalkboard! The problem with this lack of integration between software packages is that it leads to a lack of organizational and business process integration. Divisions and departments begin to operate independently of one another or develop into individual silos of activity and information. Access to information in a given department becomes highly dependent on the software package used to process transactions and the associated person entering the data. This level of independence between various departments poses a serious problem for the small business owner who needs to manage the overall success of all of his or her business’ operations and makes it substantially more difficult for the owner to identify what areas of his or her business need improvement.

A second sign that a small business is ready to move to an ERP system is that duplicate data entry and data processing has become a common practice within the organization. When operating a business in multiple software solutions, it is common to have employees enter the same data into two or more different software packages. This poses two problems to the business. First, duplicate data entry consumes workers’ time and leads to operational inefficiencies and added time costs to perform a given transaction. Secondly, duplicate data entry increases the chances of having data entered incorrectly or inaccurately, thus leading to more workers’ time spent trying to correct the problem and keep key business data up to date and accurate. A fully-integrated ERP software solution can help remedy these problems and provides immediate benefits to the organization. By having all employees enter data into a singular software package, there is no need to enter data more than once. This can reduce employee time spent on data entry and provide employees more time to perform their daily tasks, hopefully leading to an increase in worker productivity and overall business productivity and output. Small businesses can even see substantial reductions in time spent performing period and year-end processing with a fully-integrated software solution.

Lastly, one of the most common signs that a small business is ready to implement a sophisticated ERP system is that the business suffers from frequent inventory shortages for some items and dramatic inventory surpluses for other items. I frequently hear many small business owners offer the complaint that they are frequently out of stock on their most popular items. They even complain that they suffer from inventory shortages of the packing materials required for their most popular items. An ERP system with tight inventory control, a comprehensive warehouse management system, and sophisticated forecasting and planning capabilities can ensure that sufficient inventory of a given item is available to meet customer demand without excessive on-hand inventory levels; in fact, a true ERP software system can help the organization increase order fill rates and improve customer service while simultaneously reducing on-hand inventory levels. This leads to reduced inventory costs, improved customer service, and increased profitability, giving the small business a significant advantage over its competition.