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Process Manufacturing Software: Key Benefits Elude Companies without Strong Inventory Control

Wednesday, August 11th, 2010 by admin

I met with a company recently who is evaluating new process manufacturing software.  They currently have separate systems for manufacturing and distribution.  They also have numerous processes they’re performing off-line in spreadsheets and on paper.  As a result, they don’t have one cohesive set of real-time information available for use across the enterprise.

Their #1 core business issue is that they have an inventory control problem.  This should not be surprising based on the discussion about separate systems and off-line processes;  however, in further peeling back the details behind this issue, while company management “wants” to resolve this issue, it wasn’t clear to me they were willing to do what was necessary to “make” the issue go away.

A cornerstone of strong ERP systems like Enterprise 21 is strong inventory management – a series of processes and associated data that enable process manufacturing enterprises to be able to plan and execute effective and efficient raw material and ingredient sourcing and production operations.  This means being able to buy and produce exactly what is necessary to support customer demand without incurring excess inventory, whether the business manages its production operations via make to stock, make to order, or a combination of methodologies.

Without strong inventory control and accuracy, setting and adhering to the processes and procedures necessary to know how much inventory is being held and where that inventory physically resides in the enterprise, a process manufacturing company cannot achieve strong inventory management and customer service.  Or said conversely, without strong inventory control, companies will have too much inventory overall, not enough of the right inventory to satisfy customer demand, and customer satisfaction will be reduced.

Process manufacturing systems that include fully-integrated RF/barcode-enabled warehouse management provide all the necessary software functionality to enable companies to have strong inventory control and inventory management.  However, software functionality alone is not sufficient.  Having documented, repeatable processes and procedures, training personnel to perform these operations, and requiring personnel to comply with the processes and procedures is more critical than the software functionality itself.

Having the greatest system in the world without people performing their appointed roles in the manner required will make that system useless.  In the arena of inventory control, this starts with personnel performing a system transaction for every physical task they perform regarding inventory – receipts, putaways, moves, picks, packs, and shipments.  A system task must be performed to update inventory data every time a physical task involving inventory is performed.

Even if a business were willing to put the necessary systems, processes, and procedures in place, it will be disappointed that a “new system” does not provide improved inventory control if it is unwilling to establish and manage to a culture of compliance with those processes and procedures.

Wholesale Distributors Enjoy Flexibility When Implementing Enterprise 21 Warehouse Management Functionality

Monday, May 4th, 2009 by admin

A common discussion we have with wholesale distributors revolves around how they can best implement Enterprise 21’s warehouse management system. The great majority of these distributors envision moving to a completely paperless warehouse environment where warehouse workers are prompted via handheld and fork lift-mounted devices to perform the next highest priority task in their work queues.

Prior to moving to Enterprise 21, all of the distributors with whom we work were using some form of paper in their warehouse operations. Most of these organizations had their warehouse personnel writing on paper pick tickets as they went through the picking process and had the data electronically entered into their existing legacy systems hours later. Others may have been using a combination of paper and some scanning when they initially approached TGI.

In the case where there was manual recording of results, a paper pick ticket was printed and associated with each given sales order. Warehouse personnel would take the paper pick ticket, walk through the facility, and pick the items associated with that order. As the workers picked the order(s), they wrote the results of their efforts on the paper pick ticket, especially noting any places where there were discrepancies in the number of items picked or locations from which they picked. Some time later (and in many cases, much later), warehouse operators gave their hand-written picking results to an administrator for keying this information into their legacy system.

This paper-based process presented several challenges. First, there were delays between the time the physical transactions occurred and when those transactions were recorded into the system. Second, the one who recorded the data into the system was frequently not the same person who performed the physical transactions. In this case, there were opportunities for recording incorrect data when the written results were illegible and the data entry person made his or her best guess as to what was recorded. Because of these practices, the information in the computer system was inaccurate and generally not trusted. By moving to a real-time inventory system, such as Enterprise 21, where transactions are recorded in the system at the point and time in which they occur, inventory data becomes more accurate and timely.

In addition to improving inventory accuracy, distributors can take advantage of more efficient warehouse processes in Enterprise 21. One of the major advantages that organizations who ship a lot of small package deliveries can gain from Enterprise 21 is moving to a cart picking process. When doing cart picking, rather than performing picking on an order-by-order basis, warehouse personnel can perform a consolidated picking process for multiple orders concurrently, thus reducing labor consumed compared with picking each order on its own. Once a cart picking process is completed, the cart is moved to a packing location where the various orders on the cart are packed and prepared for shipment. Enterprise 21 can also enable warehouse operations to take advantage of other warehouse efficiencies including zone picking and wave picking.

The warehouse management software functionality in Enterprise 21 is fully-integrated with the entire Enterprise 21 ERP software application. Since this functionality is built into Enterprise 21, TGI customers do not have to try to keep separate systems in sync with each other or have to worry about what will occur to their ERP to WMS interface when they upgrade one of these systems.

A major advantage of Enterprise 21’s warehouse management system is that new TGI customers can elect to start their initial operations at system go-live at any point on the functionality continuum, from printing of paper pick tickets and manually recording the data to fully paperless operations. Over time, distributors can continue to streamline their operations and take advantage of more and more of the process efficiencies afforded by Enterprise 21.

By implementing the warehouse management functionality in Enterprise 21, distributors can improve inventory accuracy and gain operational efficiencies in a manner that can best be assimilated into their warehouse operations.

The Secret to Increasing Distribution Service Levels and Fill Rates

Wednesday, March 25th, 2009 by Alex Smith

A key element to the success of wholesale distributors is to simultaneously manage appropriate inventory levels while maintaining high levels of customer service and satisfaction. Depending on the reliability of the distributor’s supply base, performing these tasks effectively may seem virtually impossible. Achieving desired service and order fill rate goals is based on the successful implementation of an effective inventory replenishment program. While the concepts of inventory replenishment, service levels, and order points have been used for decades, the number of distribution companies who understand and utilize these concepts is significantly lower than one might imagine. The fact of the matter is that most distribution companies struggle with inventory optimization.

While there are complexities in the details, at an overall level, smart distribution companies are focused on delivering the highest possible service levels to their customers while minimizing on-hand inventory. For distributors, long-term profitability is contingent upon having the right products available to meet customer demand at the right time. If this concept is so elementary, why do so many companies struggle with establishing optimal inventory levels, and why do distributors struggle to have adequate product supply to fulfill customer orders?

The two-word answer to this conundrum is “service levels.” Excellence in distribution is synonymous with the ability to supply customers with a high service level that is both consistent and reliable.

What is a service level? Service level refers to an organization’s ability to enter and ship all of the items requested on a given sales order to meet the customer’s desired receipt dates. This means there are no inventory shortages or backorders, and the order is filled within the customer’s requested delivery window.

In TGI’s Enterprise 21 ERP system, a service factor can be defined by item or SKU, which defines the desired line item fill rate for that given item. Service factors can be set on a global basis or can be defined uniquely by location or facility. For some fast-moving items, a service factor of 95 or 99 may be desired, while others may require much lower service levels of 50 or 60.

How does Enterprise 21 use service factors? Once a service factor is defined – by SKU – Enterprise 21 uses the service factor in its time-phased inventory replenishment process. In Enterprise 21, a service factor of 95 implies that 95% of the time a customer places an order for a given item, the item can be shipped out of inventory, while a service factor of 99 means this is to occur 99% of the time.

In Enterprise 21, the inventory replenishment process analyzes supply and demand to help distribution organizations improve order and line item fill rates and optimize their overall inventory management performance. The process considers a variety of criteria such as desired service level and safety stock, minimum and maximum inventory levels on a product-by-product basis, on-hand inventory, forecasts and current customer demand, supplier lead times, minimum order requirements, and order multiples. In organizations with multiple facilities, Enterprise 21 can review requirements for an individual warehouse or distribution center and for the organization as a whole. Once the Enterprise 21 system’s inventory replenishment process calculates the necessary recommended replenishment quantity, the application generates online requisitions for review and conversion into purchase orders and inventory transfer requests.

What further sets Enterprise 21 apart is the continuation of this process to gather transactional data as things occur and to report on that information for analysis purposes. An integral part of Enterprise 21’s distribution software functionality is the ability to monitor service levels automatically and produce suggestions for necessary changes to existing replenishment rules. By interactively collecting and analyzing information such as order and line-item fill rates, Enterprise 21 produces reports and management alerts to notify the organization of any anomalies compared with existing service level metrics.

Successful distributors know the key to ongoing and improved profitability is due in large part to managing the balance between customer service and inventory levels. Enterprise 21’s advanced inventory replenishment capabilities, including the use of service factors, are just one of the reasons leading distributors adopt Enterprise 21 for its complete distribution software capabilities.

Establishing the Complete Chain of Custody of Your Products through Lot Tracking

Thursday, March 19th, 2009 by admin

One of the hottest topics in process manufacturing is lot traceability. The definition of lot traceability is the process of tracking given material lots throughout the enterprise and beyond. Lot traceability includes tracking lots forward from ingredients through manufacturing processes into finished goods, which are ultimately shipped to end customers. This also includes tracking lots backwards from finished goods back into the manufacturing processes and then back to the ingredients consumed in the production processes.

In ERP systems with strong process manufacturing support like Enterprise 21, companies who have a need to track lots should be able to do so easily and in an automated manner. This is a key element for establishing good system and procedural controls within one’s business, and should the need arise for a product recall, make the isolation process easy and straightforward while minimizing the amount of product necessary for inclusion in the recall.

Most companies without a modern ERP system that includes sophisticated lot tracking software functionality are managing their lot data in a suboptimal manner. Many of these companies may simply be recording lots on hard copy logs, using a series of spreadsheets to key in this data, or a combination of these methods. Not only does this process create a large amount of manual efforts, it leaves operations vulnerable to a significant amount of data entry errors and potential compliance issues.

What a good ERP software package like Enterprise 21 offers is two-fold. First, one can establish and record lot properties, which is a series of corresponding values for a given product’s physical characteristics. This practice is a key element in the quality control (QC) process. Second, one can record the complete chain of custody or pedigree of lots through the enterprise and beyond. Both of these steps are critical requirements for strong lot traceability and compliance.

Relative to system-enabled lot analysis for ingredients, when ingredients are received, the associated lots are recorded. Those received lots would typically be placed on QC hold and the inspectors alerted as to the need to inspect and analyze these lots. The inspectors would perform their analysis and record the values for the associated ingredient lot properties. Assuming the values observed and recorded were within the acceptable range for the various lot property characteristics, then the given lot of ingredients would be released to available inventory for consumption in manufacturing processes.

A similar process can be performed for system-enabled lot analysis for manufactured goods. When manufacturing occurs, the associated lots are recorded. The produced lots can likewise be placed on QC hold and the inspectors alerted to take action. Once the inspectors perform their analysis, the values of the produced goods’ lot properties would be recorded. Assuming all of the lot properties were within spec, the produced goods would be released to available inventory.

While there can be other complexities to one’s operations with packing and repacking of product into various containers with associated lots recorded, the lots shipped to a given customer would be recorded, thus providing complete visibility as to which finished goods lots were shipped to customers associated with given sales orders. This process establishes a complete chain of custody from ingredient lots received, which are consumed in manufacturing yielding manufactured lots, which are then shipped out to customers.

Once this data is recorded in the system, both forward and backward lot traceability can be performed. Forward lot traceability is the tracing of ingredients from suppliers through production processes out to customers in finished goods lots. Backward lot traceability is tracing finished goods lots back from customers into production to determine which other customers received product from those specific produced lots and back to ingredients received from suppliers, if necessary.