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Leveraging Manufacturing Software Functionality for Distributors

Tuesday, January 5th, 2010 by Alex Smith

Virtually every one of the distributors with whom we work has some sort of kitting, assembly, and/or light manufacturing software functionality requirements. With Enterprise 21’s integrated manufacturing capabilities, distributors are able to meet both their manufacturing and material requirements planning requirements with a single ERP solution.

For distributors who sell kitted items, Enterprise 21 allows for a multi-level bill of materials to be defined for each kitted item. The system also allows for substituted items for any component on the BOM. In addition, distributors can associate both labor and burden costs to each bill of material, allowing the organization to gain better visibility to the true cost of each kitted item.

Furthermore, material planning for each item in a given kit can be accomplished through Enterprise 21’s integrated forecasting and planning functionality. This gives distributors the ability to plan appropriately for each product it sells whether the product is sold on an individual basis, in a kit, or both while simultaneously reducing inventory carrying costs and improving order and line item fill rates.

By taking advantage of Enterprise 21’s integrated manufacturing software functionality, distributors can meet their software requirements with a single ERP software solution without having to purchase additional manufacturing and planning modules as add-ons or bolt-ons from third-party software providers.

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.

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.