Friday, June 22, 2012

Looking for an Inventory Management for a Small Warehouse

John posted this message on LinkedIn a few weeks ago.  He seems to have assessed his situation fairly well.  He considers the company he is currently working for a small company with approximately 10M in gross revenues.  They are using Quickbooks to handle their accounting and inventory needs.  Maybe 2500 parts and is typical 80/20 rule 80 percent of the revenue comes from 20 percent of their inventory.  He estimates that on-hand inventory levels are about $500,000. 

They have done some research and looked at some solutions both hosted and cloud from various size companies and he is looking for anyone having any suggestions.  He feels their size of business and inventory levels does not justify a $75,000 investment.

First of all, congratulations on working and contributing to a small business, which is the foundation of economic activity and job growth in this country (US for my international readers).  What is equally impressive is that they were able to scale QB’s to this size of operation.  Do not get the wrong impression.  I like QB’s and use it for my own business.  It is user friendly, convenient and forgiving.  I just do not believe that a company on a growth path with this type of revenue can scale the use of these programs effectively.  I am sure the QB people can point out many success stories of even larger companies using their solutions.  Again, I like QB, but feel there are better solutions for companies of this size and larger.

I say growth path, because they are looking for a new solution.  It is also clear they have hit a glass ceiling.  They also have checkbook mentality.  Why is $75K too much for a system?  By the way, my guess is that they should budget twice that much.  From experience, you can obtain adequate software and equipment for this amount of investment, but the training, conversion and implementation usually doubles the investment.

Notice I use the term investment repeatedly.  Investment implies a Return on Investment (ROI).  Within reason does it really matter if he invests $75K or $150K, if he knew and felt confident that he would recoup that amount with growth, sales and cost savings?

We do not know that much about the company from his description, but another issue is that comes to mind is that they are looking at accounting and inventory only.  These are two critical components any distributor needs.  They also need customer service, a contact management system, perhaps an ecommerce solution, purchasing and possibly a whole host of other modules.

They need a scalable system that will allow them to integrate all of their operations, all of their employees, all of their customers, all of their suppliers, all of their inventory, in short, everything under a single canopy.   Full integration opens the door to streamlined efficiencies, cost savings and improved profits.  When you tie all of these components together it is quite reasonable to achieve a good ROI.

I suspect John is not finding the right solution, because he is not looking in the right direction.  The $75K is not the issue.  The real issue is that he does not have a trusted advisor to help him look at ROI, Total Cost of Ownership (TCO), his operations, his people, and company culture to find a solution that works.

My suggestion to John is that he contacts DolvinConsulting.  We are trusted advisors and work with industry experts to find the right solutions to the challenges faced by distributors, manufacturers and specialty retailers.

If your company is facing similar challenges, why not reach out and ask for help?  That is why we are here.  We do not know who you are, so you have to take the first step.  We do not bite and if you do not like what you hear, then hang up the phone.  Contact us today and see how we are different.

1 comment:

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