Monday, June 16, 2014

Two Signs ERP Changes are Needed

Most know that manufacturers, distributors and other midmarket organizations depend on Enterprise Resource Planning (ERP) solutions to increase productivity and deliver great customer support via an integrated information repository.  You know the analogy, the left hand knows what the right hand is doing, less errors, better performance, and faster access to business metrics.


There are many signs that you may have outgrown your ERP solution.  Every organization struggles at some point in time.  The struggles are equal during periods of growth and decline.  The economy is cyclical and so are business operations.


Below are two signs.  How many more affect you personally? 


Sign-One:  You increase your labor force and you do not get an equivalent increase in productivity.  The extra personnel just seem to be less productive. 


When your business grows it makes sense that you may need more people to interact with customers, process orders, handle procurement and finances.  It makes sense, doesn’t it?  Perhaps it does, but how many are necessary and how many are too much?  How many actually just increase overhead?  How many more do you need to manage the workforce?  Are you creating the need for an extra level of management?


If you double your warehouse work force, should you be able to pick, pack and ship twice the number of orders?  Should you be able to triple the number of orders?  What is the ratio of people to orders processed in your organization? 


If you actually ship twice the number of orders, how many customer service people does that translate to?  How many people do you need to add to the Finance department to handle billing and reporting needs?  How many more supervisors and managers are needed to address the increase in workforce. 


It might make sense to take a look at how your business is physically organized before you add people.  Not that you do not need more people, the real question is how many and where? 


For example, would arranging your inventory locations in a more efficient way for stocking and picking make more sense?  Would conveyors or barcoding or other form of automation increase productivity enough so that you can minimize hiring? 


In contrast suppose business has shrunk, how many roles can be consolidated?  How can you empower the remaining personnel with the right tools so that their productivity increases and you can maintain business operations and then prepare for the next growth cycle?


How efficient is the software you use to process information?  How many separate systems do you use?  How many steps does it take to enter an order?  How much time does it take?



Sign-Two:  You increase your inventory level and still have troubles meeting customer demand.


How much is too much inventory?  What are your customer’s expectations?  What does on-time delivery mean?  What delivery does your competition actually deliver?  Is there anything real about Just-In-Time (JIT) inventory?  Who do you know personally that can make that type of system work?


Manufacturers have lead-times for the products they produce.  Distributors need systems that build that lead time into their procurement process so that customer demand and sales history can be balanced to ensure that you have enough inventory on hand to meet expected levels with a reasonable amount of safety stock.  In other words, you can meet customer demand without overstocking your warehouse.


A purchase “deal” is not a deal if that inventory sits in your warehouse too long.  A special price so one business can basically dump their inventory is not a deal for anyone, if that inventory sits and takes up space.  Physical space, overhead, taxes all add up and can easily out-cost any purchase savings.  A deal is not a deal unless you have a customer ready and willing (and has the monetary resources) to buy the product.


Can you find your inventory?  Do you purchase more, because you cannot find what you thought you had?  How accurate is your current system?  What tools and processes does your current system have that helps to keep your inventory accurate?  How often do you have to count your inventory to know what you have on hand?  Is the only time you feel confident on your inventory levels is immediately after the counts have been posted?


There are numerous indicators of inventory inefficiency and tools and software to address the challenges and problems.  Most businesses struggle in determining just where the bottleneck is occurring.  Otherwise, they would have fixed it already.  The problem often lies deeper than the observable symptoms.  The alternative is equally pressing.  A business knows where the problem is, but lacks the resources to properly address the problem. 


Either way short term patches and fixes designed to address the problem will inevitably make the situation worse when a decision is made to make these fixes permanent without addressing the underlying issues.  Until you get to and address the heart of the problem, the problems will repeat.



So many questions and too few answers.



These two signs are just the tip of the iceberg.  What keeps you up at night?  You have questions and we have answers.  You may agree with some of these statements and disagree with others.  Why not share those thoughts here for your fellow readers.  I would love to hear what you think.


Dolvin Consulting works with industry experts to help your business identify and remediate the obstacles that are holding you back today.  Contact us to see how we can help.  Only you know how great the pain is and the impact it has on your operations.  We understand and can help.


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