Archive: February, 2015
Nobody talks about “reducing headcount,” but this is a key benefit to a new enterprise software system. If you spearhead a project to buy a new enterprise software system, will it eliminate your position? Will this happen to you or your co-workers?
Now that I have your attention, we need to see why this is important to understand. Typically, the goal of any organization is usually unequivocally to make money for the stakeholders. By definition, this goal can only vary in a non-profit organization, in which case it becomes more difficult to define since non-profits tend to have a lot of volunteers, and each may have their own goals in mind. In either case, it is important that everyone in the organization aligns with the goals of the organization. Of course, it is up to the leadership to find ways to do this.
But whether the organization is trying to make money for investors or to accomplish another goal, someone needs to fund the organization. The ability of the organization is limited by the funding and the organization’s return on investment for this funding. In the case of a for-profit, why would the stakeholders invest in an organization that pays a 10% return when another organization can pay 15%? And for a non-profit, a better return on investment delivers an ability to grow faster with less on-going funding.
The organization cannot just “grow!” Ultimately it helps if everyone in the organization understands that an organization is better off if it can grow its return on investment (ROI).
Focusing on merchants and fulfillment companies, growing ROI requires that an organization do two of the following three things, at the same time:
- Increase Throughput
- Reduce Headcount
- Reduce Inventory
Increasing throughput is the most obvious, as this means processing more orders to increase revenue.
How though, can you increase throughput while reducing headcount or inventory? At first, this seems counter-productive!
The answer is to first realize that we are not talking about simply having layoffs and ordering less inventory. We are talking about Headcount and Inventory as a percentage of the overall throughput. For every additional thousand orders you process, how many additional people need to be there, and how much additional cash needs to be tied up in warehouse inventory (and other commitments such as warehouse space and equipment)?
Let’s say your staff of 10 and inventory levels can handle 1000 orders per week. If you need to double your staff to 20 and double your inventory for an additional 1000 orders per week, the return on investment stays the same.
But if you can increase your throughput by another 1000 orders per week without doubling your staff but you doubled your inventory investment, you’ve improved return on investment. Likewise, if you double your orders per week, double your staff, but don’t need to double your inventory in the warehouse, then you’ve improved your return on investment. For example, a million dollar investment in a company that originally returned a 10% profit of $100,000, just doubled to a two million dollar investment that returns $300,000, or 15%. Each dollar invested by a stakeholder makes a bigger profit each year.
As an organization grows, processes that used to be simple get exponentially more complex. For example:
- Receiving, checking, and storing inventory efficiently
- Processing orders and returns in a way that keeps customers happy
But no matter how efficient these processes can be, the questions that management needs to answer are:
- How much inventory will we need to order, at a minimum, to handle our throughput requirements?
- How few people will we need to handle our throughput requirements?
- Additionally, management needs to make marketing decisions that effectively grow throughput.
For these three reasons, an organization must have an enterprise-wide management system like InOrder, combining data from all areas into a big picture that visualizes what is really happening.
Without this system in place, each department tends to put their own smaller system(s) into place. Each of these subsystems has its own champions, its own learning curve. You might have a website database system and a phone order processing system, feeding a warehouse system, a separate contact management system and an outsourced email marketing system, a customer feedback system, and then some managers with their own spreadsheets or even three ring binders that need to be checked several times a day to answer management decisions.
This is known as a “silo effect” where clusters of private data reside, and are sometimes even guarded from other departments, and in a few cases, held hostage. When this happens, your IT department naturally starts building an array of applets and data feeds to gather all of this information together to enable management decision making.
Your clerical and managerial staff are spending more time collating data into spreadsheets, instead of simply reading the results and then having time to interpret them.
As the organization grows, this ad hoc approach inevitably becomes a house of cards that often relies on one or more key but over-worked and over-stressed IT champions. Rather than leveraging this team to produce the next level of data analysis for decision support, they spend all of their time patching things and just keeping core systems up and running.
With an ERP such as InOrder, your core systems become a utility much like electricity and plumbing, and a candidate for continuous process improvements as new software features are released.
By understanding the need to reduce headcount to improve the stakeholder’s return on investment, we can then see that this often actually means having the ability to grow your organization’s throughput at a faster pace than the corresponding growth in headcount, as well as improving the utilization of existing headcount, in all areas of the organization.
The Thomas Jefferson Foundation recently turned on an integration from Yahoo Store to InOrder utilizing the InOrder EDI module. This EDI module allows communication to and from an EDI Service Vendor or translation software, enabling seamless EDI communication between InOrder and your Trading Partners. In this case, Morse Data Corporation built a customized EDI integration directly using Yahoo Store’s XML services.
The Thomas Jefferson Foundation preserves and maintains Monticello, the third president’s home in Charlottesville, Virginia. The Foundation engages a global audience in a dialogue with Thomas Jefferson’s ideas. The Foundation seeks to facilitate conversations and to use its extensive research and knowledge to stimulate interactions on a variety of topics that were of keen interest to Thomas Jefferson, the most powerful of which are liberty and self- government. Through virtual, off-site and on-site engagement, including retail operations, the Foundation seeks to excite the world about Jefferson’s relevance today and ignite a passion for history. For additional information about Monticello or the Thomas Jefferson Foundation, please visit http://www.monticello.org.
Has this ever happened to you? You’re applying a payment to multiple invoices, and half-way through, it’s time to go home, or each lunch. Fortunately, InOrder lets you pick up where you left off.
When the entire payment amount is not applied before closing the Reapply A/R window, the balance of the payment is applied to Invoice #0 until the applied payment amount is updated. This feature is used to update the payment applied to Invoice #0.
- From the Original Invoice drop-down list, select “Applied Payments.”
- From the Amount drop-down list, select the payment to update.
- From the New Invoice drop-down list, select Update Applied.
- Click the Apply button.
- On the Select Invoice window, the value in the Applied column for Invoice #0 represents the amount of the selected payment to be applied. Click the Clear button to remove the amount applied to Invoice #0. When the amount of the payment applied to Invoice #0 is cleared, it is reflected in the Amount Remaining field.
- Select each invoice to apply.
Employee theft goes well beyond loss of cash or product to get to your bottom line. It can affect your customers by way of higher prices and inferior shopping experiences, which can have a direct impact on your reputation. Imagine what your customer thinks of your business when he or she is promised an item by a specific date because you think you have it in stock. Although your (paper) records showed you had the item, it was ultimately backordered. Unfortunately, the item was stolen by an employee and you were not aware until the customer was already disappointed.
And speaking of your reputation, you don’t want to invite even more shoplifting because your business is known as an easy target.
Employee theft can also affect other employees. Stealing from you indirectly steals from them. How many times will it happen before other employees question whether you’re competent enough to keep the business strong and safe? After it happens, will you unfairly limit the freedoms of the rest of your staff?
The survey questioned U.S. retail employees about store types, job titles, inventory management methods, theft perception, and outright stealing from their employers.
According to the report, the National Retail Federation (NRF) estimates that employee theft accounted for almost 44% of total losses for US retailers. Some of the data revealed from responses to the survey from Software Advice™ included the following:
- 85% of national retail chains, 53% of local and regional retail chains, and 37% of small stores surveyed use inventory management software.
- Only 28% of employees whose stores use inventory management software said internal theft is a problem, compared to 37% of employees whose stores use other methods for managing inventory.
- 22% of employees at stores without inventory management software openly admitted to stealing products, compared to 15% of employees whose stores use inventory management software.
As explained in the report, modern inventory management systems can be integrated with other software and hardware to detect suspicious patterns, providing data for management involvement.
For example, when you use a quality ERP system, your inventory availability is tied directly to your order system. The InOrder ERP system includes audit logging, which provides dates, user names, and tasks each user performs. The inventory on hand is tracked for the duration of its time in the warehouse. Any inventory transactions including receipts, sales, returns, as well as all types of adjustments, such as kit assemblies, facility transfers, inter-facility bin moves and replenishments, cycle count adjustments, damaged write-offs, etc. are tracked to allow precise SKU audits. Additionally, full warehouse “snapshots” of quantity and value on hand are taken whenever an accounting period is closed, allowing reports to show beginning on hand, activity, and ending on hand for an accounting period. Inventory accuracy typically approaches 99.9%.
How else can InOrder help detect theft?
Because InOrder’s Purchasing, Payables, and Inventory systems are all connected, you can compare what was ordered to what was received, to what you are paying your vendors.
The system tracks all purchase orders placed with your vendors, and any subsequent changes to those orders. Inventory receipt transactions are linked to purchase orders, recording what happened to each carton entering the facility. Vendor bills are entered into the system before or after inventory receipt. These bills get linked to the receipt and the purchase order. Any inventory that is received damaged is tracked as it gets routed back to the vendor for credit, and the credits are tracked. These processes enable control over what you receive and approve for payment with your vendors, stopping vendor billing fraud in its tracks.
Then these processes directly feed G/L, thwarting the rogue accountant who tries to skim by charging higher expenses on the G/L than the expenses actually incurred on your vendor bills, and then pocketing the difference.
Finally, InOrder’s tracking auditing enables you to isolate and trace other types of employee theft, such as generation of bogus customer refunds, gift cards, or credit memos issued to friends of employees. Seeing who performed a transaction and when is helpful, but forensic analysis of suspicious transaction patterns in the database can also help to isolate the employee(s) involved.
With a good ERP system, employees discover that they can trust the system, and you in the process. With their trust comes respect and confidence that their jobs will be secure and the business will continue to grow. A good ERP system helps you improve your customers’ shopping experience, achieve their trust that you keep your word about your products, and you take their business seriously.