How Business Savvy Are You?

The first step to success is knowing what goods are lying where and for how long

IF YOU ARE A BUSINESS owner, having a system in place for counting and maintaining inventory or stock is essential for the success of your business. Managing inventory well will bring higher returns on investment and more customer satisfaction.

Stock Just The Right Amount

Too Little: Having inventory can make you lose sales and customers to your competitors. Also, keep in mind unexpected orders. Suppose you have many small customers, and a few large ones that account for say 40% of your sales. What happens if the one of the latter wants to buy up a large chunk of your stock? Logic would say that always accommodate the large customer, but you cannot afford to displease the smaller buyers.

Therefore, don't take chance in an effort to minimize investment in stock

To Much: The more inventory you have means the more money you will spend on overhead costs, loans, insurance, etc. So, analyze your needs, keep a record of the entire range of goods including reorder points storage space required and item location. Take into consideration shelf life of perishable goods, and seasonal and festive demand. And as for predicting requirements of large customers, the best way is to be aware of their consumption patterns and business model.

Follow the 80/20 Rule

About 20% of the items you sell will provide about 80% of your profit, because they sell the most. It's a fact that less expensive items often sell faster and need to be replaced more often sell faster and need to be replaced more often. For instance, when you sell ten items that cost Rs. 5 as often as a single item that costs Rs 5 as often as a single item that costs Rs. 50, you will have made sales of Rs. 50 with the Rs. 5 items. So, keep these fast-selling products at the top of your re-ordering list. And invest 80% of your funds in these items.

Keep Track of Time

Turnaround Time: This is a major consideration when maintaining inventory. Not all products sell at the same rate. So, knowing which products move quickly and which ones more slowly will go a long way towards helping you achieve a balanced inventory. Follow the simple technique of noting the date of purchase and order quantity every time it is replenished, to get a snapshot of turnaround time for each time.

Lead time: It is the time between reordering and the actual receipt of goods. Order Processing, order filling, and transportation usually take place during this time, which could be days, weeks, or months, depending on your supplier. It is therefore critical to be aware of manufacturers production cycles and last order dates, location of your suppliers good owns, and even stock positions of your competitors if possible.

Safety margin: As a precaution, order extra quantities to reduce chances of a shortage, or order a few days earlier. Having reserve stock can come in handy.

Consider cost of inventory

Inventory is often the single most significant asset; it is expensive and has to be managed carefully, else you may lose money. Cost of inventory involves rent, maintenance, insurance, finance cost, pilferage and damage, and even value of stock that may never be sold. These costs when added up, erode profits.

Pilferage and damage percentages are always greater when there too much inventory. It's much easier for theft to go unnoticed when there too much stuff, and breakages and damages are more likely to happen.

When there excess inventory, markdowns (distress discounting) are always higher, because excess inventory invariably slows the rate of sale of everything. The longer merchandise remains unsold, the greater the markdowns that will be necessary to move it through.

Minimize chances of pilferage and breakage by installing a good lighting system in the godown. A CCTV system would act as a deterrent too. Fix narrow and wide shelves according to product categories, label the shelves, and also number them. This will enable you to access items quickly, plus keep a check on their movement.

Inventory accounting: LIFO, FIFO, WAC Keeping inventory means that when you add or remove items from your stock, you will have made a note of it. Here are the most commonly used methods for inventory accounting.

LIFO (Last In First Out): In this, you will sell the most recently purchased inventory first. Suppose you purchased five units for Rs 10 each last month, and five more units for Rs 12 each this month. Using LIFO, Rs 12 would be the rate assigned to each item taken out of inventory until all the five recently purchased are gone. For each item sold after that, Rs 10 would be recorded.

FIFO (First In First Out): In this, you will sell the goods you receive first. Using the example above, you would record the Rs 10 items before the Rs 12 items. This means the value of your inventory is at its most recent price. FIFO is usually used during periods of relatively low inflation.

WAC (Weighted Average Cost): In this method, each time new inventory is added, the average cost of the items is recalculated. In the example above, the average cost of the ten items would be Rs 11 after the month's purchase was made. Now each item taken out of inventory would be recorded as costing Rs 11.

Get Tech Savvy

Having an active inventory record will help to move your business forward. It's a good idea to invest in an inventory management software that controls accounts receivables, accounts payables, inventory and general ledger. The basic idea is to improve the speed with which you turn your goods into receivables, and receivables into cash.

You should also consider bar coding all your products. A bar code system allows items to be scanned at the sales counter and speeds up the transaction process, and also automatically updates the inventory records when products are sold or purchased. This increases the efficiency or your business

SAP Business One The only software you require to run your business know more

Advantages and Disadvantages of ERP - Enterpriese Resource Planning

Advantages of ERP Systems
There are many advantages of implementing an EPR system. Few of them are listed below:

• A perfectly integrated system chaining all the functional areas together
• The capability to streamline different organizational processes and workflows
• The ability to effortlessly communicate information across various departments.
• Improved efficiency, performance and productivity levels
• Enhanced tracking and forecasting
• Improved customer service and satisfaction

Disadvantages of ERP Systems
While advantages usually outweigh disadvantages for most organizations implementing an ERP system, here are some of the most common obstacles experienced:

• The scope of customization is limited in several circumstances
• The present business processes have to be rethought to make them synchronize with the ERP
• ERP systems can be extremely expensive to implement
• There could be lack of continuous technical support
• ERP systems may be too rigid for specific organizations that are either new or want to move in a new direction in the near future

Simple Fact: -

STD Code of Hyderabad, India is 040

ERP System Improves Productivity, Speed and Performance

Prior to evolution of the ERP model, each department in an enterprise had their own isolated software application which did not interface with any other system. Such isolated framework could not synchronize the inter-department processes and hence hampered the productivity, speed and performance of the overall organization. These led to issues such as incompatible exchange standards, lack of synchronization, incomplete understanding of the enterprise functioning, unproductive decisions and many more.
For example: The financials could not coordinate with the procurement team to plan out purchases as per the availability of money.
Hence, deploying a comprehensive ERP system across an organization leads to performance increase, workflow synchronization, standardized information exchange formats, complete overview of the enterprise functioning, global decision optimization, speed enhancement and much more.

Simple Facts: -

Altitute of Hyderabad, India is 536 Meters

Ideal ERP - Enterprise Resource Planning System

An ERP system would qualify as the best model for enterprise wide solution architecture, if it chains all the below organizational processes together with a central database repository and a fused computing platform.

• Manufacturing: - Engineering, resource & capacity planning, material planning, workflow management, shop floor management, quality control, bills of material, manufacturing process, etc.
• Financials: - Accounts payable, accounts receivable, fixed assets, general ledger, cash management, and billing (contract/service)
• Human Resources: - Recruitment, benefits, compensations, training, payroll, time and attendance, labour rules, people management
• Supply Chain Management: - Inventory management, supply chain planning, supplier scheduling, claim processing, sales order administration, procurement planning, transportation and distribution
• Projects: -Costing, billing, activity management, time and expense
• Customer Relationship Management: - Sales and marketing, service, commissions, customer contact and after sales support
• Data Warehouse: - Generally, this is an information storehouse that can be accessed by organizations, customers, suppliers and employees for their learning and orientation

Simple Facts: -

Hyderabad, India area is 217 Sq Km

Integration is Key to ERP - Enterprise Resource Planning System

Integration is an exceptionally significant ingredient to ERP systems. The integration between business processes helps develop communication and information distribution, leading to remarkable increase in productivity, speed and performance.
The key objective of an ERP system is to integrate information and processes from all functional divisions of an organization and merge it for effortless access and structured workflow. The integration is typically accomplished by constructing a single database repository that communicates with multiple software applications providing different divisions of an organization with various business statistics and information.
Although the perfect configuration would be a single ERP system for an entire organization, but many organizations usually deploy a single functional system and slowly interface it with other functional divisions.

Simple Fact: -

Hyderabad, India is also known as "City of Pearls"

What is ERP - Enterprise Resource Planning

ERP, which is an abbreviation for Enterprise Resource Planning, is principally an integration of business management practices and modern technology. Information Technology (IT) integrates with the core business processes of a corporate house to streamline and accomplish specific business objectives. Consequently, ERP is an amalgamation of three most important components; Business Management Practices, Information Technology and Specific Business Objectives.
In simpler words, an ERP is a massive software architecture that supports the streaming and distribution of geographically scattered enterprise wide information across all the functional units of a business house. It provides the business management executives with a comprehensive overview of the complete business execution which in turn influences their decisions in a productive way. At the core of ERP is a well managed centralized data repository which acquires information from and supply information into the fragmented applications operating on a universal computing platform.
Information in business organizations is accumulated on various servers across many functional units and sometimes separated by geographical boundaries. Such information islands can possibly service individual organizational units but fail to enhance enterprise wide performance, speed and competence.
The term ERP originally referred to the way a large organization planned to use its organizational wide resources. Formerly, ERP systems were used in larger and more industrial types of companies. However, the use of ERP has changed radically over a period of few years. Today the term can be applied to any type of company, operating in any kind of field and of any magnitude.
Today's ERP software architecture can possibly envelop a broad range of enterprise wide functions and integrate them into a single unified database repository. For instance, functions such as Human Resources, Supply Chain Management, Customer Relationship Management, Finance, Manufacturing Warehouse Management and Logistics were all previously stand alone software applications, generally housed with their own applications, database and network, but today, they can all work under a single umbrella - the ERP architecture.
In order for a software system to be considered ERP, it must provide a business with wide collection of functionalities supported by features like flexibility, modularity & openness, widespread, finest business processes and global focus.

Simple Facts: -

Hyderabad, Capital of Andhra Pradesh, India.

Imporve Efficiency For a Stronger Bottom Line

For many small and midsize enterprises (SMEs) like yours, achieving profitable and sustainable growth is both an aspiration and a challenge. With “economies of speed” as a distinct advantage, you can adopt a wide range of strategies for maintaining business momentum and outperforming much larger competition. Modern technologies such as integrated business software have become increasingly crucial to helping SMEs gain higher operational efficiency and transparency while setting a solid foundation for future growth. By leveraging solutions based on modern technologies that best fit your needs, you can achieve profitable growth in a highly dynamic market.

Market Dynamics and Challenges
To more effectively address the challenges in today’s highly dynamic market, small and midsize companies must increasingly focus their limited resources on the areas of highest impact:
Managing costs and protecting margins are essential to a company’s ability to survive and thrive in various economic cycles.

• Acquiring and retaining the best customers requires even faster response and deeper understanding of their needs and trends.
• Controlling cash flow and working capital requires companies to more precisely monitor every dollar.
• Maximizing results with scarce resources means companies must optimize use of their limited working capital, employees, and assets.

Market Dynamics and Challenges
As sophisticated business management software solutions become more readily available to small and midsize enterprises, they are emerging as essential management tools to help organizations cut costs, improve business performance, and enable revenue growth, especially in times of uncertainties. Integrated business software can:

Connect your company’s assets, employees, and customers to maximize operational efficiency while reducing errors and costs

• Provide a complete view of your customers so you can tailor services to meet their demands and exceed their expectations, thereby maximizing revenue
• Capture crucial data and deliver full transparency across the enterprise that allows you to be more effective in managing priorities and optimizing resources
• Provide real-time information so you can better control operations, make better decisions, and anticipate and respond faster to changes, thereby reducing risks.

I look forward to hear your comments.

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