An all too common scenario: Your company carries inventory to satisfy customer requirements yet no matter how much time you spend trying to calculate the perfect quantity to order:
- You continue to experience the frustrations of stock outs on those high demand items on which your cash flow and financial success depends
- Nobody wants to buy the “cash” gathering dust on the warehouse floor in the form of excess inventory — no matter how much you cut the prices.
Typically, the inventory module in most accounting systems, be they basic or sophisticated systems, do little more than tell you how much stock you have in the warehouse. They excel at stock control but do not help in managing these typical inventory problem areas.
Some have “MIN” and “MAX” levels that are used to calculate the quantity to order. You may wonder how these MIN and MAX levels are calculated and updated and how they are used? The stock outs and excess stock just do not go away. You wonder how much excess you actually have and how much business you are losing through the stock outs? The traditional measure of “how much stock in excess of 12 months of sales do I have?” does not provide any insight.
The facts are: inventory is out of balance and nothing you do resolves these two problems. Both are costing you money and you realise you may need to invest in an “Inventory Management system”.
Your concern is “Can I afford one of these systems?” Another voice in your head instantly responds “Can you afford not to have a system?”. A Google search for “inventory management software” returns well over 15 million results. Costs range from zero to millions
The starting point is obviously to define what it is you need. A previous blog post discussed inventory control versus inventory management and provides some guidelines to consider. Once clear on the benefits you require from the system, exploring the available solutions can begin.
You soon discover there are many to choose from. Some are simple PC based systems, others are the typical Enterprise Solutions.
Typical Enterprise Solutions
These systems are designed to address the full range of problems experienced in the typical day of an Inventory Manager. They are expensive, very complex to install, a considerable time frame to implement and require a whole IT department to support.
You get the feeling you need exceptional people to operate these systems — you may even express this concern during the demonstration of the amazing features. You will be re-assured the training will “upskill” everybody adequately.
Besides the additional servers, software license costs and ongoing annual license fees, costly upgrades will be required to the operating systems on both the servers and users’ computers to stay aligned with the Inventory Management system version.
New versions of the inventory management system will also be released — usually at additional cost. Refusing to upgrade will eventually result in you using an “unsupported system”. Not a good place to be!
Staff turnover requires each new user to be fully trained — existing users often require refresher courses to maintain their skills.
Lets take a step back to gain perspective. Is this really the answer?
- There is little doubt inventory management is complex, especially when looking for the perfect end result
- Even though you may visit reference sites beforehand, your decision to go ahead with the system is based to a great extent on the promises of the Vendor’s sales team
- A complex system can provide the mechanism to deliver exceptional results
- However, complex system usually require exceptional people
- Being dependent on exceptional people will never be sustainable. The facts are there are very few exceptional people in the world never mind in most companies
- When people do not feel confident using a complex system they simply do not use it!
- You only really get to understand whether the system is a fit for your business or not when you are a long way down the implementation process and by then you have to make it work
- The very reason why we need inventory is because the market in which we operate is very complex and uncertain. A perfect solution is simply not achievable. In fact an 80% solution may well be the perfect solution.
- The Law of Diminishing Returns applies. The time spent striving for the perfect solution cannot in most cases be justified and should have been spent performing the next most important activity
The solution is to use a system that allows ordinary people to deliver extraordinary results
Lets consider an alternative perspective
- An 80% solution represents a major improvement for most companies
- A system specifically designed to provide an 80% solution will be a lot simpler to use
- The training requirements are less complex and a combination of Webinars, online videos, real time chat facilities where users can ask for help when they need it, will enable ordinary people to deliver extraordinary (80%) results
- Why pay a huge sum of money for a system that cannot be guaranteed to deliver?
A typical cloud based solution
Cloud based solutions have matured and gained much wider acceptance. They offer the following benefits:
- Security is provided at the highest level available
- You do not need your own server(s)
- Implementation costs and time frames are significantly lower
- Many use a subscription based monthly payment model that do not require you to sign a longterm contract
- Access is via a web browser, whether this be a desktop, laptop or mobile device, even a smartphone
- Access is operating system independent and works on Windows, Mac, Linux and other new systems appearing on the market
- This makes it possible to access these systems anywhere in the country or the world, even when overseas on a business trip.
- No costly dedicated high speed lines are required to give your branches access to the system
- Upgrades are rolled out virtually immediately they become available
May we again suggest you review this blog post in conjunction with the information in this post?