Distribution and Inventory

Sneak Peek Demo of Acumatica Inventory Management

June 15, 2018

Imagine having the right product, at the right time, and at the right place. In distribution, this is the brass ring. Acumatica ERP can make this your reality. Let’s see how.

Doing this while minimizing excess inventory and selling for a profit is the road to financial success. While it may be easy to imagine, it often takes a lot of practice and a little bit of Voodoo to make it happen. No longer is it good enough just to have an accurate count of what's on-hand. You need to know more about its composition; a lot more.

Stock intended for projects or set aside for specific orders should be reflected in your system so your team knows they can't be used to filling regular orders. Goods just in from suppliers or RMAs need to undergo QC reviews. They must be accounted for but also excluded from available quantities. To minimize spoilage, expiration dates must to be tracked and used to streamline picking for perishable goods.

Regulated goods often demand traceability from source to consumer to stay in compliance. Do you use the ABC method to classify your stock? The Preto principle definitely applies in inventory management.

By analyzing your stock using this method, you can optimize your warehouse space and better identify what to buy and what to phase out . This isn't the only way to stratify stock. Looking at the sales velocity of stock helps you ensure that low cost, high volume, items are always on-hand. Think of a cell phone screen saver. We don't want to lose the sale of a $900 phone simply because we didn't have a $5 screen saver in stock. By combining both the ABC and HML approaches, we get a matrix view of demand and cost. A great discussion of this matrix approach is available from NetStock in an article on their resource website.

Knowing what is moving is important but it is also key to know when to buy. There are many different ways to manage reorder points and your system should support many of them.

Your systems should help you streamline operations by organizing your warehouse layout. There are two ways to manage demand, by looking at the past or by forecasting the future.

To look back, you need analysis tools to access history in detail by product, period, and customer. Be sure to exclude anomalies from thing like special orders, lost customers, and other adjustments that can skew your history. This approach is a great way to recognize seasonal trends and gain insight into what has been moving. Forecasting sales is much more difficult to do and must be done by someone familiar with your stock, customers , and current economic trends. A solid forecast is always preferred over historical analysis. However, bad forecasts are the leading cause of excess inventory.

When combined, your historical analysis and sales projections become the basis for planning future sales. These numbers, when used by solid MRP tools can drive your procurement process.

Inventory costing is always a concern. There are many different cost methods and all are viable alternatives. There is no such thing as a one-size-fits all approach. Average costing seems to be the easiest for non-cost accountants to understand. However, it does have limitations.

FIFO and LIFO are often preferred by accountants as they can more accurately reflect a truer replacement cost in inventory or in cost of sales. FIFO stands for First In, First Out. Here, the ERP system keeps track of each purchase or addition to inventory as cost layers. This method results in an inventory value more reflective of current replacement costs. LIFO works much the same way except it relieves the newest layer first. This produces a cost of sale most reflective of current replacement costs.
Standard costing is most often attributed manufacturers while specific item costing is associated with lot tracking and serialized items.

Managing your stocking levels is highly dependent on your suppliers and how well you manage your relationship with them. One way to ensure you always receive goods when you expect is to know the lead-time required for each vendor order.

Proper vendor management requires knowing:

1) How long it take to get product to your door from the time you submit an order?
2) How often you experience discrepancies in the quantity, quality, or accuracy of shipments from your supplier?
3) At what point do you need to place a new order from the supplier?

Track your vendor receipt accuracy.

1) delivery date vs promised date
2) adjustments to promise dates
3) vendor order fill rates
4) fulfillment accuracy rates

Tracking delivery performance is as important as supplier performance for the same reason; quality control assurance.

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