What is paid to the supplier is only part of the true cost of holding stock. Businesses that purchase stock, both for production and direct re-sale, will be familiar with the term ‘carrying cost’, which is the sum of:
Purchasing the stock
Damage and loss
Flowlens cloud MRP, with integrated purchasing, job cards and order processing can help you avoid carrying too much stock. So where do the costs come from?
Purchasing the Stock
There are many hidden costs with purchasing stock. The more obvious ones are missing out on economies of scale by not ordering in bulk or far enough in advance. The opposite, which can have an equally negative impact is purchasing more stock than needed to avail of a special rate.
Less obvious costs may include finance charges and opportunity costs. This is either the interest charged on finance borrowed to purchase the stock or the investment opportunities missed because money is tied up in under-performing inventory.
Stock needs a shelf to sit on and it doesn’t get there by itself. Whether you own or lease a premises, mortgage/rent, insurance, electricity, heating and security are just some of the typical costs you are guaranteed to have, as well as furnishings and equipment for moving stock. If your product requires specialist storage, such as refrigeration, the cost may be greater.
Warehousing costs increase with area size, so it makes sense to only store what is needed for the foreseeable future.
Handling and Delivery
A poor warehouse layout reduces productivity. Identifying fast moving stock and storing it at easily accessible locations will reduce unnecessary internal transport, people movement and repetitive tasks.
Likewise, inefficient use of warehouse space and shelving may result in a bigger area being needed.
Damage and Loss
The longer that stock is held, the greater the risk of depreciation or becoming obsolete. Accurate calculation when ordering is vital for reducing the risk of deterioration of stock.
For accountancy purposes, ‘carrying cost’ is broadly accepted as being fixed at a percentage of stock value, that nothing can be done about. However, smarter stock management enables businesses to reduce these costs and significantly impact the bottom line.
Implementing a stock management process eliminates excessive, obsolete, or underperforming stock that is wasting money. It also ensures that in-demand items are sufficiently stocked so that sales can be completed promptly and cost effectively.
Flowlens Cloud MRP with integrated sales order processing can help you manage stock levels, make smart purchasing decisions, and reduce manual effort.
Globalisation has changed the playing field for businesses, in particular manufacturing companies. There is the opportunity to reach customers in foreign markets and supplier relationships are now on a global scale.
However, this brings with it the added risk of external factors such as natural disasters, political instability and currency fluctuations.
Now, more than ever, businesses are sourcing multiple suppliers for the same products/raw materials. This reduces the reliance on one or a few suppliers but it introduces the complexity of managing a diverse supply chain.
Here are some things to consider when dealing with multiple suppliers:
With shipments coming from all over the world, there is a vast range of delivery times and associated costs for each product from each supplier. For example, Supplier A in China may be able to deliver Product A within three weeks but Product B may take six weeks to arrive from the same supplier. Knowing and managing this information is crucial to a business’ purchasing efficiency and stock management.
If the quality of goods from each supplier is equal, the most important considerations thereafter are price and lead time, depending on the urgency of the customer.
If suppliers know that they do not have exclusive contracts with a business, this may motivate them to offer quality goods at competitive prices. They may even engage in ‘price matching’ with the other supplier(s).
A supplier’s order turnaround time may be its unique selling point and therefore allow it to charge more than its competitors.
A supplier’s capacity to deliver large orders may be a deciding factor in choosing a provider. If a business gets a large customer order, it needs to be sure it can deliver it in the timeframe quoted. It is important to know the scale and size of suppliers’ operations. (If however, each individual supplier of the same item cannot meet demand, this is where it is beneficial to have multiple suppliers.)
Purchasing departments must consider all of these factors before placing an order with a supplier. An automated approach is the most time-efficient method of doing this. Flowlens provides detailed sales information about the quantity of materials required and the timeframe allowed for production. This automatically calculates the delivery time afforded and in turn, selects the most relevant, cost effective supplier to order from.
If you are currently struggling with managing multiple suppliers, Flowlens can help your business.
We’ve combined the most popular features of our Sales and Operations modules to create a starter solution for businesses taking the first step to creating a more efficient Sales Ordering, Stock Management and Purchase Ordering process.
Our manufacturing software is cloud-based, so you are assured of reliability and availability across devices, with no hardware upgrade costs, or expensive per-user licensing.
An effective stock management process is one of the key components of a company’s purchasing efficiencies. Stock is large capital investment so it makes sense to manage it as well as possible.
In particular, keeping track of raw materials is essential for the smooth flow of the production process. Internal controls to prevent loss, damage and misuse of stock must be established and maintained.
Depending on the type of business, these internal controls include:
Secure the Warehouse
Locked gates and doors with only authorised entry is the first step to securing the stock.
Organise the Stock
If you can’t find it, you can’t control it! Each stock item should be numbered as well as the location that it is stored in. This facilitates quick and easy tracking in the long run.
Count all Deliveries
Do not rely on delivery dockets. Identify who is responsible for signing off on the quantity received before it is officially recorded as ‘in stock’. If there are items missing or damages, this needs to be noted immediately and appropriate action taken, (accounts department notified, goods returned, etc.) Using an automated handheld scanner is the most error-free method of stock recording.
Tag all Materials
Each item should be identified by part number and description to avoid any confusion or the wrong part being used for the wrong production.
Standardise the Picking Process
Whether it is a manual or automated procedure, when any item leaves the warehouse for use in production, servicing, or otherwise, it must be recorded. A controlled gate or door is extremely beneficial for this step.
Check the Bill of Materials (BOM)
The BOM is a list of the parts needed for production and it is used to pick materials from stock. Ensure that your BOM software is reliable as this will save messy additional requests and returns at a later date.
Conduct Spot Checks
Compare small, frequent, manual counts of the warehouse stock with the recorded amounts and investigate any errors found.
Record all Wastage
If scrap materials are thrown away without being properly recorded, the stock management and accounting systems will assume that they are still in stock and quantities and values will be inaccurate. Create a procedure to record wastage regularly.
Download our ebook to learn some of the other best practices for better stock management, involving all relevant departments in the process.
Businesses that don’t operate a sales order process, such as shops and rental companies, must hold a ‘safety stock’ to meet unpredicted sales and exchanges.
A business that successfully manages its safety stock should never lose a sale because they don’t have an item. Having a lot of ‘out of stock’ products appears unreliable to potential customers.
So without the foresight of a sales pipeline, how is a minimum stock threshold determined?
Supplier Delivery Time
The length of time it takes for a product to reach your business from the supplier is the most important factor to consider. The safety stock must be adequate to meet sales during this time. It is not sufficient to allow stock to run out before re-ordering.
The next step in establishing a minimum stock threshold is establishing customers’ average purchases during the supplier delivery time.
There is a challenge to hold enough stock to cover suppliers’ delivery times that is sufficient enough to meet customers’ demand but not too great that it affects gross profit because of high carrying costs.
Let’s say that a supplier has a delivery time of 8 working days. The business knows that on average, it sells 220 units of their product per month. If there are 22 working days in the month, then the safety stock should be at least:
220 units / 22 days = 10 units per day X 8 days delivery time = 80 units safety stock
Determine Reorder Points
It’s unlikely that the purchasing department will place an immediate order when the minimum stock threshold alert appears, especially if the process is not automated. They may have a specific day of the week for this task or require time to source quotations. Therefore, the reorder level needs to be set higher than the safety stock level, depending on the individual business’ procedures.
Setting stock re-order levels is just one of the steps businesses can take to achieve savings through purchasing efficiencies.
Download our ebook to learn some of the other best practices for better stock management, involving all relevant departments in the process.
Customer Lifecycle Management is turning business on it’s head, focusing on customer needs first, and delivering profits for the long term.
Bump into anyone from Flowlens, and it won’t be long before you hear the term ‘customer lifecycle management’, or CLM for short. But what is it?
Depending on your role in the business, there are a few ways to describe what Customer Lifecycle Management means. Firstly, CLM is a business philosophy, eradicating the ‘silo’ thinking that reduces customer satisfaction and hampers future profits.
With the customer at it’s heart, it’s a joined-up approach that builds long term value by ensuring that each part of your team understands their role in the customer journey. This not only means they’re focused on improving immediate customer satisfaction, but also how they capture information about future customer needs, and interact with other departments.
Secondly, it’s about competitive advantage, making your team so responsive and effective that the customer should never need an alternative. Your competitors can’t compete if your team is completely focused on meeting customer needs today, but also learning and communicating about future needs. By capturing data with each interaction, CLM enables the marketing and sales functions to build a stronger pipeline of recurring business.
Thirdly, customer lifecycle management is about simplification. Organisations now have so many overlapping systems and databases, that the customer experience is eroded by delays and inaccuracies. Customer lifecycle management seeks to centralise the customer data, and simplify the systems to the point that marketing, sales and operations are all contributing to a single, rich source of customer intelligence data, using software that is designed to deliver effective and profitable customer outcomes.
Finally, it’s about customer intelligence, analytics and decision making. CLM seeks to build a profile of customers that, in aggregate, can help you spot patterns, unmet needs, ineffective communications or processes, cost savings or R&D opportunities. It’s about real-time information at your finger-tips.
What it’s NOT.
CLM is not a spelling mistake. Commonly confused with ‘CRM’, you might think its just another system for managing customer interactions. In our view, ‘CRM’ systems have become part of the problem. They can be clunky, cluttered, and over-engineered, leading to poor adoption and poorer customer experience. CLM delivers a unified, tailored solution, delivered in collaboration with your team and your customers.
CLM is not just for the Marketing and Sales Teams. Across the business functions, and at all levels, Customer Lifecycle Management supports what the customer needs today, whilst capturing information about future needs. By supporting the workflow across the business, CLM removes obstacles, and creates rich information that can be interrogated in real time.
CLM is not ‘all or nothing’. Customer Lifecycle Management is about focusing on solving problems and improving the customer experience where it is needed most. It’s not a sticking plaster either, CLM should build trust and long term buy-in from all stakeholders, and this is best achieved by addressing immediate concerns, whereever they might fall in the lifecycle.
In summary, Customer Lifecycle Management has the potential to turn your business on it’s head, focusing on customer needs first, and delivering profits for the long term
Today’s business technology software vendors have learnt the hard lessons from poor practices and self serving selling methods of traditional vendors.
But how do you, as a potential purchaser, spot a new age supplier from an old age dinosaur?
Consult our good practice software vendor checklist below.
Tip 1 – Satisfy yourself that the vendor cares about their customers
In today’s world, businesses need partners who will be there for the long term. Software vendors will take the time to build relationships, understand the business and the processes.
They will work from your perspective, not from their pre-determined ideas.
Tip 2 – Ensure the vendor will offer truly tailored solutions
Modern software avoids complexity and confusion by mirroring your business process and information requirements. Your team will understand the software and adopt it readily because it talks their language.
Most importantly, modern systems should have a single data store, ensuring you have one source of customer and operational data, without all the duplication headaches, complexity and cost.
Tip 3 – Ask their customers if the vendor will provide value for money
Traditional software usually entails complex licensing costs, options and upgrades, and you’re paying for many features included in the product that your business doesn’t even need.
Today’s new generation tools deliver only what you want and need.
Has thinking about how to choose the right business technology software vendor made you want to improve how you manage it? Read our articles below to get more tips and advice on how to improve your business.
Businesses that innovate survive. Technology enables efficient processes and provides what every management team craves – a single, reliable version of the truth.
The world is changing and our customer’s demands and needs are changing too. Sustainability is now a core value that has taken hold in sectors across the economy.
Traditional ways of working do not support these changes and, as with all change, it is companies who stay ahead of curve that will prosper.
Accessing reliable information and having one version of the truth is critical to understand and manage the demands on your business.
Customers and competitors demand more
Impatient customers, eager for a personalised service, won’t wait around whilst your team figures out which spreadsheet their information is saved in.
They won’t wait around while you get your sales system to talk to your production system. And they won’t wait around while you dig out the folder that holds their spare parts list.
But customers will stick around for quality. They will stick around if they get a prompt service and if they’re kept informed and educated.
And they’ll stick around if they don’t have to think about the minutiae, because you’ve got it covered.
Meanwhile competition is fierce. They’re making better products, that last for longer and give more value. Planned obsolescence is now prolonged resilience. Customers demand it.
It feels like somebody out there is ready to eat your lunch, if you give them the chance. One little chink of light, and they’re in.
How fit is your company for the coming year? As the New Year approaches now is a good time to look at your vision, strategy and team operations to see what you might improve.
5 questions to help you shape your vision
A few moment of honest reflection on these questions can help you understand where your business is, and where it could be.
Who are you, where are you going, why do you exist?
What does utopia look like for your business?
What do your customers want? How are their needs changing?
How should you design your business to serve these needs?
How far can you go?
Deciding on where you’re going is a simple enough idea, and its something your team can develop together, and then get behind.
Can your team deliver your strategy?
Strategy comes from vision. What skills do you need to achieve this vision? Which do you lack? Different people will own parts of your strategy. An honest review of the abilities and gaps in your team will reveal a primary objective.
Get the right skills on board to achieve the vision. Train up, or recruit in. Mentorship, Non-executive directors, there are various ways to develop. But focus on the key skills you need now to get your strategy started.
How does your team operate?
A team focused on a common goal, needs a common language. Here are some essential facts everyone in your company should know:
What your business is, how you make money, what your biggest costs are
What you sell
Who your customers are segments, roles, functions.
Share this language across the business.
In addition, consider the following questions about how you operate:
How do you actually do things?
Where are the problems?
What frustrates customers?
What slows the business down?
Where do you waste time and resources?
How do you measure performance?
Has thinking about your business made you want to improve how you manage it? Read our articles below to see how you can apply your new insights in 2015.
Most business leaders crave a single, reliable version of the truth. This, above all else, gives confidence and decision making capability. Taking control of overblown, spaghetti-like business processes is easier than you think.
How most business processes are created
Most businesses, after a certain amount of trial, error, fire fighting and furrowed brows, figure out their processes.
They understand ‘how we do things around here’, and pretty soon these processes become part of the furniture, passed on to new recruits.
These processes probably started out on paper, post-it notes and whiteboards, before eventually someone with a copy of Access or Excel decides to tighten things up.
The process and the system became one, and everyone got their job done.
For a while at least.
Everyone has their own way of doing things
Each department has its own version of this story, and eventually, the whole company has a fairly good idea of how they actually get things done.
Unfortunately, these outcomes have usually been arrived at by any means necessary.
Software must hold its hands up as the choices made are a major part of this misfortune. All too often different departments opt for different means at their disposal for capturing and processing data.
These proud, shiny creations, either a combination of spreadsheets, or a fancier formation of customised off the shelf software, get the job done.
More or less.
Duplicated processes cause confusion
There are the work arounds, the exceptions to the rule, the occasional mistaken deletion, or inappropriate forward of an email attachment.
And this happens in each area of the business, until you’ve got:
five customer databases
an email database
an online asset register
an offline asset register
3 copies of your Bill of Materials
not enough software licenses to go round
very frustrated customers
So we thought we’d solve this really big problem.
How to get a single version of the truth (that’s affordable)
User friendly social networking websites and mobile apps have taught us to expect software that actually works.
Companies understand the problem of user adoption, and they also know that they must get the whole team on board. Poor customer performance will be penalised through social channels and buying decisions.
As the new kids on the block we could be considered a start-up, but in actual fact we’re not.
We like to think we’ve taken the best bits about starting a new company – the enthusiasm, the best possible team, the opportunities, the shiny new business cards – and avoided the common mistakes – the uncertainties, the ego battles and the struggle to find customers.
After eight years of running web development company Crafty Devil, the founders took the decision to re-focus and re-brand as Flowlens. Read more about that here: www.craftydevil.co.uk
Where Crafty Devil could be considered the awkward spotty teenager hanging around at the back of the room, Flowlens is the self-assured young adult striding forward with confidence.
We’ve learned what we’re good at and we know how we can add value to our clients’ businesses. We’re not afraid to be different because we know our results speak for themselves.
At our relaunch event earlier this week we were thrilled that so many of our current and previous clients came along to support us. We also had Arlene Foster, Minister for Enterprise, Trade & Investment who was impressed with our transformation and commented:
“companies like Flowlens are an integral part of the East Belfast community and provide employment in their local area, which is good news for the Northern Ireland economy as a whole”
We’re excited about this new phase in our company story, and hope you join us as we help shape the future of business technology
It’s no secret that the manufacturing sector is under extreme pressure. Between depressed export demand, rising input costs, and strong competition, manufacturers need new strategies in order to prosper.
Andrew Johnston, Senior Economist at the manufacturers’ group EEF, opened this morning’s seminar programme. He gave an illuminating summary of the challenges facing the sector, and the strategies being employed to meet these.
We’re exhibiting at SubCon 2013, featuring lots of leading suppliers and subcontractors to the manufacturing industry.
It’s no secret that the manufacturing sector is under extreme pressure. Between depressed export demand, rising input costs, and strong competition, manufacturers need new strategies in order to prosper. Andrew Johnston, Senior Economist at the manufacturers’ group EEF, opened this morning’s seminar programme with an illuminating summary of the challenges facing the sector, and the strategies being employed to meet these.
Andrew Johnston, Senior Economist at the manufacturers’ group EEF addresses SubConRecent performance has been poor, with a triple dip recession narrowly avoided through marginal growth in Q1-2013.
Andrew outlined how the ‘Other transport’ sector, including aerospace and shipbuilding, is performing well, along with mechanical equipment/machinery and electrical sectors. However construction materials is still suffering due to lower demand. In fact, ‘demand risks’ dominate the outlook for 2013 in spite of strengthening confidence across the sector. Issues include: the fear of further recession, input costs, exchange rates, increased raw materials costs, finance and supply chain capacity.
Andrew highlighted that innovation will play a vital role in strengthening UK competitive advantage, in terms of IP and value added, allowing differentiation from global competitors. The EEF has found that companies are focusing on several strategies in the near term in order to address these challenges. These include increasing demand from new and existing export marketing, commercialising new technology and products, and a focus on satisfying existing customers.
Maximising customer relationships was highlighted as a key strategy for ensuring sustainability and growth. With the cost of acquiring new customers up to seven times higher than serving existing customers, manufacturers can achieve additional revenues, and secure longer term relationships by increasing their focus on value-added customer support. This approach allows companies to capture more revenue across the product lifecycle, and be ready to sell new products or upgrades when it knows customers are ready to buy.
This is precisely for these reasons that we developed Flowlens a “customer lifecycle management” software that offers manufacturers an effective management analytics, and operational tool for managing customers, with proven methods for increasing retention and profitability.
Flowlens – Customer Lifecycle
It manages customer and asset data, sales, operations, service and communications, creating actionable analytics, customer segmentation and targeting, and efficient workflow and service management features. Flowlens customers achieve greater profits and lower costs, whilst securing customer relationships for the long term.