New Video Release: Vendor Managed Inventory – Part 2 (2 min 9 sec)

This brief video demonstration is for current and prospective Microsoft Dynamics AX & Microsoft Dynamics 365 customers seeking an enterprise solution to assist vendor managed inventory.

In our last video on Vendor Managed Inventory, we showed you how to replenish your distribution center using the vendor managed inventory tool on AXIO for Distribution. This solution made it easy to check inventory levels, so you know when to increase order amount or decrease the frequency of orders. So now that your inventory is all replenished, how can you use vendor managed inventory to sell more product?

In this video, you will learn how AXIO for Distribution powered by Microsoft Dynamics AX is able to make your sales cycle process more efficient. Using this solution, your workers will be able to confirm that the inventory is being distributed properly, that orders are being fulfilled from the correct warehouse location and that orders are being delivered smoothly. If one of these variables is not working properly, you could have a problem on your hands. AXIO for Distribution protects against those kinds of errors with powerful data entry and reporting capabilities.

 


Want to see Part 1?

Dealing with Duplicate Orders in Your ERP Solution?

This week I was contacted by a company with major issues and concerns over duplicate order entries.

Like most distributors, they receive orders via EDI, telephone, fax and e-mail. In some cases, they receive orders from various departments within the same customer.  Unfortunately, it was often the case that the same order would be submitted through multiple channels and each would be captured as a distinct, new order.  When this issue was discussed with the affected customers, their response was as expected:

“Can’t your system identify them as duplicate orders? Should it not be part of the service that you provide us?“.

There was a point in my career when I would have disagreed, but, times have changed and expectations for systems intelligence has evolved. As the vendor, I should be aware of the orders I am receiving and at the very least raise a flag for orders that I identify as potential duplicate orders.  We’re partners, right?  Collaboration and customer service is a fundamental requirement of being a successful distribution partner.  When you get right down to it, these duplicate orders are MY problem, not the customer’s.  They are not going to purchase the order twice just because our system was unable to differentiate between duplicate orders.

duplicate orders through multi-channel processing

This company admitted that the situation has escalated to the point that they are checking every order manually for possible duplicates. Of course, this causes serious delays in the order entry process. Confirmation back to the customer takes longer and even with the extra effort, they are still missing too many.

Is this just a customer service faux pas, or is it even more than that?  The fact is that margins will drop for every duplicate order!  Let’s begin by understanding the harmful effects of duplicate orders.

Consider the effects of each duplicate order received:

False demand

  • Effects on forecasting
  • Procurement
  • Vendors

Potential shortages of inventory

  • Unplanned shipments/requirements
  • Customer shortages for real requirements
  • Expediting
  • Increased costs

Return merchandise

  • Inventory overage
  • Costs of returning and restocking
  • Labor requirements
  • Transportation costs

Discounted sales to avoid returned merchandise

Cost of Goods sold

  • Two sales, one order invoiced

Confused planning requirements

  • Nervous planning system

Loss of revenue!

  • Return process
  • Inspection (Scrap/Re-stock)
  • Return to stocking location

Discard original packaging

Multiple handling

It adds up, right?  One duplicate order sets off a chain of unnecessary processing and a loss of customer confidence.  Hundreds or thousands of duplicate orders can make a serious dent in margins.

So why continue living with duplicate orders?

The right software solution can eliminate the duplicate order entry fiasco with little or no human interaction. Manually checking every order by hand or even using a search function in a software solution during the order entry process is not an acceptable answer.

The order entry process needs to be fast, accurate and reliable. This does not apply strictly to availability and price.  The system needs to be able to identify potential duplicate orders based on established rules and provide that information during the order entry process at the line item level.

AXIO Distribution for Dynamics 365 Operations

AXIO Distribution for Dynamics 365 Operations addresses the points I listed above.   Implementation templates allow customers to easily incorporate best practices and proven business process rules that deliver:

  • Workflows for fast and accurate decision making and approvals
  • Automated alerts built on your rules and applied across the business
  • A System that is totally traceable and auditable as you identify issues and apply solutions
  • Pricing that is always correct based on the agreements in place and the expected and planned margins
  • Duplicate order rules based solution to avoid duplicate orders
  • Return Merchandise Authorization process connected to inventory, quality process and finance
  • Rules based workflow and alerts during order entry process
  • Forecasting solution for MRP or DRP

AXIO Distribution for Dynamics 365 Operations is built by industry experts that recognize the real needs that arise from managing operations where “on the spot” decisions can make or break success.  In this case, success is defined as maintaining highest levels of customer service while meeting planned margins for profitability.

Dominic Telaro CFPIM, CIRM
Vice President Industry Solutions, SBS Group

Dominic Telaro brings over 35 years of Manufacturing, Distribution, Software and Dominic Telaro 001 IBIS DT 110113Consulting experience. Half of his professional career has been in Manufacturing and Distribution from shop floor and warehousing positions to management. During this time he implemented ERP, DRP and Logistics solutions as internal Project Leader. The second half of his career has been in consulting, product management, product development and both consulting and software sales. He has held positions as VP Of Industry Solutions, VP of Product Development, VP of Sales and Marketing and Global Practice Leader for companies like IBIS Inc., IBM, Janis Group, Metamor, Marcam Corp. and more. Presently he is responsible for Industry Product Vision for multiple ERP solutions at SBS Group USA.

APICS Fellow and Certified in Integrated Resource Management, Instructor at Universite de Montreal, Vanier College and Granby CEGEP for APICS certification; Lead instructor for internal APICS training at Bell Helicopter, Avon, Le Groupe Hamelin


Watch how you can use color coding in advanced order management to better track orders and provide customers with real-time status updates!

New Video Release: Vendor Managed Inventory (2 min 50 sec)

This brief video demonstration is for current and prospective Microsoft Dynamics AX & Microsoft Dynamics 365 customers seeking an enterprise solution to assist vendor managed inventory.

For any warehouse or distribution business dealing with rotating inventory, supply chain management is critical. Being able to properly manage inventory can help your business increase margins and maximize warehouse space – which, you guessed it, boosts profits. This is easier said than done. Vendor managed inventory can be tricky because it isn’t always easy to transfer new inventory to a vendor managed inventory warehouse for future sale. In order to do this, you need a powerful and capable business solution.

AXIO for Distribution powered by Microsoft Dynamics 365/Dynamics AX is that solution. The Advanced Order Management module of AXIO for Distribution makes it easy for your employees to fulfill orders and transfer inventory for future sale and distribution. Warehouse workers can check on the exact product stock and assign a percentage/number of that stock to be moved to a vendor managed warehouse.

Watch as a Distribution expert guides you through the process of vendor managed inventory on AXIO for Distribution.

Flip the Script – “Out Clause” to “In Clause”

In a recent update published by Modern Distribution Management, there was an article  entitled, “Tip: Don’t Let Risk-Aversion Prevent Growth”. The article is a good read and contains important information that will provoke many to do some re-thinking about their business.

One paragraph in particular caught my attention. It caused me to step back and reconsider my approach to day-to-day operations and eventual success:

“In this new competitive environment, customers seem more willing to exercise their ‘out clauses’ if a distributor doesn’t meet their demands 100 percent of the time“, says Bill Moore, president of Industrial Profit Strategies LLC.  (Link)

It is important that an “out clause” in most cases does not represent a contractual obligation but rather an option all our customers have. This “out clause” essentially gives customers the option to stop doing business with your company. Unless you manufacture a product or service that is totally unique with no competition, all customers have an “out clause” and can do business with other vendors at will.

Consider further that today – in a world of instant gratification – the “out clause” option is being applied if you do not meet their demands 100% of the time. That’s right… one mistake and you could be on the outside looking in.

I did not come up with that figure, so we could argue about the actual percentage. However, the percentage is not the issue. The real issue is that customers are much more demanding and less forgiving in today’s distribution landscape. This is across the entire supply chain, not just the supply chain link above or below you. Your customer has to provide the same “out clause” to their customers – meaning they will not allow your errors to affect their customers and sales.

Exit - Hand pressing a button on blurred background concept on v

Why would a customer exercise an “out clause”?

  • Poor Customer Service (or lack of)
    • Long wait times on the telephone.
    • No computerized order management system for direct view into their orders.
  • Late Deliveries
  • Quality Issues
    • Product is damaged or not working.
    • Information is inaccurate.
    • Order process is inferior.
      • Invoicing
      • Shipping
      • Packaging
    • Poor Automation/Collaboration
      • EDI
      • Mobility – real time connection
      • Visibility
    • Lack of Shared Vision
      • Are you capable of assisting your customers in achieving their business vision? Or are you standing in their way?

Think of all the issues that cause you to reconsider your vendors – now look in the mirror and what do you see? Be honest!

If you can truly be honest and self-audit your firm’s performance, I would recommend:

  1. Make a list of issues for each customer. You will notice that each one has different results.
  2. Identify what you believe are the shortcomings – then brainstorm a solution.
  3. Be proactive. Schedule a meeting with your customers to compare notes and offer solutions.
  4. Apply the agreed upon solution.
  5. Build a solid relationship with your customer that goes beyond being a supplier. Truly become a partner in their business by helping them achieve their goals and objectives.

The Other Way Around – Reverse, Reverse

Guess what?! News flash – vendors often employ the “out clause” with their customers. Yes, more and more vendors are dropping difficult customers because they are negatively impacting their performance with other customers.

Harvard business review

Divesting difficult customers isn’t new and it isn’t constrained to distributors.  In this Harvard Business Review article going back to 2008, we see examples of companies up and down the supply chain making hard decisions to manage profitability and meet customer service expectations.  “The Right Way to Manage Unprofitable Customers” identified four common reasons why businesses terminate relationships with end users:

  • the declining profitability of specific customers
  • the lower productivity of employees as they deal with unprofitable customers
  • changes in the capacity to serve large volumes of customers
  • shifts in a company’s business strategy.

At the time this article was written, the vendors interviewed were all hesitant to admit publicly that they were choosing to divest customers.  They were afraid their company would be perceived as “service-unfriendly” or to be violating ethical or legal obligations to customers.

Today, companies are much more focused on providing the best possible customer experience from day one.  If divesting difficult customers helps them achieve that, then so be it.

As much as we all like to think that we are the most important customer to a business, that is simply just not the case. Vendors have many customers and if one customer is negatively affecting a vendor’s performance, they will reconsider their relationship with that customer. Many vendors’ goal is to protect the majority of their customers and keep them satisfied. They will not risk losing their sales book because a client cannot manage their business.

If the above scenario sounds familiar, you may need to go through the five steps, mentioned previously, and sit down with your vendor to get on the same page.

Businessman hand sign business contract paper sheet after agreement, trendy flat design, top view.

Is This Process Model Attainable?

You manage a wide range of customers, vendors and products. So, I will try and make this short and sweet. Can you apply this process to every customer, vendor and product? Simple answer – probably not.

The decision to divest specific customers or segments of customers isn’t one that should be made casually.  Identifying these customers and their impact to profitability, customer service levels or long-term loyalty requires accurate data and long-term trending.  Most companies simply don’t have comprehensive software solutions in place that provide the depth of data necessary to look at customers across multiple planes.  Even if they are able to identify patterns of profitability, they find it impossible to manage the divestment process correctly and to ensure proper vetting of new customers.

Do you already have a solution that will allow you to apply and deliver on the revised processes?  Do you have the right infrastructure to support the modern requirements that will be placed on your software system?

Think carefully… Remember, how much revenue/profit/margin the process can help you generate? I bet you would gladly sign up for some of that. However, if you don’t have the proper solution in place, how would you feel not reaching that number because you cannot execute efficiently enough? The cost of inaction can be steep.

AXIO for Distribution is built with template processes that help you manage and apply the changes that will result in these revenue gains. AXIO for Distribution will provide the sound base and direction you need to be successful in avoiding the “out clause.” You can turn the “out clause” into the and the “in clause.” A little cheesy, but the fact is you will have satisfied customers/vendors that will want to do business with you. Not to mention, you will have a stronger negotiating position.

How might that impact your margins?

Dominic Telaro CFPIM, CIRM
Vice President Industry Solutions, SBS Group

Dominic Telaro brings over 35 years of Manufacturing, Distribution, Software and Dominic Telaro 001 IBIS DT 110113Consulting experience. Half of his professional career has been in Manufacturing and Distribution from shop floor and warehousing positions to management. During this time he implemented ERP, DRP and Logistics solutions as internal Project Leader. The second half of his career has been in consulting, product management, product development and both consulting and software sales. He has held positions as VP Of Industry Solutions, VP of Product Development, VP of Sales and Marketing and Global Practice Leader for companies like IBIS Inc., IBM, Janis Group, Metamor, Marcam Corp. and more. Presently he is responsible for Industry Product Vision for multiple ERP solutions at SBS Group USA.

APICS Fellow and Certified in Integrated Resource Management, Instructor at Universite de Montreal, Vanier College and Granby CEGEP for APICS certification; Lead instructor for internal APICS training at Bell Helicopter, Avon, Le Groupe Hamelin


Watch how you can use color coding in advanced order management to better track orders and provide customers with real-time status updates!

Expediting is Neither Dead nor Evil!

First off, let me clarify – “expediting” is not a dirty word.  However, that doesn’t mean I enjoyed hearing it when I was running the show for a large distributor.  In fact, I cringed whenever my team even mentioned they were expediting something.

When they said expedite, I heard:

  • “We’re going rush the order and it is going to cost you way more than it should.”
  • “There will be resource redirection from the expeditor to receiving, stocking, picking, packing and shipping.”
  • “We’re going to ship it with a more expensive carrier to get it there on time.”
  • “Our razor thin margins just got thinner.”
  • “You’re in for another call with accounting to explain why our margin is so low.”

expensive expediting

So you can see why expediting was not viewed as a positive process, but rather one that covered for mistakes on the part of the planning and operations team – never sales. They were just taking the order…  Yeah right!

All of the above was true then and is still true now. Yet, there are times when expediting an order is the only way to ensure a positive customer experience and should be taken without reservations.

Here are those cases:

New ERP implementation

A new ERP implementation will reveal many shortages and overages in inventory as well as process issues that need to be addressed. This is one time where expediting is an absolute requirement as you re-balance your requirements with procurement. The first pass should be for orders in hand where inventory is not available. The second pass should be based on the MRP run requirements that are forecast-based. The order of these is imperative as you will find that the MRP requirements will adjust themselves as you gain control of the real shortages (for actual orders in house with no inventory).

Opportunistic Orders

If a sales rep does their job well, they will win new customers. Have they been forecasted? Maybe.  Do we have inventory to support the new order? Hopefully. Is it a new item being added to a 100-line customer order? Could be. The point is that a new customer and order often comes with a promise of more to follow. This is one of the best reasons to expedite. This would only be a one-time hit on margins as you build the customer/item relationship and request a forecast.

Inventory Record Accuracy

Inaccurate counts are still the good old standby for having to expedite an order. I’m amazed that after all these years and all of the advancements in inventory systems, this is still an issue! Just the other day I called an order in for an item I needed.  The sales rep said “The system shows I have 4 in stock, but if you hold on, I’ll go check. You know how accurate these computer systems are.”  So, yes, he physically checked in the warehouse. Now if he is actually out and the systems show them in stock, then the MRP or order points will not react to the shortage. Once the inventory is adjusted, by cycle counting or just an inventory adjustment, the system will create an order that will need to be expedited.

Sales Campaigns

You have a sales campaign and it is a huge success – you sold more than you stocked or had on order! I assume you will be expediting with your vendor in order to be able to meet this demand. Hopefully, this leads to new customers and larger sales from the campaign.

distribution boxes

So should we expedite?

In a perfect world, the answer is simple – no! Given that we live in a less than perfect world, then expediting will help you REACT and hopefully make everything at least appear to work perfectly in the eyes of your customer – unfortunately at a cost and loss of margin!

The only positive results from expediting are if you take it as a learning experience. Expediting highlights problems within your processes. Technically, you should never have to expedite. Orders would always be accepted within the lead times provided, inventory record will be at least 99% accurate, new products will only be quoted after discussing and including procurement to ensure availability and your forecast would be reviewed and adjusted regularly.

AXIO for Distribution provides template best practice methods that will assist in implementing processes and training for your firm. Thus, minimizing and managing your expediting requirements. As I said we are not in a perfect world but with the proper solution in place, you can minimize expediting  use it as a learning experience and apply the necessary corrections.


Watch how you can use color coding in advanced order management to better track orders and provide customers with real-time status updates!

%d bloggers like this: