Penny Wise and Pound Foolish

 In 'The Historie of Foure-footed Beastes' (1607) Edward Topsell wrote: 'If by covetousnesse or negligence, one withdraw from them their ordinary foode, he shall be penny wise, and pound foolish.'" From "The Dictionary of Cliches" by James Rogers (Ballantine Books, New York, 1985).

What the heck does that have to do with Bar Coding? I have seen people spending thousands of dollars on software to automate their warehouse or manufacturing operations and then waste money by buying hardware that is designed for consumer use or is not rated to handle the load or environment.

For example, buying a low volume bar code printer that prints so slowly that employees have to stand there and wait for labels to be printed. How much does it cost your company for this "wait time"? Buy a printer that avoids this and save yourself the money of wasted employee productivity.

Another example is buying handheld computers that cannot withstand use in the warehouse or manufacturing environment. Replacing broken hardware not only is costly but results in down time and again lost productivity. So a few bucks saved on a device will quickly be lost.

Here is a video I saw that demonstrates how durable industrial grade devices can be.

http://www.youtube.com/watch?v=A_PY23716aM Take a look and I think you will amazed!

Physical Count Success Story

I recently heard about a company that was spending a fortune doing their physical counts. They were deploying 30 employees one full week to do inventory. During this down time, the company was practically shut down. They could not receive any inventory, ship any product or conduct any other business that would affect inventory.

After a warehouse analysis, they installed a Radio Frequency based mobile scanning system and were up and running in less than 10 days. Their first inventory with the scanning system was done in SIX hours! Take a look at the video here:

http://www.youtube.com/watch?v=VBncW6qz2Fg

How to Reduce Physical Count Time by 75%

Everybody hates to do physical counts. They typically are done after hours or on weekends. The staff helping out is not familiar with the inventory items and just wants to get it over with. Why do it at all? Usually most people will answer" because our accounting firm requires it".
Physical Count is very important to an efficient running distribution operation. Every time there is one inventory error there are really two errors. They grow like rabbits! What if this was a way to get this done and drastically reduce the time needed? Here is a video that will show you how. http://www.youtube.com/watch?v=m9AFhl2M2d0

If you implement a system like this you could now begin to implement cycle counts where you break the physical into smaller parts thus achieving even greater inventory accuracy.

Getting Control of Your Shipping

One of the problems that I constantly hear about is people shipping the wrong product to the wrong customer. As I have mentioned before, this creates a lot of unnecessary costs. You have to get the product shipped back to you at your expense. You have to expedite shipping the correct item to the customer. You have to process all of the back office transactions, etc.

An intangible cost is the disappointment and perhaps serious inconvenience of your customer. If you lose that customer over the incident, you have lost future sales from that customer. I saw this video of how one company is using Radio Frequency technology and mobile data collection to eliminate this cost. The video can be viewed at http://www.youtube.com/watch?v=jymNYIk5xKY

Recording of Webinar Link

Here is a link to a recording of the Webinar  " The 10 Best Ways to Lose Money on Distribution Operations... And How to Prevent Them!" that I completed October 6th.  You can connect to the recording and view it at anytime.  Here is the link:  Post any comments or questions that you have here.

How to Avoid Shipping Errors Video

I have discussed how many companies are needlessly incurring the costs related to shipping errors. Shipping the wrong items, shipping to the wrong customer location, shipping with the wrong ship method (causing items to be delivered late), etc. As I have mentioned before, many of these can be eliminated with an integrated bar code data collection system. Take a look at this video to see one in action. You will need to enter your name and email address to view the video. Click here to see the video.

Distribution Webinar

I have announced a Webinar that I will be hosting on Tue, Oct 6, 2009 10:30 AM - 11:30 AM EDT. The title of the Webinar is 10 Best Ways to Lose Money in Distribution...And How to Prevent Them. I will share with you the common mistakes companies make and give tried and true solutions to solve them. Walk away with the tools you need to stop losing money and start increasing your bottom line. You can register by  clicking here.

Video on How to Eliminate Receiving Delays

I saw this video the other day and I thought that it would be interesting for folks to see how an integrated system for PO Receiving can work to eliminate one of the problems I discussed, Receiving Delays.  Just enter your name and email address to register  Click here to see the Video



 

Picking the Best Bar Code or RFID system for Your Company

Ok, assuming you have read the previous post "The Cost of Doing Business?" and have collected information for 30 days, you now know what it is costing you to do business the way you are doing it now. What do you do now?

The first step is to research what solutions are available to meet the challenges that you have identified. If you are a "do it yourself" type of person you could get on the internet and look for solutions. If you are not, you could seek the help of a consultant who specializes in these types of solutions or possibly contact the vendor of your ERP system for a referral.

Most of the major ERP systems for small to medium business have solutions available. How do you choose? I would recommend that you assign one person to be the "Bar Code or RFID Advocate". This person will be the leader of the project and will interface with back office staff, warehouse staff and management. I hate to use the word "committee" but it is very important that all the people affected by this change have buy-in and can participate in the process. If any one group tries to shove this down the throat of any other group, the project will fail.

The Advocate will get information and conduct phone conferences with potential vendors. Look for vendors that are interested in your specific challenges and are better at listening than talking. You need them to understand your business. After screening out the vendors that you are not interested in, arrange for a phone conference with the committee and the vendors that you want to explore further. Don't rush to a software demo (common mistake). This phone conference allows the team to ask questions of the vendor and gives the vendor more information about what specific concerns the team has. After the phone conference have the team decide if they want to proceed to the next step with this vendor, the demo.

Integration. Integration. ERP Integration to me this is the most important factor. You can have the greatest Warehouse Management System with all of the bells and whistles but if the entire enterprise is not able to access inventory information in a real time basis, it only helps part of the company, the warehouse. Speaking of bells and whistles, many of these things are "cool" and people get excited about them. But evaluate if you will really use them and if they will really contribute the effectiveness of the organization.

Make sure the system fulfills the basics:

• PO Receiving – Items received and the ERP inventory is updated as close to real time as necessary.
  
• Physical Inventory - The system should allow both full and cycle counts and provide for reconciliation of variances.
  
• Inventory Movements – Warehouse Transfers, Bin moves (if the ERP system supports the same item in multiple bins)
  
• Pick, Pack Ship – Allows for picking orders, scanning what is packed and integration to a shipping manifest system. Invoices and packing slips should be generated.
  

During the demo, pay attention to the handheld devices user interface. Is it easy to use? Remember warehouse staff will be the users and many of them are not computer savvy. If the system is supposed to be integrated, have the vendor show how it can validate real-time against your ERP database and have them demonstrate transactions being created in your ERP.

A word about hardware. There are specific devices that are designed for the rigors of a warehouse environment. Don't waste your money on cheap devices. You will just spend more money over time in replacing broken devices and loss of productivity. The same is true of wireless networks. Don't go to Best Buy and get a $50 access point. There really is a difference between the $50 ones and the $900 ones. If your warehouse is over about 35,000 sq', I recommend an RF or an RFID survey to determine exactly what the hardware requirements are. Make sure the vendor agrees to provide any additional hardware needed at no extra charge if the survey proves to be inaccurate.

After you think you have found the perfect (there is no perfect) software, how do you insure the vendor is qualified. There are two things that people "think" they should do. One is go and have a "site visit" and the other is references. When people ask me for references, I reply "Do you want the good ones or the bad ones?". Of course a vendor is only going to give you references that are good. So, what purpose does it serve? However, this is an opportunity to hear someone else's experiences. Find out what they felt they did right and wrong on their project. Learn from their journey. It's OK to inquire about the vendor too but in my opinion there is little value. One thing that I do recommend is to contact your ERP software publisher and ask them about the vendor. If there are or have been problems, they will probably have heard about them and you are already their customer.

Site visits are another waste of time, money and energy. Put yourself in the place of the company you want to visit. These people, who you don't know, want to come to your facility and take up your time for free to help them make a purchase decision. Again, will the vendor give you a bad site to visit? In my opinion anything that can be gained from a site visit can be done on the phone.

So now it is time to evaluate the quote(s) from the vendors and apply that against your costs that you calculated. What is a reasonable ROI? In my opinion a Bar Code system should recover cost in about 18-24 months, a RFID system in 24-36 months.

Obviously, there is more involved in this process than I can cover in this short post. If you feel it would be helpful, I can be available to help you with this process.

Next, Implementation     Stay Tuned……………..

The Cost of Doing Business?

Many times when I have worked with clients they have trouble justifying the cost of improving their data collection systems either through Bar Code or RFID.  They try traditional ROI concepts and many times they are successful in justifying the cost to management using these old school techniques.  However, I would like to suggest another method.  Ask yourself a question: How much is it already costing me to do business the way that I am operating now?

For example, if a customer calls and is in need of one of your products right now, can your sales staff be 100% sure that they can fulfill the customer need from inventory?  What does it cost you if your inventory is wrong and you cannot ship as promised?  Have you lost a customer or at least made him less than satisfied with your company? Usually however this is very hard to measure objectively. My suggestion, ask, simple huh? Ask your sales people for one month to just jot down when this happens and how much the sale that was lost equaled or worse yet how much that customer used to buy from you.

Another common scenario is that the company has already purchased the inventory and it may be sitting on the receiving dock or it may have been received, but the paper work is sitting on someone in the office's desk waiting to be entered into the company ERP system. So, you have the inventory but your sales people do not know you have it. Another possible lost opportunity since the customer will just go elsewhere to get the item. Again, ask your sales people to document these lost opportunities due to real or imagined stock outs. Sales people hate to document anything, but help them to understand the importance and what you are trying to accomplish. Besides you are only asking for one month!

Many companies are sharp enough to know they have these problems so the way they compensate is to build inventory to excess levels. This is called "safety stock" and by doing an analysis of inventory turns, it can be quickly determined that there is too much in stock and what the cost of carrying it is. Remember to include not only the cost of the inventory, but also the cost of the money, square footage, labor etc. that are incurred by the safety stock.

I once worked with a company that did a complete physical inventory every month. They had four "teams" one person to count, one person to verify the count of the other person, one person to write down the item counted and the quantity counted and a fourth person to check the work of the other three! These guys had a perfect physical inventory every month. But, how much did it cost them? Not only the personnel costs but every month they had to shut down for one to two days. Nothing could be received and nothing shipped. After inventory was done, another "team" of data input staff had to type in the counts and the CFO had to analyze the variances and then get the warehouse teams to investigate each variance. When we sat down and calculated all of the costs involved both tangible and intangible, they decided a new system could pay for itself after just two inventories. That means the receiving and shipping features of the new system were virtually free. Further they were treating the symptom of the disease (inaccurate inventory) and not the disease (inaccurate receiving and shipping).

Speaking of shipping, that one has huge potential for unnecessary costs. Let me relate a personal experience and I bet many of you have experienced the same thing in your role as a consumer. I own an RV and a concrete wall came out and hit the front fender (actually it was my poor driving of the huge beast of a vehicle). I took the coach to the RV dealer and he dutifully looked up the part number and ordered a new fender. When the part arrived, I drove the 45 miles to the dealer unhooked the car I was towing and left the coach.

Later that day (after I was back home) the dealer called and informed me that the part shipped was the left fender and not the right one which was damaged. It would take another three weeks to get the correct part. So, now I have already waited three weeks to get the "wrong" part and now my coach will be down another three weeks. I was not a happy camper (literally)!


The dealer called and said the part was in and the coach was ready. I paid the bill and when I entered the coach to drive home, the wrong fender was inside. I walked back into the dealer and told him. He said "the manufacturer said to keep it that it was too expensive to ship it back! So, let's look at the costs. The manufacturer paid expedited shipping to send me the correct part. They absorbed their cost for the wrong part (I often wander who made that decision). Finally, they created an upset customer. Will I think twice before I buy another RV from that manufacturer?


Here again is where your sales people can help. They are probably going to get the call from their customer that the wrong part, the wrong quantity, the wrong address, the wrong shipping method, missing parts on the order, and whatever else can go wrong in the shipping process. Ask them to just jot down these incidents. Then have someone calculate the costs, expedited shipping, shipping back of the wrong parts, time to deal with the inventory and accounting adjustments and labor to ship the correct part and receive the wrong part and put it away. Finally, remember to include the intangible costs such as customer dissatisfaction or loss of a customer. I think you will be amazed at how much all of these things cost and remember this money you are already spending. After one month add up all of these costs and see how much it is really costing you to do nothing.

What are the solutions to these challenges? Stay tuned……..