Order Management System Project Mistake – Counting On IT To Do Everything
Continuing on in the 12 blog post series of mistakes that we have seen clients make before or after we are “on scene” to assist them with their order management, warehouse management, or inventory management systems project.
2 of 12. Counting on IT to do everything
Success in order management system selection is driven by assembling a strong project team of all the departments that will use the system. Order management system selection is not just IT’s project. Large scale systems like order management software change everything about the way your company will do business. The users want good order management systems, but one group or another either pushes responsibility off on the other or they don’t have input and buy into the process. Also, be sure to have executive sponsorship that supports the project from start to finish. Be sure you have a project manager capable of coordinating and supporting project. Don’t rely on the order management system vendor’s project manager to manage the entire project. For large order management software projects this is a full time job, if you don’t have the resources seek assistance from experienced external resources to assist you.
Are you currently involved in an order management system project? Do you feel overwhelmed and need to talk to a consultant about getting some help? Contact us at any time in the project to release the pressure of the order management system project as well as your daily tasks.
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Order Management Systems Project Mistake – Having the Wrong Expectations
F. Curtis Barry & Company has been working with our clients for the past 26 years on hundreds of order management system, warehouse management system, and inventory management system projects. We felt that there is no better way to know how to successfully run a smooth systems project, than to learn from the heartache of others that have gone through it already.
We have developed a series of 12 blog posts that highlight mistakes that our clients have had to painfully learn prior to us getting hired or after we have completed our contracted phase of the order management system project.
1 of 12. Having the Wrong Expectations
Many order management software projects get off to the wrong start. In my four decades of order management system project experience, here are five things management always wants to know upfront in the project before the selection project proceeds:
- To understand type/tier of order management system that best suits your needs
- Perform preliminary gap analysis of your business compared to commercial systems available
- Develop preliminary total cost of ownership for entire project
- Understand the schedule to complete process
- To know what resources – both internal and external – are required to implement and support project
How many times have you told your boss, “ABC will cost this amount” or “We can complete the project on this timeline” – only to find out after you do the in depth research or do the project, reality is dramatically different. The point here is that management doesn’t want to go through months of detail study to find out that they can’t see their way to a huge investment. They want the answers to these questions first and then give you approval to do the detail work. This is a catch 22. Unless you have current prior experience with the order management system being investigated, how will you answer these questions?
It may be an option to engage a consultant to gain insight. You have to answer these questions in a manner that doesn’t create unreasonable expectations for the project. If you are facing the above order management system expectations from your executives, contact us to discuss your system project.
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USI Selects Manage Metrix for Proactive Business Performance Management
FOR IMMEDIATE RELEASE
Multichannel Retailer USI Inc. Chooses Manage Metrix – Co-Developed By Taurus Software and F. Curtis Barry & Company – For Proactive Business Performance Management
Redwood City, CA. and Richmond, VA; June 24, 2010 – Taurus Software and F. Curtis Barry & Company, announced back on February 22, 2010 that USI Inc., a leading supplier of lamination equipment and office accessories, has selected to implement the Manage Metrix solution. As an Ecometry client, USI is excited about the combination of Taurus’ leadership in data warehousing, analytics and business intelligence and F. Curtis Barry & Company’s knowledge of the multichannel industry, benchmarking and best business practices coming together in a unique business intelligence and performance management solution. USI and the Manage Metrix co-developers will be working on streamlining business efficiencies in the Inventory department, where USI’s goals are to balance inventory, reduce backorders, and maximize customer satisfaction.
USI chose Manage Metrix because of several factors, including the dynamic Taurus/FCBCO partnership, the solution’s valuable functionality, and the long-standing relationship that USI and Taurus have enjoyed throughout the years of Taurus developing specialized solutions for Ecometry customers.
“Over the years, we have been working with multiple Taurus Software solutions,” states Peter Frega, Director of Operations at USI. “We have been completely satisfied with their valuable products, ease of use, and superb functionality. Even still, we are more excited about implementing Manage Metrix since we have never seen anything quite like this.”
USI will be monitoring their inventory pulse using the Manage Metrix Inventory Analytics through the corporate dashboard, which yield insight on how to free up dollars in unproductive inventory, minimize backorder occurrences, processing costs and lost customers, balance rate of sales and purchases for active inventory, and automatically identifying the most productive and valuable tasks. In addition, the consultants at F. Curtis Barry & Company will be working closely with USI to establish best business practices and interpret the key performance indicators (KPIs). The KPIs illustrate what areas in inventory are excelling and proactively alert executives and managers to possible areas of concern.
“Managing inventory is so important because it’s one of the largest assets we have,” says Peter Frega. “Inventory impacts our other departments as well as our customers, and managing inventory is a challenge since inventory levels change hourly. We used to spend 80% of our time generating reports, and 20% of our time strategizing. With Manage Metrix, we expect to spend 20% of our time generating reports, and 80% of our time strategizing.”
Manage Metrix also has two additional modules, Merchandising and Marketing; which are ready for beta testing.
If you are interested in learning more about how you could use Manage Metrix in your business, or would like a detailed demo to see how Manage Metrix works – please contact Jeff Barry at jbarry@fcbco.com or call 804-264-8040.
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Using Initial Customer Order Fill Rate to Measure Customer Service
When you look at all the metrics multichannel companies can use to measure customer service, initial customer order fill rate (ICOFR) is the one that I think is best.
ICOFR is the percentage of orders that are shipped complete—all items that were on the customer order—within your company’s shipping standard. For in-stock product the shipping standard of most well-run operations is 24 hours from receipt of an order.
Many consider ICOFR to be just an inventory measure, but its usefulness goes far beyond that. To understand this metric’s value better, let’s look at some results from three clients that had not previously measured ICOFR.
The first example is a $25 million apparel Website that has 3.0 lines per order. Seventy-five percent of the product is reorderable. This company has always used the backorder rate to gauge its in-stock position and customer service; the backorder rate is 10%, day in and day out, so the client inferred a 90% service rate. The company’s first ICOFR report showed a rate of 76.5% for an entire season—hardly the world-class customer service it is striving to achieve! But the ICOFR is generally 10-15 full percentage points below the item fill rate or the backorder rate.
The second example comes from a $30 million food merchant that averages 2.25 lines per order. This business is characterized by high repeat-customer purchases and a low percentage of new product. It has a 1.5% backorder rate daily—wow! But its first ICOFR report showed a 88.5% rate—another big surprise for the owners.
The third example (see figure 1) is a $90 million apparel business with catalog and Internet channels. Fifty percent of the styles are reorderable. The attached graphic shows the pattern for ICOFR when charted weekly for a year. The numbers are highly variable, with the ICOFR as low as 52% one week and up to 80% another, depending on when item receipts are heaviest.
During the past 20 years of working with mul
tichannel companies, we have observed the results in figure 2, which shows several major categories of businesses and their initial customer orders, cancellations, inventory turnover, and customer returns. These are results for companies that are performing well and have capitalization for inventory purchases. It’s difficult for companies in the fashion apparel industry to perform above 70%, because 50%-75% of product is new in each major edition of their catalogs. A higher reorderability rate of product, an accurate history of item selling, shorter item lead time to restock, and higher inventory levels all potentially improve the ICOFR.
So let’s look at a few customer service nuances of this calculation. I like it as a measure of customer service because I believe it truly reflects what the customer expects. If he gives you an order for 3.0 items, he expects 3.0 items shipped. It’s a measure of inventory availability when the customer orders.
Also, if there are three lines on an order and you ship two, the calculation credits your ICOFR with 0% complete, which is why the ICOFR falls so dramatically. New products that really sell well with no history from which to accurately project demand strip the inventory and create the low customer service rate. This is shown in the figure 2 statistics comparing fashion apparel and reorderable/weekend apparel.
But we all know that there is a balance point between ICOFR and turnover. No business can service 100% of all orders daily and have an acceptable turnover or take the risk of overstocks. So the challenge is to find the optimal inventory point and determine how much risk you want to take.
The merchant also needs to take into account the cost of backordered merchandise. Our studies with hundreds of multichannel companies show that it costs $7 -$12 for each backordered unit of merchandise. This includes the shipping cost of the backordered unit, shipping material, additional labor, and the “Where is my order?” calls to the contact center. It does not include loss of shipping and handling revenue, potential loss of a customer from poor service, the merchandise buyer’s labor for expediting backorders, or the cost of air freight to expedite.
Measuring ICOFR does not mean you should stop measuring backorder rates or item rates. You should report all three. But the ICOFR is the only one that looks at customer service and inventory availability by order—as the individual customer experiences service.
If your management team doesn’t measure initial customer order fill rate, make it a priority to measure and report it by class and category as well as the total business weekly rate. Add it to your key performance indicator (KPI) dashboards and maybe your management objectives. Hopefully you will gain a new perspective on how well you’re serving your customer and in turn will manage the inventory optimally.
If you are needing some assistance in what and how to measure certain metrics in your inventory department or would like to discuss how we can help your inventory department be more efficient through an inventory assessment, don’t hesitate to contact us at any time. Call Jeff Barry at 804-264-8040 or email him at jbarry@fcbco.com.
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Warehouse Management System Offered as a SaaS Solution
If you are out searching for a warehouse management system there are lots of options depending on the complexity of your business and your budget. One option to consider is an on demand solution or software as a service (SaaS).
We recently had the opportunity to have a presentation by Deposco of their ShipForce warehouse management system on demand software solution. Deposco was established in 2004 and has financial backing by The Albermarle Group and UPS Strategic Enterprise Fund. In addition to ShipForce, Deposco also offers an Inventory Management System (StockForce), a Supply Chain Management system (Mobile WorkForce) as well as Business Intelligence (BI) to support on-demand user support of key warehouse metrics.
ShipForce offers all of the standard warehouse management system functionality including: receiving by advance shipping notice (ASN), purchase order or blind, quality verification, put away (directed or user enabled), replenishment, pick selection options, pack verification, inventory adjustments, etc. These functions are performed in conjunction with radio frequency (RF) to guide the user to perform the given task.
What you gain with a SaaS model is reduced need for additional Information Technology staff to maintain another application, the cost of additional equipment to support both a test and a production environment and the cost of license and maintenance fees associated with purchasing the application.
ShipForce has integration points from the client’s ERP application for sales orders, purchase orders, return merchandise authorization (RMA), item master, locations, and additional master type data. And standard integrations from ShipForce up to the client’s ERP system for shipment details, inventory synchronization, and in process fulfillment status as needed. These data integrations can be sent and received in a number of different ways including: web services, FTP, flat files, HTTP, direct database connections or direct upload into a user integration point.
What you can look forward to gain with a warehouse management system like ShipForce is a reduction in labor force through more efficient automated processes; elimination of manual data entry through the use of RF technology. Reduced shipping errors with the use of pack verification and an integrated manifesting system. Ability to reduce inventory write offs as all inventory locations and their contents are controlled systemically and all inventory movement is guided via the RF. And finally because of better control and management of what inventory is in the warehouse and where should lead to reduction in overall inventory and increased inventory turns.
Deposco’s ShipForce is SAS 70 type II certified and its audit controls of activities, processes and safeguards were developed by members of the American Institute of Certified Public Accounts (AICPA). Deposco’s application complies with Sarbanes-Oxley for public companies need for compliance to these standards and it is also PCI DSS certified.
With any SaaS software model you need to be sure that the software you will be utilizing is housed in a secure environment that has redundancy for fail over for everything from a generator for power to multiple sources into the building for supporting WAN. Redundancy is key here to be sure that you have sufficient and timely rollover to protect your company in the event of a failure at the vendor’s location. In addition to this failover protection you will also need to be sure you get validated transaction through put and at what connection speed to the SaaS vendor’s location. The larger the transaction volume the larger the communication connection will need to be.
So as you embark on your next warehouse management system selection remember that there are many options out there and a SaaS model is certainly one to consider!
If you are planning or currently in the middle of a warehouse management system, ERP, or order management system project and are feeling overwhelmed – don’t hesitate to contact a consulting firm that has successfully completed dozens of systems projects a year. F. Curtis Barry & Company is always available to discuss your project and how we would approach your unique situation. Call Jeff Barry at 804-264-8040 or email him at jbarry@fcbco.com.
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Five Basic Components of a Warehouse Assessment
Speed, accuracy, reduced labor costs, storage density…Sound familiar. These are issues most warehouses face today. What is interesting is that this was compiled from warehouses listing their key issues facing them from 10 years ago. Some things never change.
Although the industry has evolved over the years and employs many levels of automation and technology, a common theme is the need to address these timeless objectives. In working with companies who are addressing these issues, there is another common thread. That is a return to the basic processes in the warehouse.
As with issues staying the same, most warehouse functions and processes have remained relatively the same over the years. The application of technology or automation may have changed the way the function or process is achieved, but the objective and overall functional process itself remain the same.
With the ongoing commonality of warehouse functions among companies, we have found that almost every warehouse can enjoy benefits by addressing the basic operating infrastructure and processes in place today. One of the best ways to evaluate your basic warehouse needs is to have an independent warehouse assessment conducted.
The warehouse assessment process enables you to identify areas where you can improve operational performance. The five basic components of the warehouse assessment are:
1. Walkthrough and observations of the operation
2. Data gathering of necessary information and metrics
3. Interviews with key staff members
4. Report analysis to determine current productivity and service levels
5. External benchmarking to look for areas of potential improvement
Walkthrough. One of the first steps in the assessment is to take time to walk through the facility and observe general operating conditions and effectiveness of the processes being used. This is not a detailed analysis, but developing overall impressions can guide the more detailed steps of the assessment to be completed later. Many times, the initial walkthrough and observations help focus and direct the assessment process. After you have seen enough facilities, it is possible to form initial opinions as to the current level of productivity and service very quickly. The general cleanliness of the facility, employee attitude and morale, overall work pace, information posting for employees, congestion, appropriate use of automation, bar code applications, space and cube utilization, etc. are all issues that can be observed during the walkthrough that can provide clues as to the appropriate focus for the assessment. Using all of the tools available can provide valuable information for the direction of the detailed assessment.
Data gathering. The assessment will involve some new research, but chances are you’ve already been collecting a lot of the data for other purposes. Designing an assessment is a matter of putting it all together. Most assessments are a combination of research analysis, report review and on-site fact-finding. The first step is to gather all the research you already have and collect any that you are missing. It is always necessary to establish expectations or standards as the baseline for any comparisons. Measurement against these standards identifies areas where expectations are not being met and action is required.
Staff interviews. Another important step is to talk to those staff members directly involved in the activity being assessed. Interview key management staff to gauge their perspective on the operation and any future plans for growth, product changes, or planned process changes. Then talk to the workers on the floor doing the work in the warehouse. If anyone knows where the problems and opportunities lie, it is the people who live with the issues day in and day out. Don’t miss this important resource; they are many times the best source for information.
Report analysis. Among the types of reports you should consider are basic internal operations performance reports, including service levels such as order shipping accuracy, order turnaround time, etc.; receiving; quality assurance; stock putaway; returns; inventory control; replenishment; and picking, packing and shipping. Examining these reports can help reveal which departments are reaching desired levels and which ones need some attention. The reports usually will include information relating to budgets or expectations compared to actual results in key areas of the business, covering productivity as well as service metrics.
Benchmarking is important. Your assessment should compare your desired standards of service and productivity with your actual performance. Comparing your own figures—both actual and goals—to that of other catalog and multi-channel marketing companies can help you evaluate your performance, too. Just be careful to compare “apples to apples” and pick companies that are as much like yours as possible. External comparisons can lead you to certain areas or processes within your operation that are candidates for further study. But remember that you cannot take someone else’s standards or performance expectations and make them your own; there are always too many differences in operations to do this. Our opinion is that it is always better to compare your results against yourself and against a set of standards or expectations over an established time period. This permits the identification of trends as well as snapshot evaluations. It is really desirable to combine both internal and external benchmarks to evaluate where you stand.
It is also very important to make sure you measure activities and costs that are relevant and actionable. Reviewing true productivity metrics in terms of work units and man-hours is better than looking at a percent to sales measure. The percent measure is dramatically affected by price points and labor market conditions, which usually are out of the operation’s control. Emphasis should be placed on comparable benchmarks, which can lead to some action steps by the operations group.
Look for our blog next month about what the four critical areas to concentrate on during the warehouse assessment…
If you are looking for some assistance in conducting a warehouse assessment then you need a consulting firm with the experience and knowledge base that can make quick but thorough work and actionable detailed recommendations to immediately begin implementing. F. Curtis Barry & Company has conducted warehouse assessments for dozens of clients a year and would be more than happy to discuss with you how we would approach assessing your warehouse. Call Jeff Barry at 804-264-8040 or email him at jbarry@fcbco.com to talk today.
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Successes in 2009 for Junction Solutions
In our on going series of highlights of successes in 2009 I had the opportunity to speak with Jeff Marker, Sr. Vice President – Multi-Channel Retail for Junction Solutions and he had the following insights about their successes this past year.
Jeff elaborated on how despite the economic challenges of last year that Junction had its most profitable year since its inception this past year with several notable new deals and implementation go-lives. Jeff also stated that Microsoft Dynamics AX got a lot of recognition in 2009, and was recognized as the leader in the middle-market ERP space by The Gartner Group in its May 2009 Magic Quadrant report. See chart below:
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Is The Economy Recovering Happening For Your Business?
In a recent NRF SmartBrief, daily newsletter, it reported that “Retailers cautiously optimistic as sales beat expectations”… “It’s safe to say the worst is over for most retailers. And particularly for those outside the home goods area, the tide is turning,” said economist Frank Badillo. “We’re seeing consumers continuing to spend, in much the same way they did in November, December and January, with an increase in demand for apparel and smaller-ticket items.” You can find the full article with this link: http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=122992
While this may be true for some of the big retailers, what do you see when you visit local sole proprietor businesses in your community? Are they seeing a radical change in both traffic and sales in their establishments, that they feel the economy has now turned around? Has the economic recovery happened to you? The recovery is only over for your business when you see it in your sales and your paychecks.
Paul Sobota is vice president of F. Curtis Barry & Company, a warehouse, systems, and inventory consulting firm with a focus on catalog, eCommerce, retail, wholesale, and manufacturing; Learn more online at: http://www.fcbco.com
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Planning A Warehouse Move – Issues And Questions To Resolve
We recently have been working with a few warehouse clients that are involved in moving to a new warehouse facility. Along the way, it became apparent that the planning for the move required a lot more time and effort than originally thought. What seems like a simple concept can become a daunting task in a hurry.
If you are considering a move, the following thoughts might help save some time and headaches during the move itself.
- Make sure you have researched all of the applicable building codes for the area you are moving to. Determine what information and the level of detail that is required to obtain the necessary permits to outfit and occupy the warehouse.
- Most warehouses require some type of sprinkler protection. Investigate what the requirements are for the overall facility, mezzanine areas, pallet rack storage areas, and any other work areas in the warehouse. If changes are required, make sure there is adequate flow and pressure to meet the codes.
- Most areas have varying policies when it comes to determining when you can occupy the space. Some will allow the storage of materials and product as long as no order processing activity takes place; while others ban all storage or use of the space until all work is completed and permits issued.
- One issue that seems to come up often is the need for routes of egress for emergency evacuation, if needed. Make sure the code requirements are understood and met when the warehouse layout is being developed.
- If you plan on staying in operation during the move, and most companies do, this presents significant issues to overcome. Make sure you get a realistic estimate of the amount of time required to move inventory and any equipment to be reused from the current warehouse.
- Take into consideration small issues such as purchase order information for product that is on the way to your warehouse during the move, changing the address for returns or trucking pickups, mailing address changes, etc. that can fall through the crack but cause major time consuming issues if not addressed.
- Since most people involved in the move will have full time jobs to do while moving, make sure you allocate enough management time to oversee the move on both ends.
- This is a good time to think about getting rid of aged or dead inventory and not move it to the new space. Allocate time and focus on doing this before the move.
- Decide whether you are going to try to take an inventory count while you move. Although this may sound like a good idea, since you will be handling the entire inventory, think twice before you try to take inventory on-the-fly. It will take a lot longer than you think and will slow down the move.
- It may cost you more to reuse all of your existing equipment and storage media in the new space (while staying in business during your move) rather than purchasing a segment of the total equipment required to get started in the new space. Look at the big picture and the feasibility of doing this before deciding.
- A safe planning bet is to double the time you think it will take, and then be pessimistic as to meeting that schedule. Things will go wrong and happen not as planned; so you might as well provide a buffer to take care of them.
Having pointed out a few hurdles to get over when moving, a well thought out plan and constant monitoring of progress against the plan will make the move go as efficiently as possible. Remember that many steps will be dependent on others being completed; so the sequence of steps as well as the completion of required steps has to be considered also.
Define the detailed steps to be performed in a master plan, assign accountabilities to those involved, and establish realistic timelines to complete the steps to make sure the move is completed as planned.
Bob Betke is vice president of F. Curtis Barry & Company, a warehouse, systems, and inventory consulting firm with expertise in direct, retail, wholesale and manufacturing. Learn more online at: http://www.fcbco.com
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UPDATE: Virginia House Kills “Amazon” Law
Senate Bill 660, introduced by Sen. Emmett W. Hanger Jr. (Augusta County), was officially defeated yesterday by the Virginia House of Delegates Finance Committee. Senate Bill 660 would have created a new nexus standard to require certain Internet retailers to collect Virginia sales tax from its Virginia customers even if the retailer is not physically located in Virginia. The House Finance Committee adopted a subcommittee’s recommendation to lay Senate Bill 660 on the table, which effectively ends the bill’s chances of passing in this session of the General Assembly. However, the provisions of Senate Bill 660 are still present in the Senate’s version of the budget for the next biennium. To be adopted, the House of Delegates would have to concur with its inclusion in the budget.
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