Marketing Management Marketing is an attempt to create awareness of the company, its projects and generate new enquiries.

Today Advertising, sales promotion, extensive dealer network etc., are the important functions of marketing. Different modes of marketing produce different results and their comprehensive analysis helps an organization in correct decision making. But equally important for the organization is to know, how a particular strategy worked in the promotion and success of a specific project. Marketing Management Module provides various tools of marketing for the organization to get complete information regarding the conversion of an enquiry into a sale through a specific mode and the quantum of efforts behind it, both in terms of finance and personnel. Complete follow up history is maintained that makes the entire process, system driven rather than person dependent. Other important tools of marketing like appointments for the executives, their work schedules, alerts for follow ups are also available on this module.

Salient Features

Comprehensive details of various open projects as per different parameters ( unit types, group, block, floor, rates etc.) for the marketing executives to offer from the vast range of categories. All Advertisements and other promotional activities are defined and categorized with their cost to company and are linked to the enquiries generated.

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Extensive search option to explore the availability of a particular unit as per the customer's choice. Provision to rate potentiality of a customer by the executive on a defined scale. This ensures follow up on priority for the highly potential customer. Database of all potential customers with their complete follow-up history and respective alerts. Cost incurred by the company on the advertisements by various dealers and their conversion ratio can be computed. Average marketing cost for a sale can also be derived.

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Purchase Management This module deals with the inventory of all construction materials, consumables equipments & asset items at different project sites of the company along with their purchase and supplier details. The Store issues items/equipment to various users and details are recorded. Once the stock reaches below the reorder level, it generates a requisition for purchase. This also maintains records of purchases, stock, and supplier list, item/equipment/material master tables. The Store module ensures that there is a round the clock availability of a sufficient quantity of materials in a mode that neither hinders efficient construction work, nor it becomes a financial burden on the company.

Salient Features

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Maintains the details of all items, its suppliers and purchase details. Items can be categorized under different groups. Items can be defined for the particular site i.e. a particular site will be able to view only those items which comes under it. Generate Purchase order linked with purchase requisitions. Maintain Stock of all Stores & Multiple site Stores. Maintain vendor details from whom Items are being purchased. Store can acknowledge return of purchased item. Maintain Reorder Level of Items and warn accordingly

Inventory Management This module deals with the inventory of all construction materials, consumables equipments & asset items at different project sites of the company along with their purchase and supplier details. The Store issues items/equipment to various users and details are recorded. Once the stock reaches below the reorder level, it generates a requisition for purchase. This also maintains records of purchases, stock, and supplier list, item/equipment/material master tables.

The Store module ensures that there is a round the clock availability of a sufficient quantity of materials in a mode that neither hinders efficient construction work, nor it becomes a financial burden on the company.
Salient Features

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Details of all items, its suppliers and purchase details. Items can be categorized under different groups. Items can be defined for the particular site i.e. a particular site will be able to view only those items which comes under it. Generate Purchase order linked with purchase requisitions. Maintain Stock of all Stores & Multiple site Stores. Maintain vendor details from whom Items are being purchased. Store can acknowledge return of purchased item. Maintain Reorder Level of Items and warn accordingly

pply Chain Management : Enterprise Resource Planning

The goal of ERP (Enterprise Resource Planning) systems is the successful integration of a companys data and processes in to a single unified system. Usually, several components of computer software and hardware are employed in order to realize this goal. A unified database must be employed in order to store data for the various modules of the system.

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History of Enterprise Resource Planning

Originally, the term enterprise resource planning was employed to designated systems used by enterprise wide resources. It was originally used in the context of manufacturing, but in todays world, enterprise resource planning is used in a variety of spectrums. It can be used to unite all basic functions of a company, no matter what kind of company it is. Indeed, enterprise resource planning is used by governments, non profits, and corporations alike.

In order to be considered a legitimate enterprise resource planning system, the software package has to provide functionality in a single package that would normally involve two or more systems. To give one example, a software program that provides payroll and accounting is a legitimate enterprise resource planning software package. But the term is usually used in relation to bigger, more broadly based software applications. Using an enterprise resource planning system can not only replace several functioning applications, it will also eliminate the need for external interfaces that systems might have required before, as well as supplying further benefits

that might range from lower maintenance and standardization to more convenient reporting abilities.

ERP Overview

Many companies that boast the necessary in house IT skills to integrate several software programs decide to implement just a few portions of an enterprise resource planning system. They will then develop an external interface to other similar systems being employed to take care of their other application needs. To use an example, in some instances the PeopleSoft HRMS system might be perceived to be better than SAPs HRMS system, or vice versa. So a company might choose to buy an enterprise resource planning system, but desire the PeopleSoft HRMS and Financial modules, but then buy the remaining applications from the SAP company.

Even in the retail world, this is a very common practice. Even middle sized retailers often have discreet Point of Sale products and financial applications, which are then rounded out by an application series that will take care of such facets of the business as merchandising, logistics, warehouse management, and the rostering of staff.

In an ideal enterprise resource planning system, the database would take care of all data, including manufacturing, supply chain management, finances, projects, human resources, customer relations management, as well as data warehousing.

Originally, enterprise resource planning systems were rooted in material requirements planning. When the routings became part of a software architecture and the organizations planning capacity became part of standard software activity, the enterprise resource planning system was born. Usually, an enterprise resource planning system will oversee the logistics, production, inventory, distribution, accounting, invoicing, and shipping facets of an organization. Enterprise resource planning system software helps numerous business activities; these might include sales, inventory management, human resource management, quality management, marketing, billing, delivery, and manufacturing.

Enterprise resource planning systems tend to be mislabeled back office systems. This infers that customers are not involved at all with the systems. Front office systems, such as customer relationship management, deal with customers directly, as to eBusiness systems like eCommerce, as well as supplier relationship management systems.

Cross functionality defines enterprise resource planning systems. All the departments involved in manufacturing or operations can be effectively integrated in to a single functioning system. This could include accounting departments, as well as marketing, strategic management, and human resources, in addition to warehousing, Information Technology, logistics, and production.

Before enterprise resource planning systems were developed, all the departments that comprised a company would have to rely on their own separate computer systems. The system belonging to the Human Resources department would usually contain employees personal data, as well as info on the department itself and the reporting structure. The PR department would take care of paycheck info. The Finances department would have a system that dealt exclusively with the companys payment transactions. In order to communicate with one another, the various systems would require a certain amount of common data. For the Human Resources department to be able to send salary info to the PR department, for example, there would have to be a static employee number assigned so that the employee in question could be successfully identified by the two systems. Because of this confusing system, many complications would arise.

The development of enterprise resource planning systems led to the combination of data among applications that used to be strictly separate. Organizations thus no longer had to worry about keeping their data in synchronization across numerous different systems. Larger organizations no longer had to worry about the vast number of software specialties that were previously required to keep the business running.

Enterprise Resource Planning Best Practices

One benefit of installing an enterprise resource planning system is known as Best Practices. If a company does not wish to customize their enterprise resource planning system, they can choose the Best Practice function, which comes with the softwares basic version.

Best Practice usually applies to larger companies that have compliance requirements, or where the process depends on commodities like electronic fund transfers, owing to the fact that the process of capturing and reporting such content can be easily codified within the enterprise resource planning system, and subsequently replicated across several different businesses that have similar requirements.

Implementation

Enterprise resource planning software systems can be quite complex. Installing such a system almost certainly requires major changes within the companys work practices. A specialist will typically have to be employed in order to soothe the transition, as such systems are not typically in house skills. How long it takes to install such a system depends on how large the business is, as well as the extent of the changes being made. Smaller projects can be installed within a period of three months. In order to install a large system, however, it could take several years. What is most important, however, is for the company who has purchased the enterprise resource planning system to eventually take control over it. First, they will generally have to employ a consulting company to help them. Consulting companies generally help the company in three phases: consulting, customization, and support.

The consulting phase takes care of the enterprise resource planning system implementation and helps the system go live. The tailoring involve might include product training, the creation of process triggers as well as workflow optimization, advice on how to improve the way the system is being used in the business, the optimization of the overall system, as well as help with writing reports or assisting in the implementation of Business Intelligence. The consulting operation also includes planning and testing the system. This part of the process should not be forgotten about it is of vital importance for the systems future functionality.

The three levels of enterprise resource planning system consultation include systems architecture, business process consulting, and technical consulting. The systems data flow will have to be designed by a systems architect; this design should include a future data flow plan. The firms current business processes will then be studied in depth by the consultation team, who will match the current business processes with the enterprise resource planning systems capabilities and configure all the firms needs. The process of technical consulting might include programming operations. Most of the businesses that sell enterprise resource planning system software will allow their software to be modified in order to suit particular business needs.

The customization process involves changing how the firms system works via the writing of new user interfaces as well as application codes. Typically, these operations are not included in the enterprise resource planning system software and must be done by a specialist team.

It can be incredibly expensive to customize an enterprise resource planning system. Most of these packages are not designed to support extensive customization. As a result, the vast majority of firms choose to utilize Best Practices, a method that is outlined above. On the other hand, there are some enterprise resource planning systems that are so general that customization will

have to take place on every level. For such packages, it is advisable to purchase third party plug ins that interface well with the enterprise resource planning system software. e the system has been successfully implemented, your consultant should provide you with support in order to assist your company with any enterprise resource planning system related problems that may occur in the future. This ensures that the system stays running. It is advisable to create a committee to be headed by the consultant using a participative management approach throughout the design stage in order to provide hands on management control and minimize additional costs for the units that are going to be affected by the new enterprise resource planning system.

Usually, a maintenance agreement program supplies the business with all the patches of the current version, including major and minor releases. Your staff should be allowed to make support calls whenever necessary. The price of this type of agreement is usually around twenty percent of the enterprise resource planning systems user licenses.

Building Better Supply Chain

Author : Exforsys Inc. Published on: 31st Aug 2007 | Last Updated on: 9th Sep 2007

Building Better Supply Chain

In order for your company to remain relevant in todays marketplace, it is essential to continually look to evolve your supply chain process. Companies that prosper and minimize their costs while maximizing their profits and keeping customers happy realize that this habit of continual supply chain evolution relies on well thought out and well applied redesign efforts. And this redesign is accomplished by using computer systems to perform detailed analysis and perform more efficient supply chain planning. In this article, youll learn what some of these analytical systems can offer your business.

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Why Redesign?

You may be wondering, My supply chain functions fine! Why spend all this effort in some big redesign effort that might end up only saving a few measly bucks? The answer to this question lies in the Japanese concept of Kaizen. Kaizen is the principle of continuous improvement that was popularized by certain Japanese companies, notably Toyota.

The purpose of Kaizen is to use scientific and analytical methods on a daily basis to eliminate all excess and waste within an organization through the process of making gradual and continuous improvements to the products, habits, and functioning of the organization. In order to be maximally effective, the philosophy of Kaizen must be shared and practiced every day by each member of the organization.

Some examples of things that the Kaizen method would seek to improve are:

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The quality of products (for example, an herbal supplement company seeking to remove as many impurities as possible and increase the value of its product to the customer); .. The speed of an assembly line; . Product design (in certain cases, companies that followed the Kaizen principle would actually temporarily stop an assembly line upon finding a defective piece of equipment so that the defective piece could be examined and improved upon, while suggestions were given to prevent the defect from happening again); . Shipping and storage costs and efficiency; . Customer service response times (for example, constantly striving to reduce the time that customers spent on hold before being able to speak with a representative who could help them resolve their problem); . And reducing the number of products returned.

Applying the philosophy and practice of Kaizen to your supply chain (and to the rest of your company) will benefit your company by creating an ever-increasing improvement in the value that your product has to your customers.

More value for customers means more loyal customers who spend more money and even refer your product or company to their friends as a result of their enjoyment of doing business with you. It will also reduce supply chain costs that eat away at your profits. This is whats called a win/win situation.

Step 1: Determine Project Objective, Facilities And Needs

So, with the concept of continual improvement in mind, the first step in building a better supply chain is to determine your project objective, facilities and needs. This means that you must

decide what your goal in redesigning your supply chain is. Once you know your goal, you must next get an overall awareness of the size and involvement of the project.

In order to know what the overall size and involvement of the project will be, there are several elements you will need to take into account.

For example,

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Do you know where your factories and other production facilities are located? Do you know how many of these facilities you have? What about your manufacturing facilities? Who supplies you with your product materials? Do you know how many of these suppliers you have and where they are located?

These are questions that, when answered, will help you arrive at a clearer idea of the size of the project youre initiating.

In this stage, you should also begin to identify whether your manufacturing, production, storage and shipping facilities belong to your company, or are under another partys ownership.

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Are these facilities under lease? Are they outsourced (often the case with a retail supply chain)?

This information is important to identify early on because it lets you know how much control you have over your facilities, so that you can plan your design project accordingly. If you wish to involve, say, a distribution facility owned by another company as part of your supply chain redesign program, you will have to establish a line of communication between your company and this other company.

Additionally, in this stage of your project planning, you should examine issues such as customer supply and demand patterns, and the overall financial health of your company. These issues are important because they will affect the size and involvement of your redesign project. If your company is in good financial shape, then you can allow yourself to choose a redesign plan that is more ambitious in scope.

Likewise, if customer demand for your product is high, then that is a signal that the benefits of your redesign project will be maximally effective because in a high demand environment, getting more products to your customers more effectively means more sales. Conversely, if your customer demand tends to be erratic, or is seasonal (fashion accessories, for instance), then you should factor this into your planning process.

Also, determine the range of your supply chain redesign. Is your company local, regional, nationwide or international? Your companys range will affect your redesign effort in several ways.

For example, international product delivery rates will have an impact on your shipping costs. Also, in todays age of heightened global tensions, dealing with security and privacy concerns should also be a consideration.

The next task is to assess your supply network. This includes identifying both your supply manufacturing needs (for example, identifying where you get your raw supplies from) and your means of distribution. When assessing this network information, its important to remember that the data can vary according to the time frame.

For this reason, it may be necessary to design different redesign analysis models that represent different scenarios. For example, one model that represents a short-term, seasonal analysis and another that represents a longer term approach.

Step 2: Identify People, Places and Things

As supply chain manager or logistics executive, your goal in this step is to identify your customers, transportation and shipping methods and means of storage. The first objective is to identify your customers. Specifically, this is where you gather data related to customer demand.

You can use electronic records of sale such as customer receipts and shipment records, as well as invoice materials to determine the volume of product that is being delivered to your customers.

The good news is, the fact that this information already exists in your computer systems makes it relatively easy to acquire.

In addition to identifying your customers, you will need to determine your shipping and transportation costs. Depending on your location, you may be able to obtain some of this data from databases that describe trucking and parcel rates for North American carriers. Using this data can make your job much easier and save time that you would normally have to expend in research.

You will also need to compile data regarding your supply facilities. You can utilize contracts and various databases to determine the scope and cost of your supply chain facilities, including your distribution centers, manufacturing facilities and others.

Typically, accounting staff at these facilities can provide you with the data you need, but you may have to do some additional investigative work, owing to the fact that facilities in different locations may have different preferences in how they choose to maintain their accounting data.

Step 3: Testing your Data

After obtaining the relevant data, you must test its accuracy. This is the goal of Step 3. Acquiring and analyzing the data you obtained in Steps 1-3 provided you with a framework for redesigning your supply chain, but now that data must be tested so that any miscalculations can be eliminated and the data can be retested until the model is as accurate as possible.

Traditionally, this testing involved targeting the supply chain data and using mathematical formulas to validate the accuracy. Fortunately, this data can now be tested using supply chain management software that utilizes sophisticated algorithms to verify the validity of the information supplied.

Another key factor in testing your data will be structuring hypothetical scenarios based on the aggregated data from Steps 1-3. This will allow you to devise solutions to supply chain problems that might arise in real life, such as a weather condition that adversely affects your shipping route or storage location and necessitates an alternate plan.

The value of being able to formulate these situations beforehand and test them in no-risk situations cannot be overstated, as a realistic simulation based on actual data stimulates creative solutions that might not otherwise be apparent.

Also, you should take advantage of your supply chain software solutions ability to generate mathematical solver programs that can optimize your supply chain by running through various scenarios and finding the best solution based on the data fed to it (your actual supply chain data accumulated in steps 1-3).

Using this technology to analyze your problem scenario can point to solutions that can reduce your supply cost, eliminate bottlenecks and other issues that result in longer product cycle times, and ultimately raise your customer higher satisfaction levels.

Step 4: Review your Results and Plan

Once youve performed adequate analysis and identification of your supply chain process, and tested your data for accuracy, the final step in re-designing your supply chain is to review the results of your testing and establish a plan of action based on the results.

Many supply chain software solutions come with applications that allow you to create detailed analysis reports, complete with representational charts and graphs. Some of the more userfriendly software solutions even allow you to customize this data and export it into common desktop software clients, such as Microsoft Excel.

After you review your test results, you next step is to develop a viable plan for action, which could include integrating software that allows or better communication between the various links in the supply chain, establishing greater supply chain visibility in order to identify problems in the chain more readily, negotiating new business terms with suppliers, or even planning to outsource some aspects of the supply chain.

In conclusion, there are several steps that should be followed when your objective is to redesign your supply chain form maximum effectiveness:

First, you must identify your project objective, facilities and needs. This step encompasses the initial stages of planning, and involves setting a clear objective and collecting information from the rest of your supply chain, such as distributors, warehouse staff, manufacturing facilities and others in order to determine the size, complexity and level of involvement that your project requires.

The next step is to determine the people, places, and things that exist as part of your supply chain. First, use customer sales receipts, shipping records and invoices to identify who your customers are. Next, determine your shipping costs and carriers. Finally, you must compile data regarding your supply facilities, which is often available through accounting departments at the facilities.

Next, you must test the data that youve compiled in steps 1-3 above for validity. Several supply chain software applications exist for this purpose. By testing the data, you can not only identify existing problems in your supply chain process, but you can also run hypothetical scenario tests that allow you to plan for future crises.

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Finally, you must review your test results and use them to formulate a plan of action. You should also use your supply chain software analysis applications to compile these test results and export the data into more user-friendly applications for more widespread dissemination among relevant parties. Armed with this new accurate and tested information, you can now make plans to improve the efficiency of your supply chain and increase your profits.

Advances in technology have made it possible to obtain data and analysis that can be used to maximize your supply chain efficiency. When used consistently and correctly, the methods outlined above give your company the ability to achieve your business potential and keep your companys name synonymous with superior service in your customers minds.

ly Chain Management : Distribution

Author : Exforsys Inc. Published on: 1st Jul 2007

Supply Chain Management : Distribution

Alongside product management, promotion, and pricing, distribution is one of the four key components of marketing. In simple terms, distribution provides an inlay between the producer of a product and the seller of that product. After a product is made, it is usually then sold to a distributor, who in turn will sell the product either directly to customers, or to retailers who will in turn sell it to customers.

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What is Distribution?

Throughout history, distribution has been related to questions in the field of logistics, namely, how does one get a particular product to a customer. Thus, the distribution end of supply chain management must contend with such decisions as to whether to sell the product directly, or through a retailer; whether the product should be distributed on a wholesale basis; whether the product should be sold via multi level marketing channels; whether members of the channel should share advertising costs, etc.

The Channels of Distribution

Quite often, there is a chain of intermediaries who pass the product down to other organizations. The product might change hands several times before it eventually reaches the customer. This is what the distribution channel means. The producer has to take in to account the fact that each level of the distribution channel might have particular needs they are hoping to have fulfilled by the product and that is before it even reaches the end user!

Several distribution channel options might be available, depending on the exact nature of the product or service you are offering. It might be best, for example, for you to eliminate the channel altogether and sell direct via the Internet, mail order, or the telephone. Or you can go through an agent, who will sell your product directly on behalf of you. Alternately, you can use a distributor, who will sell your product to retailers. They, in turn, will make sure your product get to end customers.

There are many ways by which a product might be sold. But services are also sold in this fashion. Hotels often sell their service, which is essentially a room, via travel agents, airlines, centralized Internet portals, etc.

In fact, recent years have seen a number of innovations in the sector of service distribution. One instance has been a vast increase in rental services as well as franchising. Rental services these days might offer anything from tools through televisions and beyond.

There has also been a lot of integration in the service industries, with two or more related services coming together to offer related services. This is particularly evident in the area of tourism and travel. Sometimes, you can rent a car, book a flight, and book a hotel all on the same website. There is also an increasing demand for retail outlets for services. In shopping centers, you can easily find travel agencies, real estate companies, and more service providers.

There can be a number of different levels to each distribution channel. There is the zero level channel, which involves distribution with no intermediaries whatsoever. The one level channel involves one intermediary in the case of consumer goods, this usually refers to the retailer. If it is industrial goods we are talking about, then that one intermediary will generally be a distributor. For smaller markets, using a zero or one level scheme can be quite practical and effective.

For larger markets, however, it is generally better to use a two level system, which will involve a wholesaler. This enables a ton of smaller retailers to receive and sell the product. The Japanese market uses even further levels than this, having evolved a highly complex distribution system for even simple consumer items.

In the realm of supply chain management, of course, we must also take in to consideration the relationship among the various members of the distribution channel. Generally, the relationship among the players can be described in one of three ways. First, there is the conventional channel relationship, which involves a bunch of middlemen passing the goods on from the producer to the end user. Then, there is the single transaction relationship, wherein a channel is set up for only one transaction. This frequently happens when a piece of real estate is sold, for example. Then there is the Vertical Marketing System, or VMS, in which disparate distribution elements are all integrated in to one cohesive system.

Keep in mind that a lot of the marketing techniques that you apply to external customers of your company can also be applied to each divisions internal customers, as well. This might come about in the form of a formalized arrangement, wherein goods are transferred to different units in

the distribution channel at a transfer price. When this happens, all sides should view the interaction as a normal relationship between a buyer and a seller. The same marketing techniques can thus be employed.

Whats more, administrative and service divisions of the business can also employ marketing techniques. These techniques can be used to optimize their relationship with their customers, who may only be the other members of the organization. The way that non-profit organizations have typically dealt with their clients is a good example for this.

Management of Distribution Channels

It is important to make a wise, informed decision about how extensive your businesss distribution channel shall be. If you want to achieve wider distribution, then the cost will be a lot lower if you use intermediaries. In fact, the vast majority of product manufacturers are unable to sell directly to customers, as it would be way too costly for them. The bigger the producer, the more intermediaries should be used in order to have a cost effective operation.

Most of the concepts surrounding distribution channels are related to costs. Many of the practical matters relating to distribution channels, however, have to do with customer control. A lot of businesses think that by selling their product in to the distribution channel, their role in the matter has come to an end and they no longer have to do any work. But in order to be effective, it is vital for businesses to take a market-oriented approach and manage every level of their products distribution until it arrives at the end user.

There are three levels of channel distribution membership. The first one is intensive, wherein a large majority of the resellers are stocking the product. The normal pattern, however, is selective distribution. In this membership model, only suitable resellers are selling the product. Finally, there is exclusive distribution, in which only selected resellers are permitted to sell the product this is usually one seller per geographical region.

Sometimes it can be tough for suppliers to motivate their distribution team to provide the sales they require. There are many ways a company might motivate their distributors to make more sales on behalf of their organization. One way is through bribery, wherein you offer a better profit margin to tempt your distributors to push your product rather than the competitions. Alternately, competition might be offered to the sales personnel of the distributor, tempting them to push the product. There is another side of the spectrum wherein the personnel of the agent are

trained to the same standard as the suppliers own sales staff. These instances are quite rare, though.

A vital element of supply chain management is the management and monitoring of the distribution channels. Just like a companys own sales and distribution departments have to be overlooked and taken care of, each level of the distribution chain will have to be managed in a similar vein. In reality, however, most companies utilize a mixture of different distribution channels. They might help compliment a direct sales team, call on bigger accounts, work with agents, or help take care of smaller accounts and prospects.

One of the more recent developments in distribution is the concept of vertical marketing. This unites the producer, wholesalers, and retailers in to one integrated channel. Sometimes this happens as a result of one of the members of the distribution chain owning the others outright this is referred to as corporate systems integration. For example, a supplier might own its own retail outlets; in this case, it is called forward integration. Backward integration, in which the retailer owns its own suppliers, is a much more common example. The furniture retailer, MFI, falls in to this category, as they own Hugena, who manufactures their kitchen and bedroom units. Another integration model occurs via franchising, as is the case with McDonalds fast food restaurants. Another model occurs with simple cooperation, in the sense that Marks & Spencer cooperates with their suppliers.

Another approach is via a contractual system. These are often dictated by retail or wholesale cooperatives.

Then there are administered marketing systems. When one member of the distribution chain with more power is able to use its position to coordinate the activities of other members, then there could be said to be an administered marketing system. Typically, it is the manufacturer who has the dominant position in this scenario.

The point of vertical marketing is to give everyone on the distribution channel some power over what goes on there especially the retailers and suppliers. Research shows, however, that it is best to pursue these strategies at the mature stage. If one sets out at an early stage of the product using these methods, it could do more harm than good in terms of profits.

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These methods can also pull attention away from more important business matters. Theoretically, suppliers do not do well in retail situations, whereas retailers should focus on selling rather than on bothering with manufacturing facilities.

Then there is horizontal marketing, which is used less often and has less to do with marketing. It typically refers to situations in which several non competing businesses work together on a venture because it is beyond their capacity to go at it alone.

ply Chain Management : Inventory

Author : Exforsys Inc. Published on: 24th Jun 2007

Supply Chain Management : Inventory

What is Inventory?

Inventory refers to the list of goods and materials in stock by a particular company. The purpose of inventory is to manage and conceal the fact that oftentimes manufacture delay lasts longer than the delays in delivery. Inventory also eases the imperfections that result as part of the normal manufacturing of a product. These imperfections can lower production efficiencies in those instances where production is idle owing to a lack of needed materials.

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Business Inventory

The following stock reasons might apply to any stage of the product or any owner.

Buffer Stock: Sometimes the upstream workstation might get delayed in providing the next part that needs to be processed. In that case, a buffer stock is held at each workstation. Depending on

the process, the buffer stock might be very large or tiny. In recent years, Toyota has been able to eliminate this type of stock.

Safety Stock: Safety stock is held just in case something goes wrong and a machine or the process fails. Total Productive Maintenance and similar programs can help eliminate this kind of stock.

Overproduction Stock: If the forecast and actual sales did not match up, then overproduction stock might be held. If you want to eliminate this type of inventory, instill a made to order program, or use JIT.

Lot Delay Stock: This kind of stock is generally held because part of the manufacturing process is only designed to work on a per batch basis. Thus, each lot item has to wait for the entire lot to be processed before being moved on to the next workstation. A single piece working can eliminate this aspect of inventory.

Demand Fluctuation Stock: This type of stock is held in instances where a production capacity is not able to flex according to demand. As a result, a stock is built up during lower utilization periods to be supplied to clients when the demand is exceeded by the production capacity. For this stock to be eliminated, a production lines flexibility and capacity must be increased.

Line balance stock: These kinds of stock build up because of the fact that various sub-processes in a single line may work at different paces. So stock accumulates after a faster sub-process occurs or before a large lot size sub-process takes place.

Changeover stock: When a sub-process has a long set up time, then changeover stock will accumulate. While the change over is occurring, this stock can be used up. Tools such as SMED can help eliminate this changeover stock.

All of these inventory stock classifications apply to the entire supply chain not just within one particular plant or facility.

Those in supply chain management who have to deal with inventory must learn a set of special vocabulary terms. One of these is SKU, or Stock Keeping Unit. This describes the combination of every single component that goes in to the assembly of a product. Anytime the packaging or product itself undergoes a change, then a new Stock Keeping Unit has been created. Keeping track of this helps one to manage the inventory.

Another important term in inventory is stock out. When you run out of the inventory of a Stock Keeping Unit, then the term stock out is used.

Another term is NOS, or New Old Stock. This refers to a product that was made a long time ago but has never been used and is now being offered for sale. Sometimes that product is not being produced anymore, and the New Old Stock represents the sole source of a particular product at present.

Accountants often treat inventory in terms of goods to sell. But a lot of organizations, such as non profits and manufacturers and service providers, have a whole store of inventory that is not intended for sale, such as furniture and office supplies. The inventory of manufacturers and distributors and wholesalers tends to gather up in warehouses or similar storage spaces. The inventory for retailers might be kept in a similar warehouse or a shop that is customer accessible. Inventory that is not intended to be sold to customers may be kept in any area of the business. Stock is merely money in disguise. If the stock is not controlled, then theft may occur.

A company that manufactures products will divide their sellable goods in to three different categories: raw materials, meaning those materials that will be used to create a product; work in process, meaning materials that have already begun to be transformed in to sellable goods; and the finished goods themselves, which are already ready to be sold to clients. Finally, there might be goods for re-sell that the company counts as inventory.

When it comes to accounting for inventory, every country has its own laws. In the United States of America, the Financial Accounting Standards Board, among others, regulates inventory laws. The United States Securities and Exchange Commission then enforces the laws. Inventory management can have a major effect on a businesss internal operations via their cost accounting methodologies.

Inventorys internal costing and valuation can be quite complicated. In the old days, the vast majority of enterprises ran on a one process basis. This is seldom still the case in our technological era. Where these one process businesses still do exist, then an independent market value exists for that product.

In todays complicated world, with numerous multi stage process organizations, much inventory that is held that would have once been classified as finished goods is now categorized as work in process. The valuation of these goods is a management decision, as there is no market for a partially finished item. The arbitrary valuation of work in process, in combination with the allocation of overheads, has led to some results that are not very desirable.

The inventory of a company can be a mixed blessing. On the one hand, on a balance sheet it counts as an asset. On the other hand, it can tie up funds that might be used for other purposes. It also must be protected, which requires extra money. Inventory might also be a burden on ones taxes, depending on what the particular countrys tax regulations are on the depreciation of inventory.

On a companys balance sheet, inventory will appear as a current asset. This is because the company can turn that inventory in to cash via selling it. Some companies might hold larger inventories for this very reason they can inflate their apparent asset value, as well as their perceived profitability that way.

If a company stocks too little inventory, then they will not be able to take advantage of bigger orders from clients, as they will not be able to deliver. Indeed, here we must come face to face with two conflicting objectives: that of customer service and that of cost control. These interests can and oftentimes do pit the companys operating and financial managers against their marketing and sales offices. If goods are unavailable at a particular time, this is likely to anger the sales department, who may be working on commission. The solution to this problem is to reduce the time of production to being nearly identical to the delivery time expected by the customer.

21st Century Cost Accounting

The accountant should help the company make better, more informed decisions in regards to their inventory. They can also help effect a wider change in the public sector that will result in an increased value in the investment of the tax payer. Wise accounting measures with regard to inventory can also aid the incentivization of progress, making sure that reforms are both sustainable and effective in the long run. It can also help ensure that success is recognized in the companys reward systems, in both a formal and informal way.

This is where accounting plays a key role in supply chain management. It should be obvious to all involved that finances play a major role in nearly every aspect of a business. It should also help determine whether or not the business is going about its day to day activities in an appropriate, ethical fashion. Foundations have to be laid firmly to ensure that the public has confidence in a particular business if not, then all will be lost.

It is also the responsibility of the finance department to provide all the necessary information, advice, and analysis to help the service managers of the company operate in a more effective fashion. This transcends the typical every day concerns with budget that so many of us are preoccupied with. It has to do with helping the company attain a higher understanding of how it performs in the market. This entails making connections between different fields as well as comprehending the complex relationships that exist among given inputs, which are the resources brought to bear, as well as the outputs and the outcomes that they attain.

LIFO and FIFO Accounting: When a dealer sells products from an inventory, the inventorys value reduces by the cost of the goods sold. In the case of commodity items that cannot be tracked individually, the accountant has to determine a good method to identify the type of sale that has taken place. The two most common methods are first in, first out (FIFO) accounting and last in, first out accounting (LIFO.) The former refers to the first unit in the inventory as being the first one to sell, while the latter considers the last unit in the inventory as being the first one to sell. Depending on what method the accountant chooses, it can have a significant impact on taxes, value, and net income. By utilizing a LIFO accounting system, the business will report lower net income as well as lower book value due to inflation. As a result, the company does not have to pay high taxes. Some countries have banned LIFO accounting for this reason.

Standard Cost Accounting: In standard cost accounting, efficiencies, a form of ratio, are employed to compare materials and labor that were used to produce an actual good to the same goods that would have been required under the standard conditions. As long as the two rates are similar, there should not be much of a problem. It is true, however, that this kind of accounting developed over a century ago, when labor formed most of the cost in the production of products. Now labor constitutes a minor part of the overall cost, but this type of accounting continues to focus on it.

Standard cost accounting can also be quite harmful to an organization. If a policy decision is made to increase inventory, then the managers performance evaluation could be harmed. This is because in increase in inventory necessitates an increase in production, and as a result, processes have to operate at a higher rate than before. This means that if something goes wrong, then the process is going to take longer and use up way more of the labor time than is usual. Despite the fact that the management has no control over this problem, they will then seem to be responsible for the excess.

During tough financial times, business might utilize the same efficiencies to right-size, downsize, or reduce their labor force by other means. Workers who lose their jobs under such circumstances do not have control over excess inventory and cost efficiencies, putting them in the same helpless state as their managers.

It is thus advisable to find an alternative to this type of accounting something that is easier said than done.

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Theory of Constraints Cost Accounting: The theory of constraints was developed by one Eliyahu M. Goldratt in order to address cost accounting problems. The theory is based on the idea of throughput accounting, in which throughput money obtained from items sold to customers is used instead of output items that might sell or might boost inventory. Labor is considered as a fixed cost rather than a variable one under this scheme. Goldratt defines inventory as everything that a business owns that it plans to sell, including such things as machinery and buildings. Throughput accounting only acknowledges a sole class of variable costs: that is, operating expenses such as components and materials that depend on the quantity being produced.

National Accounts

In todays business world, inventory plays a significant role in national accounts. It also contributes to an analysis of the business cycle. Occasionally, short-term macroeconomic fluctuations can be attributed to the cycle of inventory.

Head-Supply Chain Management

The Company The opportunity is with a leading infrastructure company involved in the construction of national highways, railway lines, irrigation projects and industrial infrastructure from design to execution. The

organization is a young, professionally managed infrastructure company with highly skilled and experienced team of associates and projects all over India. There areas of expertise lie in the sector of transportation, irrigation, power and urban infra. The Role The role of the Supply Chain Head, would provide Leadership and take Ownership for the entire gamut of Supply Chain Management which includes Asset Management, Procurement, Inventory & Stores and Contract Management. This role would also involve:-

y y y y y y

Managing Procurement for Pan India Operations Helping the group in controlling costs by alternate sourcing & value engineering Implementing Structured Budgeting & Costing methods Established Strategic tie-ups for major materials with both Global & Local vendors Build a team of highly charged professionals

Responsibilities of Contract Management, strategic sourcing, procurement & maintenance of assets/machinery & materials required for all projects.

Purchase & Logistics

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Strategic Sourcing, Vendor Development, Long term tie-ups with vendors, Negotiations for Procurement of Imported materials / Capital Equipment / Assets / Services etc Work closely with team for brining improvements in Supply Chain Prepare & manage the budget for the department ensuring the objectives of the departments are met within the agreed cost estimated. Monitor procurement activities & maintain the highest level of quality lowest cost and designs and implementation of suitable logistics for the same. Initiate cost reduction programs and establish strong vendor relationships, negotiate contracts and execute processes for purchase, receipt, inspection and payment of material conforming to sound ethical practices Initiate and administer company contracts related to procurement of material and also Plant & Machinery and establish systems for tracking, reporting, vendor quality, delivery and cost. Meeting budgeted targets on cost savings.

y y

Vendor Development

Developing long-term partnerships with local & foreign suppliers; managing supplier performance to ensure meeting of service, cost, delivery and quality norms. Consistently evaluating vendor performance to ensure adherence to predefined specifications and supply of quality material / execution of job works.

Procurement
y y y y y Final Negotiations with Vendors for every material. Preparing MOU for long terms contracts i.e. Steel /Cement and other bulk material. Preparation of own cost estimates; compare the bids with our cost estimate. Providing cost inputs of materials, sub-contracts and equipments. Strong interpersonal skills. Successful in developing and nurturing business relations. Providing price approvals for purchase done under other divisions with Proven Negotiation skills.

Stores and Inventory Control :

Monitor & ensure Material Reconciliation, Vendor supply reconciliation, Shipment reconciliation. Scrap Management Inventory Monitoring and Control through ABC analysis. Statutory regulations and compliance, Audit observations and solving audit queries. Ensuring 100 % accountability, Traceability and Quality standards. To ensure all statutory & legal compliances related with materials department & ensure zero NCR in ISO audit To participate in Make or Buy decisions with project management

y y y y

Assets Management

Formulate company's contracts & procurement manual companywide for uniform purchasing policies.

Maintaining Safe work practices in all activities achieving-Zero Accident target.