Month: June 2022

You may have come across the term demand planning with regard to inventory management and/or supply chain.

That is because it’s a process that is valid across functions, and helps fulfil customer demand for goods without disrupting the supply chain, and with little excess inventory.

This can help you increase revenues and keep your customers satisfied while improving overall efficiency.

What Is Demand Planning?

The demand planning process needs to be a continuous one – something that is an essential part of your business.

Thanks to technological advancements and the emergence of software like Tranquil, this is not just possible, but even easy.

It is necessary to analyze customer trends, historical sales data, and seasonal trends so that you can ensure that your business is capable of meeting customer demand very effectively.

For this, demand planning merges supply chain management, inventory management, and sales forecasting.

It makes use of data from inside and outside sources to forecast future demand.

This prediction can help you form your strategy for sales and operations, enabling you to plan how much to produce or purchase to be able to fulfil the demand.

What are the Elements of Demand Planning?

While there are several aspects to demand management strategy, the following three are the most important:

Product Portfolio Management

This refers to the management of the entire product lifecycle – from product launch to its life-ending.

Product lines are often interdependent; it is important to understand the way new products can influence the demand for other items, to get a clear picture of the product range you need to enjoy the lion’s share of the market.

Statistical Forecast

Statistical forecasts leverage historical data to generate supply chain forecasts with sophisticated algorithms.

Here it is critical to ensure model accuracy, understand conjectures, and pinpoint deviations and exclusions.

Seasonal trends can also be evaluated via statistical forecasts.

ALSO READ: Benefits Of ERP Software For Logistics Industry

Trade Promotion Management

One of the best ways to drive demand in the retail sector is through marketing events.

Trade promotions help brands to connect with their customers via promotions, giveaways, discounts, contests, etc.

Why Is Demand Planning Important?

Effective demand and supply planning drives profitability and boosts customer satisfaction as it helps businesses to attain the proper balance between fulfilling customer demand and adequate inventory.

This necessitates cross-organizational collaboration and is not an easy task.

As extra inventory ties up finances, and you run the risk of being stranded with dead or very low-value stock, it can have a significant impact on your business.

Or you may face severe disruptions in your supply chain, leading to a shortage of products, which could cause backorders or emergency purchases, which are always expensive.

Basically, with improper planning, you are likely to face delays and unhappy customers.

Demand Planning vs. Demand Forecasting

For predicting sales, businesses study both internal and external data; for this, first, a demand forecast has to be made.

These are all part of the inventory demand planning process.

Normally, demand is forecast for the near future – up to a maximum of 24 years; however, this depends on the industry as well as the product.

Businesses may need to make adjustments in the forecasts to reflect market conditions and customer trends.

The demand forecast forms the basis for the entire process of demand planning.

ALSO READ: What is Capacity Requirement Planning?

Where Does Demand and Inventory Planning Sit Within a Business?

The process of demand planning necessitates inputs from multiple departments like purchase, production, operations, finance, marketing, supply chain, and sales.

They also need to collaborate well with each other.

Business strategy planners and product portfolio managers have to consider lead times for production and raw materials.

Demand and inventory planning involves several business functions, and so the employees handling the related tasks may be spread across departments, or be a separate group altogether.

However, to achieve the best results, demand forecasting is most accurate and successful when linked closely to marketing and sales.

7 Key Steps for Successful Demand Planning

Demand planning is multifaceted and complex, and becomes more so with business growth.

• It’s important to create a cross-departmental team with clearly assigned roles and responsibilities. Like purchase department is tasked with ensuring sufficient and timely inventory, and so on.
• The employees involved in demand planning have to reach a consensus on what data to include for creating a precise prediction. This will differ for each business, but some common elements are sales data per location and platform, inventory turnover, production times, lead times, out-of-stock rates, dead stock, and other KPIs. Marketing and sales teams can be consulted for price change timings, marketing campaigns, and more that could impact demand. Product teams should inform regarding new products, competitors’ products, and other factors that could affect the precision of the forecast.
• External data is critical and should be used for robust forecasts. Examples are suppliers’ delivery timelines, performance, consumer buying habits, and market conditions that could impact your sales.

         ALSO READ: Why ERP User Interfaces are Important?

• Create a statistical demand prediction after deciding which forecasting prototype is apt for your business. Demand planning software can help you do this accurately and quickly. You can also generate forecasts by regions, customers, and products in addition to organizational predictions.
• Evaluate and hone the demand predictions with the important stakeholders. Add the latest data to check if it affects the forecast significantly. Examine any info you feel is erroneous, and eliminate deviations that could alter the overall forecast. Make sure that the prediction is in tune with the wider financial predictions of your company.
• Compare the predictions with your inventory, check how much you need to fulfil the forecasted demand, and add a buffer to it. Find the suppliers who can meet this demand and ensure they are capable of delivering what you need when you need it. Also, ensure the transportation is able to handle the volume of product in the time you want.
• Lastly, measure the results so that you know how successful your strategy has been. It is important to review your performance regularly and make the requisite changes.

Demand Planning Tools and Methods

There are two broad approaches to demand planning – push and pull.

The push method assumes that people will come if you build something great – a philosophy that was used till very recently.

Businesses believed that to create demand it was enough to be innovative with products. So, they would manufacture products and wait for sales to happen.

But this strategy did not succeed always. Unexpected demands led to stockouts and missed opportunities for sales, or excess inventory piled up on shelves and warehouses, leading to expenses.

It was extremely difficult to strike a balance.

The modern method is the pull approach – here the business assesses consumer demand, and bases overall planning on that.

The main difficulty here is getting a correct forecast of consumer demand; with incorrect predictions, you may have the same negative effects of the push method.

ALSO READ: Important ERP Modules and Functions

Today, to help overcome these problems, we have modern demand planning tools:

• Linear regression – puts prior demand levels into statistical models for sales forecasting. Also called the line of best fit, the model uses prior demand to plot a curve, and expands it to make demand forecasts.
• Moving average demand – believes that demand in the future will be an average of the past few sales periods.
• Sales forecast – generates an approximate future demand on the basis of sales opportunities and prospects discovered by the business for a specific period.
• Seasonal trends – makes demand forecast by evaluating historical sales in specific seasons, and is suitable for businesses with highly seasonal sales.
• Companies combine these methods with demand planning software so that predictions and modeling can be automated, and be more reliable and precise.

ALSO READ: Benefits of ERP in Production Planning 

What are the Best Practices of Demand Planning?

Demand planning is a complicated process; understandably, best practices concentrate on greater co-operation and accuracy.

• Get all the stakeholders on board, and hold them responsible, by leveraging forecasts and statistical modeling that extract data from multiple departments.
• Define the process model thoroughly to ensure clarity and a good performance from all.
• Ensure accurate inventory data and efficient inventory management for successful demand planning. Gathering and preparing data is crucial for demand planning. You need inventory movement visibility in real-time, and KPI reports that give a clear picture; you must also mine data and combine it to pick out areas to improve. This can facilitate agile processes.
• Make the initial prediction, and then perform demand sensing by considering factors like consumer purchase behavior, market movements, supply chain information, etc.
• Refine your forecast and finalize it.
• Leverage pricing, promotion, and marketing tools to shape demand.
• Use analytics and measure your metrics to check how you have performed

There are demand planners who design an initial plan version by leveraging descriptive analysis or historical data.

They make alterations as necessary, and have a team whose sole function is to make the plan, implement it, correct mistakes, and craft the execution plans.

ALSO READ: What is Zero Inventory?

What Does the Future Hold?

Thanks to improvements in demand planning software, businesses are able to be more precise with their predictions.

The software can be linked to POS data, and extract information from vendors, allowing businesses to include real-time data in their planning and analysis.

IoT or the Internet of Things is capable of enhancing demand planning by enabling companies to get the latest updates on inventory and raw material status.

It can also keep track of sales as they take place so that the management can immediately stock more of the products that are selling faster than initially anticipated.

This kind of visibility can help businesses to ensure optimal inventory levels and minimize the panic and costs that occur with overstocking and understocking.

Furthermore, modern demand planning software leverages artificial intelligence and machine learning and is capable of processing mountains of data at high speeds.

It can thus pick out patterns and trends that human effort may easily miss.

This can help demand planning executives to make adjustments on the go.

Implement the Right Software

The most important thing you need to do is be diligent when it comes to purchasing demand planning software.

With dozens of ERP software solutions in the market, choosing the right one can prove daunting.

You need a reliable and capable tool that can handle forecasting, provide real-time reports, and is transparent.

Tranquil is a reputed ERP system with a robust inventory management module. It can automate difficult and cumbersome tasks like tracking your metrics, making forecasts with the help of statistical analysis, calculating the ideal inventory levels, and so on. This can help your team to concentrate on inferring the results, cooperating with other departments, and making the requisite adjustments. It is a user-friendly, intuitive software that helps to automate and streamline multiple functions in your business. Schedule a Demo with us.

 

The general notion most people have about a business is that if they have plenty of goods in stock to sell, or loads of raw material in the warehouse to produce goods, it is doing well – it has goods that can be sold for money.

In short, the inventory is seen as an asset.

You wouldn’t be entirely wrong if you thought so, but you would not be entirely correct either.

After all, inventory has to be stored well, and protected from theft and damage; certain products need air conditioning, waterproofing, controlled environments, and so on.

Some stock may be lost to spoilage inadvertently.

Ergo, while stock is an asset, it also incurs expenses for storage and maintenance while decreasing in value with the passing of time.

This is why most businesses try to reduce the inventory they hold; the concept of zero inventory has also become more popular now due to the risks associated with overstocking.

As the name suggests, it refers to the practice of storing the least quantity of inventory, allowing the company to fulfil orders immediately.

ALSO READ: What is Negative Inventory and How Can you Prevent it?

What Is Zero Inventory?

Zero inventory does not exactly mean no inventory whatsoever.

It is an inventory and supply chain management strategy which aims at maintaining as minimal inventory as possible.

Just enough stocks are kept so that shipping times or production schedules can be carried out as determined beforehand.

This also means that orders have to be fulfilled immediately on stocking or producing new products.

In short, with a zero inventory system, you don’t accumulate raw materials or products in your warehouse.

Hence, zero inventory is also called the just-in-time inventory model, as new inventory is either bought or manufactured just in time to fulfil the latest orders.

Why Is Zero Inventory Important for Businesses?

Any business has to spend money to maintain warehouses; a manufacturing company is even more so, as they have raw materials as well as finished products.

This means they end up tying up a substantial sum in inventory.

Let’s say they feel the need to expand – perhaps open another branch at a new location as the demand is increasing in that area; if they follow a zero inventory approach, it means they have the money to spare for expansion.

On the other hand, if they have loads of inventory, their carrying costs are likely to be high as well, which means no spare cash for expansion, or even upgrading equipment or technology.

ALSO READ: What is Dropshipping and it’s Benefits? 

Advantages of Zero Stock Inventory

Financial benefits are the biggest gain you can make with zero inventory management; this is because companies can free up a significant amount of money by reducing the inventory they keep on hand.

This money can be used for a multitude of purposes, keeping the company right on track to growth and success.

1. Cheaper and Safer Storage

It costs a pretty penny to store goods, and the longer you store, the more expensive it becomes.

You have to lease or rent warehouses, insurance, taxes, pay for refrigeration (perishables, medicines, etc.), security, and packaging, and then there is the opportunity cost of not being able to use that space for more productive activity.

Therefore, it’s only logical that when you store a lesser quantity for a lesser time, you can save a great deal.

You also don’t have to worry about damage, obsolescence (electronics and fashion), expiry (for perishables), and theft when you store only enough inventory to fulfil immediate orders.

So, less risk, and less expensive.

ALSO READ: What is Batch Tracking?

2. Reduced Time and Labour Costs

In addition to the expenditure, storage also necessitates time and effort from your workforce.

Inventory can’t be haphazardly bundled together; it has to be categorized and stored in an organized manner.

This makes it easy for employees to pick, move, and count the items.

The more inventory you have, the more time and money you spend on these activities.

With zero inventory, however, you don’t have to worry about any of it.

3. Ideal Strategy for Start-Ups

As zero inventory means stocking the least possible items, the business will have smaller bills to pay to their vendors, as the order quantity will be less.

With smaller quantities, they can also negotiate deals where they pay vendors after selling the goods.

This is an ideal situation for a new business just trying to make its ground.

ALSO READ: What Is Cloud Data Protection? 

4. Lower Insurance Premiums

When you stock large amounts of inventory you will also be liable to pay higher insurance premiums.

The fewer the products or lesser the raw material you stock, the lower will be your insurance cost.

Drawbacks of Zero Inventory

While zero stock inventory has significant cost savings for any business, you must also be aware of its pitfalls.

• Unexpected demand surges can put the company at a disadvantage if they follow zero inventory. They may be unable to fulfil orders in time, disrupting the supply chain, and annoying customers.
• Vendors often spike the prices in the short term, increasing costs for businesses. This often happens in times of natural disasters.
• Companies may have to rely on just a couple of suppliers, and they may find it tough to find other sources when demand is high or prices are cranked up. This can cause trouble in managing the supply chain. You may not have the time or money to deal with the situation and fulfil customer needs.
• The efficient management of a zero inventory strategy can be complicated and necessitate specialized training for your staff.

Zero Inventory Examples

The best way to understand how it works is to look at a few examples.

1. Online Marketplaces

Amazon, eBay and other online marketplaces have no or few warehouses.

They take orders from customers, connect with the original maker or seller via an inventory management system, and then ship the product to the customer.

Here, the retailers act as middlemen.

They tie up with certain sellers or manufacturers and advertise their products without stocking them.

However, they may maintain a small inventory of certain items that sell in big numbers.

ALSO READ: Common Inventory Management Problems and Solutions

2. Boutiques and Custom Dress or Suit Makers

Bespoke clothes for men and women are designed and stitched specifically for individuals.

Their measurements are taken, and they select the fabric they want according to material, colour, pattern, etc.

The clothes maker does not have to stock a lot of material, as such customers are prepared to wait to get that perfectly tailored outfit – they don’t expect to get it in one day.

3. Caterers

As opposed to a restaurant, a caterer only makes food to order.

They may only stock a few basic ingredients required for most dishes like oil, salt, spices, certain flours, etc.

Special ingredients, fresh vegetables, fruit, and meat, are purchased as and when they get orders.

This poses no risk of spoilage.

ALSO READ: Common Inventory Management Mistakes to Avoid

Zero Inventory and the Supply Chain

When you want to implement zero inventory, it is essential that you have a solid supply chain management strategy in place too.

Zero inventory actually puts a lot of pressure on the whole supply channel; this is because to facilitate zero inventory, the supply chain has to bear the entire burden of carrying both inventory and raw materials.

That is, there is more frequent movement of these items through the supply chain.

Vendors have to be super-efficient and operate seamlessly so that they are able to handle frequent, small-volume production runs.

Orders have to fulfilled individually, and shipped directly to the customer.

Of course, they are likely to insist on minimum purchase quantities.

It also necessitates manufacturers to get involved directly in the ordering process and customers.

This means they need to be tech-enabled, have the right skills, and implement proper B2C ordering and delivery processes in their business.

It is critical that businesses maintain robust relationships with the supply chain, and to achieve this, they need to communicate effectively and collaborate with them closely.

ALSO READ: What is Pipeline Inventory?

Zero Inventory And Stock Control

Goods need to be manufactured and shipped depending on the actual consumption and demand – only then can the zero inventory model work properly. A robust inventory management system can help companies to optimize inventory processes, and give them all-round visibility of their vendors across the supply chain.

Reliable ERP software with efficient inventory control modules can ensure that information is instantly updated across systems as sales happen.

If a business has goods that depend on raw materials in production, then the management can hide that product on their site or their sales platform to avoid displeasing customers.

Zero Inventory Reality

Obviously, we cannot expect a business to hold absolutely any stock at all; they will keep some buffer stock.

We have already seen that in case of emergencies, calamities, and other unforeseen circumstances, having no stock can be disastrous for a business.

To ensure customer satisfaction, a certain amount of inventory should be maintained in the company.

What a business is likely to do is stay as close as possible to zero inventory to enjoy cost savings, better cash flow, and less inventory loss.

ALSO READ: What is Stock Adjustment and Stock Transfer?

Achieving Zero Inventory

A business must have excellent control over their inventory, coordinate supply chains well, and forecast demand accurately, to successfully fill new orders as they come in, with zero stock inventory.

Let’s look at it in some detail:

Demand Forecasting

Timing is a crucial factor here; a company must know when exactly they will get delivery of new stock from their factory or vendor so that the products spend little to no time as inventory in the warehouse.

Demand forecasting plays a huge role here.

Historical data, seasonal trends, and market patterns – all of these can be used to predict future trends.

In some industries, companies enter into contracts for long-term purchases with their most important customers, reducing ambiguity over demand.

ALSO READ: Tips For Efficient Stocktaking

Agile Production

Manufacturing companies must sync production with demand planning to align the new orders with the latest products; this has to be done through small, frequent production activities.

Companies that are agile, and fast, have a great advantage here.

Even if a sudden spike in orders occurs, they can quickly scale up the production to meet that demand.

Coordination with Suppliers

Most companies work with numerous vendors.

Whenever they receive new orders or forecasts, the management should be able to produce or purchase the exact quantity of materials or finished goods in time.

This would mean having an excellent relationship with vendors who can respond quickly to their needs.

ALSO READ: Why ERP User Interfaces are Important?

Coordination with Customers:

The customer is at the end of the supply chain – and the ultimate goal of any business is to satisfy the customer.

This means fulfilling orders quickly and delivering quality products.

In custom-made products like certain clothes, foods, and so on, the customers are willing to wait.

They know that to get exclusive things, there will be a certain waiting period.

Likewise, B2B customers who place huge orders are aware that it can take a longer time for the vendor to fulfil the order, and will wait for a certain amount of time.

A robust ERP with customizable features and an efficient inventory control module, like Tranquil, can help you implement inventory strategies that are best suited for your business. To see how it works, do schedule a demo at your convenient time. Our executives will walk you through the software and answer any queries you may have.

 

There is no doubt that the logistics industry is critical for business anywhere in the world.

Trade and commerce flourish because of it, as do supply chains.

The logistics and transportation industry is growing at an exceptionally rapid pace, thanks to the growing popularity of E-Commerce, and the international market opening up.

With the smooth flow of demand and supply, the logistics market has become one of the most important industries in the world and has contributed in a big way to the global economy.

As this industry involves handling vast amounts of data in real-time, managing freight, supply chain, warehousing, transportation, maintenance, and storage, it necessitates utmost competency and capability.

ERP for logistics industry is a highly effective tool that is smart and is capable of using its exceptional system intelligence for automating processes and managing frequent changes, cost volatilities, and other uncertainties.

We will see how exactly the logistics industry benefits from ERP; however, it will do us good to start with the basics, and then move forward.

ALSO READ: What is Cross Docking?

What is ERP?

ERP or Enterprise Resource Planning helps businesses to automate cumbersome tasks and streamline business processes to improve overall efficiency and productivity.

Various business functions like production, finance, HR, inventory, payroll, supply chain, customer relationship, order management, and so on, can be handled much more efficiently with a robust ERP like Tranquil.

It integrates all these functions, eliminating silos, and bringing all the information into a centralized database.

Employees can access relevant information easily, facilitating better communication and collaboration between departments.

Employees in various departments can access the same information for their needs and accelerate business performance.

ERP has a crucial role to play in the logistics industry.

Let’s check out the benefits of this software for logistics now.

ALSO READ: Benefits of ERP for Steel Industry

Benefits of ERP Software for Logistics Industry

ERP is capable of being seamlessly integrated into several industry domains with different applications.

This helps to bring all the important aspects of a business on a unified dashboard, making monitoring easy and facilitating informed decision-making.

1. Reduced Expenses

ERP solutions provide precise data in real-time, enabling organizations to take better, more accurate decisions to curtail their monthly expenditure.

Decision-makers no longer have to wait to get important information or feedback, allowing them to resolve issues and take corrective actions wherever required.

This can be done as soon as it is required so that the problem does not blow up into a huge expense for the company.

Eventually, this translates into enhanced productivity each month.

ALSO READ: What is Landed Cost and How to Calculate It?

2. Customer Portal

A robust ERP for logistics industry includes a customer or vendor portal to enable easy login and prompt and effective monitoring of all aligned processes.

Communication is integrated via email or secure SMS so that the user gets updates directly in their profiles.

Portals with secure logins for registered users allow stakeholders to know the status of logistics, among other things.

3. Inventory Control and Stock Visibility

It is crucial that you have absolute control over inventory to ensure that there is operational efficiency in logistics and transportation.

The sales tally, stocks, current requests, and deliveries on the route are the most important elements of your inventory that you need to keep track of.

Thanks to the inventory management module in your ERP system, all this information is available to you in a single dashboard; now you won’t miss any important detail about your inventory.

You also have a robust tool with which you can smoothly handle inbound and outbound orders.

With just a few clicks, you can see what items you have in your inventory and what is stocked out, allowing you to make quick decisions when placing orders.

ALSO READ: Common Inventory Management Problems and Solutions

4. Financial Reporting

This is one of the most important advantages of implementing ERP system in logistics.

The accounting tools in Tranquil help to keep track of revenue and expenses so that you can balance your accounts receivables and accounts payables.

It also generates automated reports, categorized by location, employee, profit centre, or whatever parameters or KPIs you select.

This extra information enables decision-makers in the supply chain to restructure logistics processes to enhance efficiency.

It will also facilitate the quick identifying of causes of profit loss, which in turn will help with planning to compensate for those problems.

Tranquil has robust budgeting and forecasting functions which help logistics as it enables the management to create in-depth corporate financial plans.

These plans can aid in the estimation of the company’s expenditure and income in the future, as the financial reporting tools include not only workforce planning but also predictive budgeting.

ALSO READ: Ways to Improve the Procurement Process

5. Easy Maintenance

The biggest assets in the logistics and transport field are the vehicles used for transport, and next, the individuals in charge of the vehicles.

With the logistics networks becoming more complex, the maintenance and planning of transit schedules become cumbersome.

In time, these complexities can negatively impact the logistics business significantly.

Thanks to ERP software like Tranquil, however, it can become easy for a business to hand over complete control and visibility to the entire supply chain or logistics network.

Eventually, this translates into greater operational fluency for the business.

ALSO READ: What is Batch Tracking?

6. Improved Distribution Management

ERP software for logistics industry ensures improved channels of distribution and faster distribution times.

It can be configured to extract data from historical data stored in the company’s systems, customer reviews, or from social media so that the delivery process can be improved.

You can get all the stakeholders like retailers, distributors, vendors, and delivery partners on the same page for aspects like inventory, payments, collections, customer experience, transit, and so on; basically, it helps everyone stay on top of their logistics both outbound and inbound.

This brings in greater operational fluidity and renders the process more transparent.

The shipper will be able to track the live status of the shipment and get access to important information like customer and distributor details.

Having all the important information at their fingertips will help business leaders and managers to take the right decisions, grasp order trends, and understand reasons for delays, all of which will help them to manage customer escalations smoothly.

ALSO READ: What is Stock Adjustment and Stock Transfer?

7. Governance With Real-Time Tracking

Tracking shipments in transit can be pretty challenging.

However, GPS integration can be used to track vehicles that are in transit, in real-time, and you can see where the vehicle is located at any given time.

It also facilitates direct communication with the delivery executive.

This will facilitate providing customer updates as well as insights from the control room.

This can be achieved by leveraging the advanced location features, along with the business Intelligence feature included in ERP software for logistics.

Leveraging accurate, real-time data helps managers in providing better customer support, and also in developing enhanced, smarter business plans.

8. Customer Satisfaction

ERP solutions like Tranquil provide in-depth customer-wise analysis, with a complete record of all their information.

This enables the company to form deep personal bonds with customers.

The real-time data helps managers to avoid making mistakes, make timely deliveries, and fulfil their promises to customers while delivering personalized services.

ALSO READ: Common ERP Challenges

9. Enhanced Staff Management

Logging and managing the number of hours, leaves, breaks, overtime, accident claims, payment bonuses, insurance, performance evaluations, and more of freight operators and other employees can be overwhelming with a manual system.

However, with an efficient ERP solution, it can be easily automated and streamlined, making the task error-free as well.

With a mobile ERP solution for the logistics industry, you can implement an extra security layer and have backups of data for every activity under the human resource management department.

The KPI indication feature integrated into the ERP offers entrepreneurs and managers quick and easy access to employee performance evaluation reports, which facilitate improved decisions related to the workforce.

For this reason, ERP solutions are held in high regard for workforce management in the logistics industry.

ALSO READ: Why ERP User Interfaces are Important?

Conclusion

It goes without saying that logistics play a crucial role in the economy of any country. It offers an organized and efficient approach to the storage, transportation, purchase, etc. of goods to numerous businesses. Logistics becomes more profitable when it is more streamlined; the profitability extends to the customers too and does not just stop at themselves. This offers huge benefits to every stakeholder involved in the logistics industry. We have also seen that ERP software for logistics industry has numerous benefits.

By implementing a robust, cloud-based ERP like Tranquil for your logistics business, you can gain a competitive edge, get maximum ROI and boost profitability. The intense competition means you cannot afford delays or mistakes of any kind. It could mean you getting left behind if you don’t integrate your system with a robust ERP. So we highly recommend that you implement an ERP system like Tranquil without much further ado.

Tranquil is a cloud-based solution, which offers even more advantages. You and your team members can access critical and relevant information whenever you want, regardless of where you are, and what device you use. As the system uses stringent authorization protocols to grant access, you need not worry about data security. Tranquil is also flexible, scalable, and customizable. If you’re confused about how the system works and how it can benefit your logistics business, do book a demo to see our ERP system performing. Our team members will be present to answer all your queries and explain the work in detail.

 

We hear a lot of talk about ‘cloud’ in terms of IT and software.

Most of us know that it simply means storing data and apps on remote servers rather than your own.

But how safe is it to do that?

Is your data protected? Read on to know more.

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What Do We Mean by Cloud Data Protection?

Cloud data protection refers to a method of data protection that safeguards data in the cloud, whether it is moving, static, or stored.

It is so designed to provide the best protection and security to data storage.

Fundamentally, it both offers, and ensures the availability of processes and services like the following:

• Infrastructure security – this refers to all the measures, policies, and processes that provide data security in cloud
• Storage management – the cloud infrastructure has to offer a safe interface that is available continuously so that access to data is available. Additionally, data logs recording access, editing, and copying are maintained.
• Integrity – data encryption is implemented to protect data and prevent unauthorized editing or inadvertent corruption.

Fundamentally, cloud cyber security refers to the process of ensuring that the data of an organization is safe in the cloud.

This is regardless of where it is located, whether it is static or moving, and regardless of whether it’s internally or externally managed.

ALSO READ: Must-Have HRMS Modules and Features

Why is Cloud Data Protection Important?

With an increasing number of companies moving to cloud data and app storage rather than developing and maintaining their own data centres, cloud data protection has become more important than ever.

The shift to the cloud has transformed the role of IT to an international enabler of business, from a local provider of safe cloud storage.

Strong IT has enabled things like distribution of data, multi-cloud adoption, and secure hybrid cloud.

It also protects data from unwanted exposure and adheres to regulatory requirements by governments as well as industry – which are becoming increasingly stringent.

Leaders in the IT industry are turning to cloud data security platforms capable of offering comprehensive security for SaaS apps, data centres, and the internet too.

This helps to make sure that the configurations in public cloud apps align with the best practices.

Only then can regulatory compliance be adhered to, and data be protected effectively.

The cloud model involves shared responsibility; this means that along with the cloud vendor, businesses are also motivated to prevent data breaches.

Why Companies Need Cloud Data Protection?

Organizations today gather mountains of data – from mundane information to confidential business information and sensitive financial data.

They are also increasingly preferring to move and store data in the cloud, whether private, public, or hybrid cloud storage, SaaS, etc.

Naturally, this has also given rise to security concerns in cloud computing.

Businesses are finding out that protecting and safeguarding all of their information in various environments can be complex and daunting.

Here are the reasons why:

• Businesses are worried about data storage security in cloud computing, as they do not know anymore, exactly where all their data and apps are stored, as they are hosted on third-party infrastructure. They cannot see who has access to their data and who uses their apps; they have no visibility about the devices being used to access their data, and how it is used and shared.
• Organizations have no idea about the way cloud providers store and protect their information. While cloud services do provide excellent security, it is still limited. This is because both providers and businesses have shared responsibility of protecting data in the cloud. The capability of cloud providers varies greatly, which means the cloud data protection and security can be pretty inconsistent.
• Businesses have to face a number of security threats, like the following:

o Loss or theft of critical data
o Breach of security
o Malware
o Bugs in the app that make it vulnerable

Companies have to maintain compliance with data protection regulations and privacy laws as applicable in their countries; for example, in the EU, it is GDPR, and in the US, it is HIPAA.

Bear in mind, however, that establishing and administering policies related to security across numerous cloud environments can be extremely difficult.

How Companies Can Better Protect Their Data in Cloud Environments?

It is possible for companies to store their data in the cloud and security be given to it.

Here is what they need to know first:

• What is the data they have in the cloud, and what its location is
• Which is the data with exposure, how the exposure is happening, and what the probable risks are
• What are the applications being accessed and who is accessing them?
• How their applications are being accessed and used
• Which is the information that needs protection, and what the level of protection is.

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Armed with this information, organizations should deploy automated, consistent, and seamless cloud data protection measures.

This should enable them to identify, categorize, track, and safeguard their data and applications across numerous environments.

These measures should also be able to differentiate between routine activities and abnormal actions.

Ideally, the data protection measures must be built from scratch to ensure maximum performance and scalability.

The platform should be globally distributed so that your users can access their apps easily and quickly.

This means you will need to partner with a reliable network provider so that your users can experience reliable and optimal performance.

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To implement extensive and thorough protection for your cloud data, you must attempt to have a zero-trust framework.

Search for providers who can deliver that.

With zero trust, you can handle the particular cloud security challenges faced by your business.

This can be done by using content, device, user, application, and other context to build trust before making a connection.

As your company utilizes cloud services to be more flexible, zero trust enables you to provide proactive protection to your resources by controlling access.

This gives you an edge over cyber threats and attacks.

How is Data Protected in the Cloud?

Data security in cloud computing is typically provided via disaster recovery, cloud storage, and backups.

These methods are supposed to guarantee that the data stays in the possession of the organization if there is a breach due to malware, loss of data, or any other activity that would take advantage of vulnerable cloud data.

The most common methods of data protection include access control, multiple-factor authentication, and secure deletion; however, these measures are more to do with data security rather than the protection of data.

Businesses employ these measures to prevent access by malicious users and negligent employees or just protect it from them.

But data breaches are another story altogether, and standardized security policies are important here.

Cloud workloads are the most susceptible to attack, and hence it is critical that companies and their cloud providers have a clear understanding of their responsibilities about mitigating data risk.

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The Benefits of Cloud Data Protection

Cloud data protection offers numerous benefits to companies.

Let’s take a look at them:

• Enhanced security for applications and data – thanks to the improved visibility of the cloud app architecture, cloud data protection offers companies the power to boost security across all elements of the cloud, including hybrid and remote users.
• Maintain regulatory compliance – across the world, voluminous amounts of data are generated. Along with it, so do regulations in each country or region. Some examples are CCPA, HIPAA, GDPR, etc. By deploying measures for protecting cloud data, you are actually adhering to regulatory compliance.
• Proactively recognize and reduce risks like malware, security threats, and suspicious behaviour of users
• Define security policies properly
• Detect and prevent loss or disruption of data
• Provide controlled access to users

Cloud Data Protection Best Practices

When creating a protection program, most companies forget to do the groundwork – and this can complicate matters once the initial stages of developing such a program are through.

To avoid these pitfalls, you need to follow these best practices:

Make a Detailed Record of Sensitive Data

Like an inventory of materials or products, make an inventory of the sensitive data you want to protect.

Record where it is stored, and how you can protect it.

This will help you greatly when you want to implement a protection program.

Think of it as putting your cash in a safe to protect it – you would obviously note down how much you have put in!

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Combine Encryption and Authentication

Using multiple-factor authentication is a great deterrent to unauthorized access, and protects your cloud data and resources.

However, hackers can impersonate users and access your critical data.

With encryption, the data is scrambled, and passcodes are generated randomly to give you additional security.

These encryption keys are sent only to authorized users.

Choose a Trusted Provider

There are numerous vendors who offer data protection services, with most offering you top-notch security that is superior to others.

However, you should look for someone who develops data protection in the cloud that is meant for the cloud and uses a zero-trust framework.

This will protect data between cloud operations, and will also ensure that you maintain compliance with regulations by working with organizations in charge of cloud compliance.

ALSO READ: How Do ERP and Cloud Computing Differ? 

Cloud Data Protection Challenges

While the cloud offers multiple benefits to businesses, it does have its fair share of challenges.

What are they? Let’s find out:

Gaps in Protection

Today there are several tools like SWG, CASB, CSPM, etc., that provide data protection for the entire organization.

In spite of this, there are gaps between teams and products.

This can complicate things and lead to cross-team function redundancy; it can also reduce visibility as well as control over data exposure across apps.

Encryption

Reports say that the majority of traffic generated through Google search is encrypted.

Hence, in case your data protection measures are not up to the mark, and you are unable to control your data in the encrypted traffic, your data is likely to be exposed and misused.

This is more so for SaaS apps that depend on encrypted and secure connections to the app for data exchange.

Limited Visibility and Control

Cloud security and privacy often seem mutually exclusive – especially when you use public clouds.

The majority of data protection measures give limited information to enable decision-making regarding data usage in the cloud.

Not being able to see the full picture, like the users who are trying to gain access, their location, and the status of the app makes it difficult to exercise control to ensure secure and efficient use of data.

ALSO READ: How Cloud-ERP Software Helps Saudi Businesses?

Poor User Experience

When you divert internet traffic through the security measures in your existing infrastructure, it is likely to slow down app performance, leading to frustrated users.

You can add more devices to boost performance, but that means heavy expenditure – and it’s not the most practical thing to do.

The legacy architecture was not really meant to manage sudden surges in remote access.

The cloud is here to stay thanks to the innumerable benefits it offers. If you have not moved to the cloud yet, allow us at Tranquil to show you how you can benefit. Book a demo at your convenient time, and we will explain how it works.

 

Today, the steel industry is facing multiple challenges – especially high operational and maintenance expenses, thanks to the huge spike in demand for steel.

The steel industry is a material-intensive industry; its industry concentration is low, it is not a well-organized sector and all-around business conditions are not that great.

The ability to innovate and improve the process of production is also slow in comparison with other industries.

This is why the development of management has more than its fair share of hurdles.

The competition is very intense as well.

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The vast amounts of materials that need to be handled cry out for a need for operations that are quick, completely controlled, and obviously free of error.

Raw material costs keep increasing steadily, to top it all.

Infrastructure projects taking off and being executed in full swing all over the world is a major contributor to this demand.

Steel is used in numerous industries; from the cans that hold our tinned food, to the bridges to the homes we live in, it is everywhere.

Steel is manufactured from iron ore by filtering out impurities and unwanted elements.

Then it is processed and made into different items. The manufacturing process needs to be carefully monitored and managed.

Enterprise Resource Planning or ERP is an invaluable tool for all industries today, like manufacturing, retail, healthcare, etc.

With the stupendous growth that the steel industry has achieved, it is only natural that ERP for steel industry also becomes commonplace.

Implementing ERP like Tranquil helps facilitate better communication between departments, leading to increased growth and profitability.

It enhances overall performance and workflows, enables efficient processing of production orders, minimizes human errors, and affords better control over materials movement during the production life cycle.

Streamlining critical business processes helps to keep a lid on expenses and prevents them from burgeoning.

Let us check out the details of ERP software for steel industry, like its modules, benefits, implementation process, and so on.

Key ERP Modules for Steel Industry

Though the ERPs with regular modules can be used for this industry, Steel manufacturing ERP requires some special modules additionally, which are given below:

• Production management
• Inventory tracking
• Waste management
• Warehouse management
• Stock movement
• Order Management
• Logistics
• Costing and cost control
• Shop floor scheduling
• Dashboard for Quality Control
• Multi-company Management
• Dashboards for Reports and Analytics
• Integrated fleet Management
• Integrated Payroll and HR management
• Asset management and maintenance
• CRM

Most of us are aware of the benefits of implementing an ERP solution for our business. When it comes to ERP for steel industry, there are some unique benefits in addition to the common ones.

Let us take a detailed look at what they are.

Benefits of ERP Software for Steel Industry

A steel manufacturing company is bound to follow several procedures even before they begin the production process.

The right ERP solution for steel industry eases the handling of laborious administration processes, smartly and efficiently.

1. Cross-company Integration

This is probably the biggest advantage of implementing an ERP solution for steel manufacturers.

Integrated ERP software enables the integration of all important operations, beginning with procurement, right up to order shipment and everything in between like raw materials handling and manufacturing.

It helps to bring a sense of order to the chaos that normally exists in a steel plant.

2. Multiple Planning

Multiple planning strategies are employed for the production process in a steel manufacturing company.

For example – steel bars and long sheets are generally produced using the make-to-stock strategy; steel strips or flat products are normally manufactured under make to order approach.

For products that are made to order, the costing depends on the material requirements and the specifications of the order.

Products that are made to stock, however, are costed using standardized procedures.

These complexities of costing as well as planning strategies can be simplified with the help of a robust ERP system.

ERP for steel industry can efficiently handle the production processes, helping users to effectively monitor the various strategies and records easily and quickly

3. Saves Time

Steel manufacturing ERP shortens the production and sales cycle significantly.

It also helps in streamlining the inventory management as well as supply chain, rendering their tracking much easier than before.

4. All-round Visibility into Important Data and Processes

Thanks to ERP software like Tranquil, steel manufacturers can get a seamless flow of information throughout the organization, allowing all users to access relevant information wherever they want, whenever they need.

This feature ensures that organizational efficiency is increased.

It also provides complete transparency to owners and managers in the business, affording them a bird’s eye view of all the important processes and information.

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5. Accurate Business Forecasts

The demand for steel is at an all-time high; construction, heavy equipment, bridges, automotive, and airline industries – have been pushing the demand for steel higher and higher.

This makes it critical for steel manufacturing companies to stay on top of factors like raw materials pricing, emerging market trends, and similar.

It is imperative that there is excellent integration of business forecasts, market trends, and electronic orders.

Choosing to perform robust integration of disparate business systems will significantly help in making precise business forecasts.

Steel manufacturing ERP is invaluable for all of these – forecasting, analysis of market trends, predictive modelling of needs, and business integration.

6. Controlling Expenses

By implementing ERP for your steel manufacturing business, you can get robust control over your accounting and finances.

This has the eventual result of optimal control and management of the budget related to your project, and the related expenses.

By gaining control of your finances in addition to your business operations, you can easily see where your expenses are increasing, and if there are any wasteful expenses, and immediately take steps to curtail those expenses.

ALSO READ: Advantages of ERP to Automotive Businesses

7. Product Variations

If you compare the steel grades over time, you know that there has been tremendous improvement.

In the min 1900s, plain steel was used to make steel rods and bars; towards the end of the 1900s, came ribbed bards.

In the next century, we witnessed the advent of extremely stable and strong bars which were treated thermo-mechanically.

When grades change, it is obvious that the raw material configuration also gets altered.

This can lead to confusion; but with an ERP solution in place, the floor manager can easily design the components automatically, depending on the order.

They can also efficiently handle processes beginning with the sales order up to the finished products.

8. Variable Production Processes

Continuous processing, batch processing, or both methods are often part of steel manufacturing.

For example, batch processing happens in the converter and blast furnace, and the casting happens continuously; again, the finishing lines run in batches.

After studying the customer requirements as set in the order, shipment planning, and so on, the batches are selected.

Thanks to robust ERP systems like Tranquil, such variable production processes are well supported.

The software analyses the raw material forecasts, order details, and the schedule of production depending on when the shipment is due and selects batches automatically.

ALSO READ: What is Batch Tracking?

9. Integrated IT Model

When implemented in a steel manufacturing facility, ERP offers an integrated model of IT which offers robust support to every process.

Starting with the handling of raw materials, right up-to-order shipments are taken care of thanks to parallel processing and efficient sharing of data.

ERP systems have also undergone a significant transformation, and are now more capable and efficient.

They can integrate and handle inventory management, process controls, reports, forecasts, schedules of production, planning shipment, human resource management, and so on.

10. Improve Inventory Traceability and Tracking

The integrated inventory module helps you to exercise strict control over stock movements.

It also makes your warehouse management smooth and easy.

Tranquil ERP will help you forecast and measure the quantity of raw materials of semi-finished goods that you are likely to need for your production.

The real-time inventory information provided by our software helps you to synchronize the demand cycle.

This means that you can check if the required raw materials are available in your inventory once the bill of materials is generated.

ALSO READ: What is Dead Stock? Reasons and How to Avoid It?

Final Thoughts

As mentioned earlier, ERP software has evolved tremendously and has become more powerful, user-friendly, and cost-effective as well.

This means that it is no longer limited to large corporations.

Even start-ups and SMEs in the industry can take advantage of the immense potential of enterprise resource planning solutions without blowing a hole in their finances.

Tranquil has been helping businesses across industries to enhance efficiency and productivity, streamline operations, reduce expenses, and improve profitability and growth. Our ERP solution is deployed in the cloud, so it is flexible, highly economical, and easy to deploy. You get updates automatically, without having to worry about them. If you are not sure how it works, just contact us to set a date for a demo session. Our team will walk you through the software, and show you how your business can benefit. We will also be happy to answer any queries you may have.

 

What is Capacity Requirement Planning?

Capacity requirement planning or CRP is simply the process of figuring out the resources you will need to meet consumer demands.

It could be whether you have enough human resources, equipment, and space for the next year, seeing who is available the next week, or even for the next season.

Capacity planning is the thought process that comes before determining that you have enough people to get the job done and achieve business goals.

Lack of CRP can make it difficult to keep pace with the demand or to have unforeseen expenses later.

Obviously, deciding how many people and equipment you will need for a specific task or project is not a simple task.

The norm is to make adjustments on the fly, adding resources where and when required.

But there is a better way of doing it – capacity planning.

It is a systematic process of preparing your business for the future – immediate, near, or long-term.

With proper capacity requirement planning, you will be able to secure all that you need to complete the tasks ahead, scale, and also recognize potential supply chain bottlenecks.

ALSO READ: Benefits of ERP in Production Planning

Definition

Capacity requirements planning can be defined as the process that determines, measures, and adjusts levels of capacity.

It’s a management tool that helps the company in the efficient use of resources by increasing the accuracy of its production process.

What is the Importance of Capacity Requirement Planning?

Thanks to the organizational structures in place today, managers face numerous challenges with aspects like remote workers, autonomous teams, complex tasks that make estimations difficult, priorities that clash and shift, matrix structures, and more.

Staying on top of where your employees are assigned and what they are doing is cumbersome, and managers make estimates about the time required to complete certain projects, or if they have the right people for the job.

The right tool, like Tranquil ERP, can help you simplify capacity planning by addressing the above-mentioned challenges efficiently.

You can also streamline your business processes and enhance efficiencies across your organization.

What Inputs are Needed for Capacity Requirement Planning?

These are the inputs required for CRP, which can be gathered from the relevant files:

• Planned order releases
• Open shop order
• Routings
• Lead times
• Capacities of individual work centres

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How to Plan Capacity Requirements?

It is an important activity for any business, and a capacity requirement plan is created depending on certain factors.

Discover the Work-level Requirements

For this, you will have to arrange workloads depending on the type and process of work, and the employee who does the task.

On completion of this, set a satisfactory service for each work, calculate the resources needed to achieve that work, and measure the amount of work done.

You can then draw up an SLA between customer and vendor.

Study the Current Capacity

It is critical that you make a thorough analysis of the current capacity.

Match the item quantification as mentioned in the SLA to the goals, and then check how the resources are used.

Note which workload consumes the maximum of each resource.

Define a Plan for Future

Work out the amount of work for certain quarters, and configure a system to satisfy service level.

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What Affects Capacity Requirements Planning?

1. Product types

Complex products take longer to produce, need sophisticated equipment, and more skilled employees.

Simple products can be produced faster, and hence can be manufactured in huge volumes in a short time.

2. Finances

The business needs to have the financial capacity to purchase new machinery or hire employees

3. Skilled Workforce

Without skilled employees, or inability to hire additional or more skilled employees can hamper the production capacity

4. Equipment Capacity

Well-maintained equipment can quicken the production process.

What are the Capacity Requirements Planning Strategies?

Companies employ different strategies to help determine the quantity of raw materials, labour, and machines that would be needed over a period to produce goods and services sufficient to meet consumer demand.

Without proper planning, you may fail to fulfil consumer demands and lose the customer.

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1. Lead Strategy

Here the manufacturer purchases equipment to increase the capacity even before the actual demand has increased and is, therefore, an aggressive approach.

It allows the business to get a bigger market share.

However, it could lead to excess inventory if demand falls short of expectations.

2. Lag Strategy

You may have guessed that this is completely opposite to the first approach.

Here, the company adds more capacity when available capacity is full, and demand is crossing the present limits.

In short, the manufacturer increases the capacity just prior to the demand increasing, so there is no risk of excess inventory.

3. Match Strategy

Midway between lead and lag, in this approach, the manufacturer adjusts or increases the capacity in stages, based on market conditions.

4. Dynamic Strategy

This strategy is a smart one, where the manufacturer studies the actual demand and the sales forecast and increases the capacity a little before it is actually needed.

This approach is more accurate and not as risky as others.

ALSO READ: How to Choose an ERP Software to Enhance your Purchase Management?

Types of Capacity Planning

There are three main types of capacity requirement planning; together, they can make sure that you have an adequate amount of each for both short and long-term.

Workforce Capacity Planning

This strategy enables you to ensure that you have adequate human resources to fulfil consumer demand.

You need the right number of people, and with the right skills, so that they complete the tasks efficiently.

In case you need to hire more people or fire some, you will know how soon you have to make changes to account for the time taken for your recruitment and onboarding process.

Product Capacity Planning

This type of CRP allows you to determine if your business has an adequate quantity of products or resources required to fulfil deliverables.

For example – if it’s a baby needs store, you need to check stocks of diapers, baby clothes, lotions, booties, baby foods, feeding bottles, toys, cradles, cribs, and so on – the things needed to fulfil customer demand.

Tool Capacity Planning

As the name suggests, this strategy makes sure that you have the requisite tools like computers, vehicles, forklifts – whatever is required to produce and deliver your goods and services without delay.

ALSO READ: Detailed Guide on Make to Order vs Make to Stock

Benefits of Resource Capacity Planning

Let’s now look at the advantages CRP offers:

1: Reduce Costs

CRP helps you pick the most economical method of fulfilling future resource needs.

For example, if you get a new task from a customer that needs the services of a software developer.

This can be done by any developer but you have highly experienced people on your team; obviously, they need to be paid more.

With capacity planning, you can see what each employee is working on, and can change the future assignments depending on their skills and availability.

Let’s say you have one highly experienced employee who is available but is expensive; you have another employee, new, but capable – however, their availability is in a week’s time.

Now you need to decide whether it’s more economical to start immediately and pay more to the developer, or wait a week and pay less.

CRP will help you make the right decision on resource management and budgeting.

ALSO READ: What are the Challenges in ERP Implementation?

2: Ensure Availability

Make sure that you have the resources to deliver the work before you accept new assignments – CRP can help you see if you can.

You must either have people available or be prepared to hire more.

Make sure that neither is your team overworked nor do you fall short of the workforce.

Analytics and resource reporting can help you ensure that your team doesn’t get burnt out.

Continuously overworking can cause your employees’ health to deteriorate.

3: Manage Your Skills Inventory

There is a strong relationship between capacity planning and your team’s skills inventory.

This is just a record of the skills of your employees, and it’s especially helpful for tech skills.

When it comes to IT, you can list their skills like the programming languages they know, whether they are adept at only coding, or other elements like design, testing, security protocols, and more.

Similarly, when you need a lawyer, their record will tell you in what laws they specialize – international, intellectual property, inheritance, and so on.

This will help you determine if an employee has the requisite skills when you have to actually allocate them to a task.

You will need to update this inventory when the employees upgrade their skill sets.

The inventory should be checked regularly to determine if the employee skills are suitable and adequate to deliver your strategic initiatives.

If they are not, you can take corrective actions.

ALSO READ : Guide on How Do ERP Systems Work

4: Identify Skill Shortages

Let’s say you signed on for a major project but suddenly realize that you don’t have the requisite skills for your team.

Capacity planning would have shown you this beforehand, allowing you to identify the shortcomings and take the necessary actions, like:

• Ensure that you use all the skills available with your team
• Augment your team with permanent or temporary hires so that you now have the needed skills
• Provide training so that your existing members are upskilled

The skill shortage can be of different types; let’s say you need three developers skilled in Python but you only have one.

You could get the expert to coach their colleagues and fill the gap.

Managing resources with capacity planning can help you forecast what your training requirements could be.

Determine what work you are likely to be doing in the near future, and support your employees so that they can develop their skills and deliver the goods.

ALSO READ : Ways to Improve ERP with AI

5: Book Resources

Make use of organizational systems like Tranquil ERP that allows you to allocate resources to projects directly.

It is especially helpful in a matrix structure where several project and operational teams depend on the same pool of employees.

When an employee is booked, it shows as such, and this helps everyone plan more efficiently.

You can use CRP to identify teams or employees who are overworked or underworked, as well as any conflicts.

With competition being intense today, random unplanned allocation of human resources won’t cut it anymore.

Managers need to use their employees strategically so that the company is well prepared to deliver projects efficiently.

To Sum Up

Tranquil ERP helps in capacity requirement planning by determining current production capacity and adjusting it to fulfil consumer demand.

You get a clear idea of what can hamper your operations in the near and distant future, and how you can overcome these challenges.

It gives you real-time data and optimizes your production planning, offering options to fulfil consumer orders in time.

Capacity planning is an invaluable tool that will help you strike a balance between finding the right people and allocating them in the right way.

Tranquil ERP is a robust and efficient ERP system that can help you achieve your business goals through automation and streamlining of your business processes, and boosting employee productivity. It can help you save time, money, and effort, and positively impact your bottom line, increasing profitability. If you are still unsure of getting on the bandwagon, give us a call to schedule a demo – or shoot us an email. We’ll demonstrate how exactly the interface works, and our representatives will be happy to answer your queries.

 

As a manufacturing business, you need to choose the production methodology that is best suited for your specific business – mainly the type of product you manufacture, your facility capacity, and so on.

There are several types of production processes from which you can choose:

• ETO or Engineer to Order
• ATO or Assemble to Order
• MTS or Make to Stock
• MTO or Make to Order

The most commonly used processes are make-to-order and make-to-stock.

So here we will examine these two processes in detail, and the differences between them.

This can help you make a decision about which process is most suited for your manufacturing business.

Make-to-Order (MTO)

Also referred to the pull-type production method, make-to-order manufacturing refers to the process of getting orders from customers first and producing sufficient quantities to meet those consumer demands.

This can be followed in processes which are reasonably quick.

In one way, it is similar to the engineer to order process, as the product can be customized as per customer specifications.

This helps to avoid wastage and ensures no holding inventory.

It is suited for industries like food – for example, a catering business; the fashion industry, skincare, bags, and so on.

It is also suitable for industries who produce raw materials – for example, say cement, or steel bars.

Assembled computers are also another example of this model of Obviously, it won’t work for industries where it takes weeks or months for the product to be manufactured.

However, lead times will be longer for processes like manufacturing and shipping, these products are also not manufactured on a large scale, so the final product could be more expensive.

ALSO READ: Guide on Stock Adjustment and Stock Transfer 

Implementing MTO Systems

Make-to-order products, as we have seen, are usually produced for specialized industries which could need specifications that are not found anywhere else.

Due to this and the variety of raw materials that need to be stocked, it is important that make to order production businesses implement a robust inventory management system like the one from Tranquil.

An automated inventory management system can help manufacturers to effectively track all raw materials and orders.

Barcode scanners and the bill of materials feature can help manufacturers to track products with just a click.

They can also assign the components required to assemble the MTO product precisely to ensure smooth and uninterrupted production.

Advantages of Make to Order Process:

1. Minimal Waste

Reducing waste does not mean just cutting down expenses on the disposal of materials.

With this process, you only need to spend on what is necessary for your production, and that too, those that benefit your customers.

Any product addition, process, or action is considered wasteful if it does not provide value for the customer.

2. Lowering the Risk of inefficiency

As manufacturing is strictly as per the customer’s order and commenced after receiving the order, it is possible to manufacture products with maximum efficiency.

You will need to determine however when you will start production – either by choosing forward or backward scheduling.

3. Customizable Products

Customers who want a personalized shopping experience will seek you out, rendering your products unique, as compared with make-to-stock companies.

ALSO READ: Guide on How Do ERP Systems Work 

Disadvantages of Make to Order

1. Irregular Demand

Every business has cyclical demand for products, with peaks and slumps; during festival seasons, you may have sudden spikes in demand, which can put a strain on your processes.

2. Material Stock Shortage

By its nature, a make-to-order business has to be ready for the next order so that production can begin as quickly as possible.

However, if your stock levels are not accurately recorded or read, you run the risk of being out of raw materials at crucial times, which means lagging behind on orders.

3. Customer Wait Times

Customers are not willing to wait for a long time for their products; with MTP, lead times are longer, and this could result in unhappy customers.

Of course, they do know that they have to wait, but if the waiting time goes beyond what they expected originally, it will result in dissatisfaction.

That was about the make-to-order process.

Now let us look at the other option.

ALSO READ: Important ERP Modules and Functions

Make-to-Stock (MTS)

The make-to-stock process is all about producing goods depending on anticipations of demand from consumers.

Products are stocked for sales likely to happen in the future, and not for those that have already taken place during production; these are kept ready for distribution in warehouses.

Forecasts and real-time data help manufacturers in determining the correct quantity of products to be manufactured and help to reduce wastage.

It is the ideal production method for complex products which take a longer time to manufacture – for example, cars, machinery, and similar.

It is also the most commonly used process of production.

Of course, it involves handling and storing substantial inventory stocks, so lean production is not really possible.

Now as you can see, this method is the complete opposite of the MTO process, where the products are manufactured based on actual demand, or the pull-type model.

On the other hand, the make-to-stock production method is a push-type model as the products are pushed into production anticipating sales.

This method relies heavily on the accuracy of sales forecasts.

If that is not accurate, you could end up with excess inventory, and lose revenue because of carrying costs, theft, damage, or spoilage of materials or products.

For example, in anticipation of the sales of TVs spiking just before the Olympics, an electronics manufacturer may decide to double their production.

Now here the company is basing its inventory on anticipation and prediction and not actual demand – and that is make to the stock method.

There is always the risk that the demand may fall short of the predicted figure.

ALSO READ:  Inventory Management Challenges and How Best to Solve them

Implementing an MTS System

As the make-to-stock production process relies heavily on forecasts, trends, and historical data, it is imperative that you install an automated inventory management system that allows efficient tracking of inventory.

From the time it is purchased till it is received, inventory must be tracked meticulously so that it does not get misplaced in production.

Tracking raw materials throughout the production life-cycle is critical as it facilitates the implementation of a seamless transaction flow through the whole system.

Features for vendor management enable make to stock manufacturers to systematically organize their products.

The features may include elements like vendor part numbers, lead times, multiple vendors per item, costs, and so on.

With a powerful ERP like Tranquil, the possibility of human error is greatly reduced.

You can also ensure that you don’t miss opportunities that present themselves in your supply chain.

Tranquil is a cloud-based ERP software and its robust Inventory Management and Production Management modules can help make production planning and maintenance smooth and simple, and offer greater visibility into purchasing, production, warehousing, and so on.

What are the Advantages of Make to Stock?

Depending on the type of your business and the products, make-to-stock can be a viable production method for you.

Let us first look at the benefits it offers:

1. Spread Resources and Production

Here you manufacture products in anticipation of consumer demand, and this allows you to allocate resources more carefully.

Production can therefore be performed to ensure maximum efficiency.

2. Make to Stock Scheduling

With this method, you will be able to create a master schedule of production, ensuring the smoothest possible workflows.

This way, everyone knows where each one has to be, what tasks remain to be carried out, or what milestones are still to be met.

ALSO READ: Difference Between Procurement And Purchasing

3. Minimal Customer Wait Times

In MTS production, your products wait for your customers instead of the other way around as it is in the MTO system.

Products can be shipped to customers as soon as customers place orders.

This means minimal wait time for customers.

The make to stock method is perfect for manufacturers who exercise full control over their business workflows and who value organization.

What are the Disadvantages of Make to Stock?

As with anything, this method has got its own drawbacks; so let us take a look at what those disadvantages are:

1. Customer Trends and Demand can be Unpredictable

One can never predict or forecast with 100% accuracy regarding consumer demand – no matter whether you are using the best software, or you have studied historical trends and seasonal demand surges for the past few years.

Many unknowns are there – the best example is the COVID 19 pandemic – which can throw all calculations out of year.

And you may end up not selling anything close to what you expected.

This means excess inventory, and higher chances of damage, wastage, theft, and obsolescence.

Or it could also happen, that there is an unexpected surge in demand and you are not prepared for it.

Being stocked out means unhappy customers!

ALSO READ: Detailed Guide to Point-of-Sale Systems

2. Inventory Levels

You always run the risk of carrying too much inventory or insufficient inventory. It’s just the nature of this methodology.

3. The Difficulty Making Accurate Sales Forecasts

Business is a complex thing and can be impacted by a multitude of variables, most of them completely out of your control.

This can make forecasting sales very difficult.

And on top of it, even if you make a tiny mistake, you could end up with excess inventory or get stocked out – costing your business heavily.

Each methodology has its own set of advantages and disadvantages.

It may not be easy to decide which method you should follow, and which will be ideal for you.

However, it is not something written in stone, so you can experiment with both methods and see which one suits your business better.

You can switch between the two even.

Whatever you choose, you will still need to do a lot of hard work!

However, if implemented properly, you can ensure smooth, uninterrupted production and minimal wastage or delays.

ALSO READ: What Are the Stages of Fixed Asset Lifecycle?

Final Thoughts

Whether you choose to make to stock or make to order, you need a robust ERP system like Tranquil that has efficient and customizable modules for production management and inventory management.

These features will help you take your production efficiency to the next level, and give you the competitive edge you always wanted.

Tranquil ERP is a cloud-based system that helps in the automation and streamlining of all the departments or processes in an organization. To see how it works and how it can help in the efficient tracking and management of inventory and smooth production, do schedule a demo with us. We will be happy to explain everything and answer your queries.