Author: TRANQUIL

E-commerce is something we are all very familiar with, as many people prefer to do a lot of their shopping online.

E-commerce has radically transformed the way businesses operate and communicate with customers.

Apart from e-commerce startups, many brick-and-mortar stores have also created their online stores, as they are able to sell while significantly reducing expenses.

However, to get the maximum benefits and to ensure that the business is conducted smoothly, it is important that retailers perform ERP and eCommerce integration.

ERP like Tranquil is a software solution that helps businesses streamline operations, increase productivity, provide better customer service, gain a competitive advantage, and boost overall profitability.

Why Should you Do eCommerce Website Integration with ERP?

Normally businesses don’t consider integrating their eCommerce site with ERP as they think there will be tremendous disruption in their business, and that it is an additional expense.

Once you experience the benefits of the integration of both customer experience and your business operations, the expense is more than justified.

With the integration of E-commerce and ERP, you can increase efficiency and productivity across your company.

Important pieces of data like customers, inventory, items, shipping, orders, and so on, are all linked to disparate systems.

Without integration, you would have to manually enter your sales orders into the ERP system, which would be very time-consuming and cumbersome.

However, once your e-commerce site is integrated with the ERP, this and other information is shared automatically between the two systems.

This leaves you with more time on your hands that can be used in a more productive manner.

Similarly, making manual adjustments to the inventory in your system, like reducing after a sale, for example, can lead to errors like overselling.

That means, you haven’t reduced the inventory correctly, and have taken more orders than you have inventory.

When processes are not automated, the probability of making mistakes is very high.

Let’s see the most common mistakes that occur when information is siloed in different systems:

• Wrong inventory levels
• Incorrect or incomplete shipping address
• Product information that is incorrect, missing, or incomplete

To put it in a nutshell, when there is no eCommerce ERP integration, you run the risk of displeasing your customers and have inefficient processes – which could eventually spoil your reputation.

ALSO READ: Important ERP Modules and Functions

The Basics of ERP and E-Commerce Integration

There are many ways of integrating your e-commerce site and your ERP software.

Before you choose a plugin or a vendor who can integrate your systems, you need to consider the following factors:

As the bidirectional information flow happens, all the actions performed on your e-commerce website are reflected in your ERP solution.

This helps to ensure that your inventory and orders are always updated and current.

The information could include the below-mentioned details:

• Web order details, like items and their quantities, to ensure that the order is dispatched without errors, and the relevant inventory adjustment is made
• Entering contact details and other information for new customers, and updating existing customer information
• Payment information to ensure that money gets deposited in your bank
• Detailed shipping address to ensure that the product is delivered to the correct address.

ALSO READ: Top Trends of ERP System For The Future

To make sure that the information is shared fully and there are no gaps, whatever you update in your ERP system will also reflect on your e-commerce site, including the below-mentioned details:

• Updating details about newly introduced products and products that were discontinued, so that your e-commerce site always shows only those products which are currently available at a particular given time.
• Updates to product or item data, so that your site always displays correct product information to your employees and customers.
• Updates made to inventory information are automatically reflected on your e-commerce store so that it always shows the correct quantity of available products. You won’t sell a product you don’t have in stock, nor will customers be disappointed by stocked-out notices even though you actually have those items in stock. These updates may be necessitated because of the sales that happen in your physical stores, or some issues at the vendors’ end.
• Changes to prices of products are immediately reflected in both your systems. This happens when there is a change in exchange rates or supplier prices. It helps to manage the promotions prices as well as sales throughout your company.

In other words, when you integrate eCommerce and ERP software, you get both of your software solutions on the same page.

Now you may think, that’s fine, but what is in it for me and my business?

ALSO READ: Guide on How Do ERP Systems Work

Benefits of ERP Integration with an E-Commerce Storefront

Integration offers several benefits, with the prime benefit being that your information is no longer siloed and inconsistent.

You have consistent details no matter which system you look at.

Let us see about the benefits in some detail.

1. Minimizes Data Redundancy, Human Intervention, and Possibility of Errors

By integrating your online store with your ERP solution, the ERP system automatically has access to online orders, payment and shipping information, online customer details, and so on.

Similarly, your e-commerce store can be updated about inventory levels and products as you enter the details in your ERP system’s inventory management module.

In this manner, you can avoid manual data entry and human effort, and thereby minimize errors and redundant data.

2. Brings Down Operation Costs

Real-time information from the ERP software is visible on your e-commerce website, allowing customers to view things like the quantity available in stock, the status of their orders, tracking their shipments with tracking numbers, and more.

Thanks to automatic data updates, you have no errors or re-works, or orders going wrong (overselling for example).

All of these factors help to bring down the costs of business operations significantly.

ALSO READ: How Does Landed Cost Affect the Cost of Inventory?

3. Enhances Efficiency and Productivity

When the two systems are integrated, they will ensure even greater streamlining of business processes.

This will help reduce human intervention in all of these processes.

When an order is received online, they are sent to the ERP in real-time.

An ERP user in the back office is able to easily and immediately track the order, and continue to process it further.

In this way, the integrated eCommerce ERP software helps to reduce your time to market, or in other words, helps to accelerate the fulfillment cycle of orders.

4. Decreases Cost of Inventory

Since all of the information about sales that happen online is updated in your ERP system immediately, the inventory in your ERP also gets updated.

Based on current sales, the ERP can also project sales for the next month or quarter.

This gives the inventory department, current and updated information about inventory levels and what may be needed to fulfil customer demand in the near future.

Armed with this information, they can plan purchases more efficiently and reduce inventory expenditure.

ALSO READ: Ways to Improve the Procurement Process

5. More Shipping Choices

By integrating your online store with your ERP, you can achieve better shipping services.

Customers will be empowered and have the option to select their preferred shipment mode depending on the time needed for delivery, the charges, particular handling, and so on.

Integration facilitates the shipping of orders to various addresses internationally smoothly and efficiently.

6. Improved Customer Satisfaction

When customers get updated and relevant product information, are able to track their orders correctly and get information about the available quantity of a particular product on the e-commerce site.

It gives them a great sense of satisfaction.

Additionally, you are in a better position to provide exceptional customer service, as all of your information is updated, and you can offer more choices to customers.

This significantly improves customer satisfaction and helps increase loyalty toward your business.

7. Increased Trust and Credibility

It’s very easy to attract new customers.

However, it is not that easy to keep them coming back for more.

To retain customers, you need to build trust and show them that you can be relied on.

You must deliver what you promise; without that, you will lose your reputation and your business.

When there is more transparency in the buying process and customers receive accurate and reliable information, they will be inclined to buy from you the next time too.

It also frees your resources from attending to minor customer requests and allows them to focus on scouting for new areas for improvement and growth.

ALSO READ: ERP vs CRM

8. Generates Financial Reports in ERP

Various financial reports are generated in the ERP system.

The eCommerce site churns out sales reports.

With the integration of ERP and your online portal, you can easily generate important financial documents like cash flow, trial balance, profit and loss statement, and the balance sheet.

These statements are critical to giving clarity to your financial information.

9. Better Control of your Business

Integration of your ERP system with your online storefront, you get to exercise better control over your entire business and gain a competitive edge that will help you grow your business.

ALSO READ: What is Mobile ERP? 

To Sum Up

Now that you have seen the immense benefits in the integration of your eCommerce website and your ERP, it is time to give your company these benefits.

Once you implement this integration, you can experience for yourself how your customer service improves, and overall business operations become more efficient.

Tranquil has a proven track record in implementing customized cloud-based ERP systems. Do book a demo with our team. We will be happy to explain how the software integration works and how it will benefit your business. Our executives will be available to answer your questions.

If you work in sales, you know that your work with customers doesn’t end with them deciding to purchase your product or service.

The intensifying competition has led to customers demanding specialized and highly customized products.

While buyers have every reason to celebrate, sellers are left to deal with the problem of pricing their products correctly.

Companies dealing in a single product will not have this problem, but nearly everybody deals in multiple products, and not a single one.

This is where CPQ comes in.

ALSO READ: What is Business Process Improvement (BPI)?

What is CPQ?

CPQ refers to ‘Configure, Price, Quote’. It is a software solution sellers use to generate precise quotes for products that are complex but can be configured.

The aim of a CPQ system is to make your sales cycle more productive and effective.

The software eliminates the risk of inaccurate quotes sales teams have a greater chance of forming meaningful relationships with customers and offering them positive purchase experiences.

The software is designed to enable sales teams to generate accurate quotes almost instantly.

Product pricing is automated for products that can be customized as per client requirements.

Sales teams get real-time data that help them to move prospects through the sales pipeline and induce them to buy, rather than waste time calculating quotes while they are pitching a product.

ALSO READ: Sales Order vs Purchase Order 

How Does CPQ Software Work?

Businesses usually deploy CPQ software to boost productivity and velocity in sales.

Let’s break down the CPQ process into three stages to understand how exactly the software works:

Configure

This refers to configuring your products or services.

Businesses offer tailored products, experiences, and solutions, catering to the individual requirements of every customer, and this complicates the work of sellers.

The software configures complex product or service offerings that fit the customer’s requirements.

It also identifies opportunities for cross-selling and upselling that the sales agent may have missed.

Implementing this software solution takes away the human error risk factor, and gives more time to your sales teams to build strong relationships with customers.

ALSO READ: ERP Software to Enhance your Purchase Management

Price

Price is the ‘P’ in CPQ.

When solutions are complex, pricing becomes all the more complicated.

When you offer customized products, you cannot have a pre-decided price before the product is configured.

If sales agents price products at prices that are not optimal, they stand to lose business and increase turnaround times too.

The CPQ software leverages AI to identify customer purchase patterns and market research to discern the price the customers are ready to pay.

Basically, the software ensures that you offer a price that is both reasonable and personalized to your customers without compromising on profitability.

ALSO READ: How AI transforming ERP?

Quote

Once the software has configured your product and determined the price. You need to send a final and detailed quote to your customer, which is free from errors.

Prospects normally ask for quotes from multiple vendors, which means you need to respond quickly.

Configuration and accurate pricing can be pretty complicated, making speed difficult to achieve.

This is exactly where CPQ software comes to the rescue.

You have seen now what is CPQ process.

Keep in mind that not only can CPQ generate custom quotes for your customers.

It also lets sales agents review quotes before sending them to customers.

So that they can note down or alter required details at the last minute.

How are CPQs Leveraged in Today’s Business Model?

Now that you know what is CPQ software, let us see how businesses enjoy its benefits.

Today, the majority of companies have multiple product models.

They offer an extended base with multiple options and features for every single product.

This is mostly due to the change in approach to production, like DevOps.

More innovation has come in, and companies are leaner and more agile.

When companies use CPQ, the software pinpoints the products to sell depending on a number of customer requirements.

Sophisticated CPQ software is also capable of considering economic factors, competition, and market pricing to deliver personalized quotes to individual.

ALSO READ: Route and Van Sales

Benefits of CPQ Software

The overarching benefit of deploying CPQ tools in your sales department is streamlining the process and automation.

This frees your sales agents from cumbersome tasks and allows them more time to engage with customers and build meaningful relationships with them.

It removes the necessity of sales agents ploughing through mountains of paperwork or digital spreadsheets searching for information about the customer, and manually calculating and generating quotes.

The CPQ sales software automatically handles all the possible configurations, and figures out the pricing, and discounts where relevant, enabling your sales team to deliver unambiguous quotes up-front and instantly.

In addition to these, there are other benefits as well, which are listed below:

Accurate Quota Creation

Several customers will be those who just ask for quotes from you so that they can compare prices that they have been quoted by other companies.

Therefore, you need to be accurate and extremely efficient.

A huge advantage with sales tools is that you can grant access to everyone in your company that needs them, and they can get real-time updates.

If you want to be able to generate precise quotes for your customers quickly, this is essential.

Apart from the sales department, customer service, finance, and other teams can also be included in the process to ensure that the quote is as precise as possible.

You need to send a quote to the customer that adheres to compliance regulations, and which is competitive yet profitable.

Thanks to CPQ software, you can team up with other relevant departments and deliver the most accurate quote in the first instance itself.

ALSO READ: How Does Landed Cost Affect the Cost of Inventory?

Integration

While it is necessary to include various departments in the quote creation to achieve efficiency and accuracy, it can lead to customer information being parked in silos.

Fortunately, CPQ software has a feature that enables integration with tools used by the different departments – CRM, for example.

This helps everyone who is a part of the process to access the guidelines and communicate with one another.

Quotes go through several stages:

• Receipt of customer order
• Sending invoice to the customer
• Receipt of payment
• Order fulfillment

This is ample proof that many departments apart from Sales are involved, and several tools in addition to CPQ are used.

When you deploy a CPQ solution capable of integrating with the tools you currently use, like ERP software for example – you can improve the workflow between sales and Ops, and deliver a positive experience to your customers.

More Efficient Sales

Any sales executive would love to give all of their time to their customers.

However, they have to go through numerous processes and tasks related to selling that don’t include customers.

In fact, nearly three-fourths of a sales agent’s time is taken up by administrative activities.

This means they get very little time to prospect and engage with customers.

When you implement CPQ in your business, your sales agents will be freed of mundane admin work, and concentrate on enhancing customer engagement.

There are some more benefits you can gain from implementing CPQ in your organization:

• Your sales agents can respond quickly with precise quotes for customers who request them
• You will reduce your churn rate or the rate at which you lose customers
• You can generate and send more quotes to target customers than before
• Get more return on your investment on every sale that you make
• Enjoy more revenue flow and cost-saving

On the whole, CPQ solutions save time and money for sales departments and the business in general.

With the software lifting the burden of the CPQ process, the sales agents and their managers can concentrate on building a systematic and standardized sales process.

They can perform more value-adding tasks like choosing the best practices, assessing the sales process they follow currently, and recognizing elements and activities that need improvement.

This will help you significantly in reducing the costs related to selling, and enhance your revenue flows.

ALSO READ: Different Ways to Improve the Procurement Process?

Does My Business Need a CPQ System?

So now that we have seen what is a CPQ system, we come to the question of whether or not your business really needs it.

Today most businesses already have software solutions like CRM, BI, ERP, and so on.

Can they afford another one?

Do they really need that additional software?

After all, there is expense involved, and there will be some disruption in the implementation phase, and immediately after.

So, to answer this question, first, ask yourself the following questions:

• Do I have multiple complex products with difficult pricing structures?
• Are my sales agents able to generate accurate and efficient quotes for these products?
• Is my sales team taking too much time to generate quotes for customers and increasing turnaround time?
• Am I offering unnecessary discounts and losing revenue?
• Are customer quotes available only with the sales agent who generated them?

Even if you answered Yes to just one of these questions, it is essential that you start looking for a reliable CPQ solution.

If the thought of implementing yet another software solution in your organization is daunting, there are tracking tools that help you manage your tools and keep track of what you spend on them.

How to Choose a CPQ for your Organization?

There are a few more questions to ask – but these are for the software vendor.

• Can your CPQ software integrate with my current software tools like ERP and CRM? If you can do it, can you explain how it would work and the efficiency level it would have?
• Is your software cloud-driven and accessible by mobile?
• Does your CPQ solution leverage artificial intelligence and data analytics?

Select a CPQ that can answer yes to all three questions, and you should be good to go.

ALSO READ: Guide on ERP in Production Planning

Conclusion

Remember, CPQ is not an essential software for every business, but it is vital for those businesses dealing in customized, complicated product or service offerings, and have complex pricing models.

Why not take advantage of software that can not only make your job easier, but also help you serve customers better and increase your revenues?

At Tranquil, we have flexible solutions that can help your company automate and streamline your sales and other processes to enhance overall productivity, improve workflows, and boost profitability. If you are not sure about implementing this software in your business, why not see it for yourself? Do schedule a demo with us at a time of your convenience, and we will show you how it works. Our experts will be on hand, and happy to answer any queries you may have.

 

Switching over to a new system is always difficult, and often, expensive – and it’s the same for an ERP.

Unfortunately, the implementation of new software is not given the same importance as some of the fundamental business activities, and this can be problematic.

Businesses tend to ignore aspects of ERP implementation like cash flow, analyzing benefits, performance goals, risk assessment, and so on, and focus instead on minimizing expenditure related to implementation.

And then they hope for a miracle to make business operations efficient overnight.

Of course, this does not happen, and the blame then goes to the system; not to the wrong implementation of it.

In some instances, the management recognizes that it is the lack of planning that has caused the implementation to fail.

They may be forced to hire an expert ERP consultant to re-implement the solution, which is double the expense.

ALSO READ: How ERP Can Improve Business Efficiency?

ERP Implementation Failure Reasons

Here are some of the most common reasons for failure of ERP implementation:

1. Lack of Adequate Resources

Businesses often underestimate the resources needed to implement ERP.

Organizations must have a realistic and precise understanding of the resources both internal and external resources, that will be needed.

The company should have a robust timeline with regard to the commitment needed from employees who will use the system, like the Finance, Accounting, or HR departments.

You may need to hire temporary resources to maintain process continuity while the users undergo training on the new system.

The business should get information from consultants, vendors, or contractors regarding external resources – the skills, resources, and duration required to successfully implement the new system.

2. Poor Software Fit

One of the biggest ERP implementation failure reasons is a lack of understanding of organizational requirements – the purpose behind implementing the ERP should be very clear.

Make sure you sit down with all the relevant senior employees and managers and get feedback about their pain points that need resolution.

Discuss future plans and try to predict where similar issues may crop up.

Once you have all the requirements from everyone, trim the list to include the most important requirements, and also note down the features that are necessary for your ERP.

You can also note down the features that are not essential but would be valuable.

ALSO READ:  Benefits of ERP in Production Planning

3. Inexperienced Consultants

An ERP system is expected to be used for the long term, and therefore you need to pick out experienced employees for the implementation – those who have been through an implementation before, and who know your business goals and needs thoroughly.

When it comes to the external consultant too, make sure that they are experienced, and have performed implementations in companies of similar business or size in the past.

4. Secondary Customization

Customization, interfaces, and data conversion are the chief areas of technical risk in ERP implementation.

Sometimes customization can increase the cost and time needed for deploying the solution.

While some customization is often required, and possible, that over-customization can cause huge technical issues that can throw everything out of gear.

True, there is no need to implement the ERP as is if it doesn’t meet your requirements, but you shouldn’t go overboard with the customizations – they should be only performed to derive benefits for the company.

ALSO READ: How Do ERP Systems Work?

5. Project Management

The success and failure of ERP implementation ­hinges to a great extent on the project management of the implementation.

The size and scope of ERP implementation necessitate a dedicated and experienced professional who can supervise the different activities of implementation.

They should be able to look at the big picture while not letting the small details slip by them.

When project managers actively participate in selecting and implementing the ERP, that is when it becomes really successful.

Make sure you choose someone who is capable of understanding the users’ pain.

6. Poor Implementation Strategy

The ERP system should be implemented systematically and in an orderly fashion, and the strategy should be aligned with the company’s goals.

Without a clear strategy and understanding of the problems it is expected to resolve and the expected outcomes, implementation can be pretty challenging.

A good implementation strategy should consider deadlines, budgets, financial benefits, and important business processes, and make sure they are properly taken care of.

With no clarity on the goals, the strategy could become confusing.

When ERP is deployed successfully, a business can gain a competitive edge, boost productivity and plant utilization, enhance customer service, reduce expenses, and manage inventory more efficiently.

ALSO READ: ERP Software to Enhance your Purchase Management

7. Disinterested Leadership

If the people at the top are not committed to the ERP implementation, that sentiment will trickle down to everyone in the company.

Management should allocate appropriate resources for ERP implementation, and reassign them according to changing conditions.

Money is a major resource – and if the leadership is unwilling to pay, the project can get delayed.

The same goes for people – while they need to be diverted to ERP implementation, their basic tasks also need to be done.

The management has to ensure that work continuity is maintained through temporary hires.

Since ERP is a pan-enterprise task, the top leadership must ensure that executives from every department commit to the use of all required resources.

8. Insufficient Team Resources

It is vital that you have to have appropriate resources in your ERP team – skilled and experienced.

If you don’t assign the required resources, your ERP can fail.

Whether you assign your current employees or hire temporary employees for the purpose, you need to realize, that a significant amount of time is required.

When you use your own employees, you need to ensure that their regular work has to be completed as well.

One solution could be hiring outside resources to work on specific tasks like data conversion.

ALSO READ: What are the Challenges in ERP Implementation?

9. Lack of Accountability

This is extremely important.

You need to establish who is responsible for various tasks, and at what level.

A decision that is not timely, clear, and of high quality, can cause your ERP implementation to fail.

The majority of the decisions regarding the implementation should be taken at the team level, as waiting for the top management for every little thing can cause too much delay.

After all, it is the team members who will use the system and who are familiar with the processes who are best placed to know what is wrong, and what changes can improve things.

10. Resistance to Change

Whatever proof you give people, the lower-level employees will resist the implementation or at least resent it.

After all, it’s a whole lot of work for them, and they won’t look forward to it.

Therefore, it’s imperative that you communicate the necessity and importance of the ERP implementation thoroughly; we recommend starting a little early so that they have the time to come to terms with it.

Resisting change is human nature, and fear it; some may be able to see the benefits and future possibilities.

Many may not understand the need to switch to a new system at all – but with a little preparation, you can get your employees to cooperate wholeheartedly, and the implementation can be successful.

You can think of hiring change management consultants to handle this situation if the resentment is very high.

ALSO READ: Modules in ERP Software

11. Insufficient Training

Any new system, when implemented in an organization, mandates that the users be properly trained in its use.

Those who are not well trained, will cause a drain on the resources of the implementation team and eventually, your company.

When the resources reduce, your ability to resolve problems also diminishes and the implementation may just sink.

12. Inadequate Funding

We have already established that ERP implementation can be expensive and that the top leadership must be willing and able to allocate the necessary funds.

Remember that if your implementation fails because you did not divert the requisite funds, it will cost you a whole lot more.

Apart from the price of the software itself, you may have to pay additional hires, contractors, consultants, specialists, and so on.

You may in some cases, have to improve your infrastructure, especially if you are deploying the ERP on your premises.

System improvements, bug fixes, tech support, etc. are other areas you can expect to spend on in the future.

You will definitely save a lot, but that will happen later – the expenses will come first.

ALSO READ: Ways to Improve ERP with AI

13. Insufficient Data Cleansing

Preparing and cleaning up data is time-consuming and can be monotonous.

You need to know how the system works, and at the same time, you need to have the correct format for the data.

It’s like the question of whether the chicken came first or the egg!

Both data cleansing and the system building have to happen simultaneously – and if not done properly, can cause your ERP implementation to fail.

We recommend that you separate your data into static and dynamic; static data is information that has to be entered only once – like vendor contact info; dynamic data is information related to transactions.

The static data resides in tables of data fields, with some being optional and some mandatory and some optional fields.

You need to then map the fields back to your legacy system, and decide how to copy data into your new system.

ALSO READ: Influence and Importance of ERP System in Different Industries

Dynamic data is also similar; however, the difference is that there will be numerous transactions pertaining to one vendor or customer, even going back years – and you don’t need to transfer it all.

Pick what you want to move – only that data that provides value.

You also need to correct any misspellings, eliminate duplicate records, and complete any incomplete information.

While this is not rocket science, it can be confusing to people who are not very tech-savvy.

At Tranquil, we can help you with data cleansing after we understand your unique requirements.

To Sum Up

Change is always difficult and time-consuming, but it is worth it if the change results in something good. You can ensure that you get good results with change if you invest sufficient time and effort, and are dedicated to making it work for you.

At Tranquil, we have the expertise of implementing ERP solutions for businesses of all sizes and across all industries. We can perform the right number of modifications and customizations, and provide guidance, or even consultants to ensure that your implementation is successful. If you are not sure how it works and how it can benefit your organization, do schedule a demo with us at a time of your convenience. Our team will walk you through the system and answer any queries you may have.

 

You may have heard about changes made to processes in your workplace, designed to improve productivity and increase efficiency.

There are several tools that help to improve processes and the way you do your everyday work.

But what exactly is it all about, and does it actually offer any benefits?

Business Process Improvement or BPI is a set of practices like discovery, mapping, documentation, analysis, and finally, redesigning of a particular practice, in order to improve its efficiency.

You can think of them as recipes used to generate an output that greatly contributes to the better functioning of your business.

Every department in a business has its unique set of processes, and at times, you don’t stop to consider how efficient or not the process is.

This can have negative effects on the company’s performance and slow down growth.

ALSO READ: Ways to Improve the Procurement Process

BPI is a practice that introduces steps to maintain and boost the overall efficiency of your business processes.

But how and where do you start? You first have to identify the processes that need improvement. And how will you do that?

Common Symptoms of Inefficient and Ineffective Processes

You can identify inefficient processes by these symptoms or signals:

1. Non-repeatable Processes

If you need to recreate your process whenever you have a setback, it shows that the process needs to be improved.

Processes are generally a set of standardized tasks, activities, and participants, intended to generate the same outcomes effectively.

However, if you need to replicate the process to get the same outcome, then that needs to be fixed.

2. Lack of Process Knowledge and Information

Your processes can also become inefficient if your employees are unclear about how the process is executed, and/or the outcome expected.

The processes are not carried out in the manner they should be, and this can lead to gaps in operations and avoidable revenue leaks.

This is another situation you need to resolve and improve the process; educate your employees about the process and what is expected from them.

ALSO READ: How ERP Can Improve Business Efficiency?

3. Having Little or no Control Over your Processes

Things have a tendency to go out of your control in any business, and here, process control is crucial.

It is absolutely essential that you have complete control over not only process standards, but also the accountability and documents.

There could be utter chaos without it; and if that is the situation, you need to improve the processes and have better control.

4. Inconsistent Output

A business thrives when it delivers outcomes that create value for customers.

If your outcomes are inconsistent, this means there are flaws in your business processes.

You need to quickly fix the issue so that your processes deliver consistent valuable output to your customers.

5. Your Customers are not Satisfied

It is normal for any business to get some negative feedback once in a while; but if the criticism is high, you have to start examining what is going wrong.

It’s a huge red flag, and you need to plug the leaks in your process to ensure customer satisfaction.

ALSO READ:  Common ERP Challenges

6. Your Business is Taking your Opportunity to Decision

Everyone works to have a good quality of life – so that you get to spend quality time with your family, and do things you enjoy.

However, if you are so overworked that you have no time or energy left to enjoy your life, are not getting enough sleep, and are frustrated all the time, it means something is wrong at work.

Your business or job is taking over your life, it’s time to rethink your processes, and redesign them.

Methods Used to Practice Business Process Improvement

BPI is an excellent way of automating, streamlining, and optimizing your business processes.

Though there are several business process improvement methodologies, usually a few of them are used in combination:

1. Process Discovery

This refers to the viewing, analysis, and adjustment of the fundamental structure and processes that together form your daily business operations.

It refers to putting all of it down on paper, or on digital documents, so you can see and learn from them, and improve on them.

The discovery enables you to collect every element of the business process including procedures, people, resources, protocols, technologies, and anything else there may be.

You could get started by creating a standardized process discovery questionnaire that is based on consistency, priorities, exceptions, etc.

ALSO READ: Advantages of ERP for Education Sector

2. Process Documentation

Documentation can be defined as creating an in-depth guideline about executing a specific process – an important method that lists all the activities required to carry out that process.

Documentation can help you keep checklists, process maps, SOPs, document templates, tutorials, etc. in order.

This way, you don’t have to bother about creating a step-by-step reference in the process. Yes, it is an exhaustive exercise, but essential.

3. Business Process Mapping

With process mapping, you create a workflow diagram of the process to understand it thoroughly and to see its relationship with other processes, especially, how it overlaps with them.

It summarizes all the roles, activities, and business entities that are part of the business process.

These maps represent the business process graphically, enabling you to discover the current method of your operation, and offer the visuals required to discover latent inefficiencies and opportunities for improvement.

4. Better Communication

Communication is the most essential element in business processes, without which, a process is simply a set of activities with no connection to one another.

Improved communication is imperative to BPI.

With effective communication, you can have continuous improvement, as it can help you have more clarity in everything and reduce confusion.

ALSO READ: What is Product Bundling?

5. Improved Handoffs

Transferring information and responsibility, and sometimes, a person, to another department, system, or person, is what we refer to as business process handoff.

To ensure the smooth running of the business process, it is vital that this transfer happens smoothly.

Only then can you set clear expectations, avoid making assumptions, communicate efficiently, and make the process transition clear and transparent.

6. Enhanced System Integrations

In any process, systems are important; it goes without saying that making your systems integrations more efficient is critical to BPI.

You need to make sure that all your automation tools and systems are efficiently integrated so that you don’t have to face difficult situations later.

Your systems should not seem like a digital Rolodex to you; if they do, then you need to schedule a discovery.

7. Training and Education

As we mentioned earlier, your employees must know what is the process in detail, how it works, what their roles are, and what are the expected outcomes.

Without that, the process is highly likely to fail.

It is therefore vital that your employees are properly trained and educated about the execution of business processes.

You can achieve this with documents and exercises, and impart knowledge all throughout your organization.

ALSO READ: Benefits of Having an Employee Self-Service System

Benefits of Business Process Improvement

Now that we have seen what BPI is and what are the different methods used for it, let’s take a look at the business process improvement benefits:

1. Improved Productivity

Manual workflows and systems can be cumbersome and time-consuming.

They can be automated with process improvement measures, saving you and your employees a great deal of time and effort.

Stuff like sending emails, transferring data, manual form filling – all of this can be avoided, and you can focus on value-adding and revenue generating activities.

Let’s take the example of an eCommerce store, and you have to add new items to the product catalog.

It can be awfully time-consuming if you have to manually enter every item. Even in case you hire someone to do it or outsource it, you will have to approve all the items before they go live, to make sure everything is in order.

Similarly, paying your suppliers for the products and services you purchase from them, is also time-consuming – but not if you have a vendor payment app that automates this activity.

Process improvement can help you save time by cutting down the number of steps you need to perform, and streamlining approvals.

You can instead focus on finding new and better suppliers and supply channels, improve your customer service, and improve on other issues that can boost revenues right away.

ALSO READ: Influence of ERP System in Different Industries

2. Happy Employees

Nobody enjoys performing the same duties or routines every single day, and therefore, it is important to keep your employees motivated.

If your employees are happy and motivated, they will do their jobs well, and even think of new ways to help improve things at your company.

The feeling that they have contributed something valuable and made a change, can give employees great satisfaction.

Move employees away from cumbersome routines and drudgery, and let them know that they can make meaningful impacts in the workplace while adding value to their own careers.

3. Satisfied Customers

While it would be great if you could personally interact with every single customer, thank them for their patronage, and make them all feel special, we all know that it is just not possible.

But with automation and technology, you can definitely come pretty close to it. With events like webinars, specific pages on your website, and thank you email messages, you can help build customer trust and loyalty.

These positive experiences will motivate customers to recommend your business to their friends and family.

And it’s the best kind of publicity you can have.

ALSO READ: What are Backorders and How to Manage or Avoid Them?

4. Reduced Risk

Manual work is always vulnerable to human error – whether it’s data entry for new products, generating invoices, making calculations, or information transfer from one system to another.

Regardless of how impeccable your system is, the human error factor is simply unavoidable.

However, with the right improvements, tools, and automation, all of this can be avoided. Things that people struggle with, technology can handle with ease, and with no error.

Conclusion

In the initial stages of a company’s business, they may not realize the importance of business process improvement and automation, and may simply dismiss it as something they may consider later. However, that could turn out to be an expensive mistake. Process improvements help a business to grow. If you have not yet implemented automation for your laborious tasks, you are wasting your time, and that of your employees, and are definitely not in the best position to ensure business growth.

The right software can help you streamline and automate business processes of all the departments in your business. Tranquil is a robust ERP solution that can help you do this, and a whole lot more. Whether it’s finance, inventory, production, or human resource management, our ERP solution can help improve the processes in all these areas, and accelerate your business growth.

If you are not sure how it works, simply schedule a demo at a time of your convenience, and our team will explain it all to you. We will be happy to answer any queries you may have.

Walk into any supermarket, and you are besieged with Buy one Get one free offer; Microsoft Office is a set of software solutions sold together; combo meals at fast-food chains, like a burger, fries, and coke; a music CD that you buy has several songs on it – without us realizing, we experience product bundling in our everyday lives.

In spite of this, many online businesses don’t even consider this strategy, let alone implement it.

But by ignoring this strategy, businesses are losing out on a lot of revenue.

Product bundling is the ideal method to increase revenue, sell slow-moving inventory, and offer a ‘complete solution’ to your customers.

ALSO READ: Pipeline Inventory and Decoupling Inventory

What is Product Bundling?

Product bundling is simply a technique whereby the seller bundles or groups together several products to be sold as a single unit for a specific amount.

With this strategy, customers are encouraged to buy additional products.

For example, let’s say that at a fast-food chain, a burger may cost SAR 23, a coke SAR 5, and a serving of fries SAR 8.

If you add them up, it comes to SAR 36.

But if you choose the meal combo, you get the same for say SAR 32.

Now even if you had wanted only the drink and burger, which would have cost you SAR 28, you are tempted to choose the meal, because then you get the fries at half the regular price.

In the same manner, a supermarket may bundle products like this: 1 kg detergent, 1 bottle dishwashing liquid, 1 bottle softener, 1-floor cleaner, and say 1 toilet cleaner, and sell it at a slightly lower price than what the total would be.

With bundling sales of a lot more products can be increased which would otherwise have not been possible.

Advantages of Product Bundling

Bundling sales offers several advantages to businesses; it allows you to do a lot more with the stock in hand.

1. Increases your Average Order Value

With product bundling in business, you can boost sales and profits of specific items, with time.

Grouping products together can induce your customers to purchase more than a single product in one purchase – thereby increasing the average value of your orders.

In the previous example of the cleaning products – by offering an attractive price on the bundle, the customer is encouraged to buy a floor cleaner and toilet cleaner even though they only wanted the detergent and softener at present.

2. Reduces Cost of Marketing and Distribution

As you bundle products and sell more, your marketing and distribution expenses come down; rather than market individual products, you now only need to market your bundles as one product (of course, the products have to complement each other).

Bundling different items together necessitates only a single bin to store the bundles.

You also need to ship a lesser number of boxes containing individual items; as an eCommerce retailer, you can save big on shipping.

Suppose you have 8 different products, and sell all of them, you would need 8 different boxes and 8 separate consignments.

However, if they are bundled as one, you could send it out in one shipment, reducing your cost of distribution.

ALSO READ: What is Batch Picking? 

3. Product Bundling Decreases the Need for Revenue-Sharing With Competitors

Let’s suppose you own a sports goods store.

You sell unbundled badminton rackets.

Most people who buy the rackets are likely to need shuttlecocks, badminton net, shoes, socks, jerseys, shorts, handle grip, and so on.

If you don’t have such a bundle ready, it is highly likely that customers may go look for such a bundle in another store.

They may also check out prices online, eventually purchasing from your competitors.

By providing a bundle of goods that they need, you offer convenience, and they are much less likely to go search elsewhere.

You may have to offer a slight discount on the entire bundle, but it will be worth it.

4. Move Stagnant Inventory

Products that don’t get sold become the dead stock in your warehouse or on your shelves, and increase your carrying costs – after a while, you may even have to discard it all.

However, with the bundling of products, you will be able to clear out slow-moving products before it becomes dead stock and cause loss to the company.

This is especially effective if you can bundle a slow-moving product with a fast-moving one.

Let’s say you have Assam Tea which is a fast-selling product.

You also sell crockery in your supermarket but it is moving very slowly.

You can bundle the tea and a set of teacups or mugs together, and customers will buy them willingly.

This helps you free up rack space, decrease wastage of inventory, and reduce inventory carrying costs.

In fact, bundling is the best way to move your slow-moving stocks. You can also get back your capital invested in it.

ALSO READ: What is Dead Stock – How Can You Avoid It?

5. Give Customers a Complete Solution

Selling a product to a customer means they buy just one product; however, when you sell them a bundle, you are selling them a complete solution.

Continuing with the supermarket that bundled cleaning products – they offer a complete home cleaning needs solution with their bundle.

You provide your customers with a comprehensive shopping experience from your supermarket or eCommerce site.

This helps to build brand loyalty and also helps in generating more revenue.

These kinds of bundles also get a lot of word-of-mouth publicity, and you can get new customers while the existing ones keep coming back.

Plus, you get to sell inventory that may move very slowly on its own. For example, in the cleaning products bundle, you can include glass cleaning liquid – not something that sells like hot cakes; however, by bundling it with other products in demand, you ensure that this product also goes off your shelves just as quickly.

ALSO READ: Route and Van Sales 

Types and Examples of Product Bundles

Businesses use different strategies when it comes to selling product bundles. Check out some of the well-known ones.

1. Pure Bundles

In this model, the components of the bundle – the different items present in it – are not sold in the store as standalone products but only as part of the bundle.

This strategy offers the limited choice to the customer.

For example, if a company bundles the ingredients of a dish and sells them together, the customer can cook that particular dish, but may not be able to buy those ingredients separately if they wanted to make something else from some of those ingredients.

Let’s say a company has bundled the ingredients to make biriyani – this includes basmati rice, the spices, cashew, ghee, and vegetables and meat required.

Now the customer who purchases this bundle will be able to make only biriyani and nothing else; but if they buy a bag of rice, they can have the choice of making fried rice, pilaf, or anything else.

2. New Product Bundling

This approach includes grouping newly launched products with currently popular products to promote the new product.

This method is popular with online stores; they often mix new products with their fast-selling merchandise to give some exposure to the new product.

The more popular the existing product, the closer it brings your customer to the new product. For example – Apple iPhones are already extremely popular.

Let’s suppose the company comes out with a new wearable device – something revolutionary.

Instead of launching it by itself and marketing that product separately, the company may be able to sell the wearable by bundling it with the iPhone.

In this manner, whoever wants to buy the new iPhone will also buy the wearable device and try it out.

If they like it, the popularity of the new product will spread, and the company can sell it as a standalone product later.

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

3. Mix-and-match bundles

This is a strategy employed mostly in physical stores, whereby they give the customers the choice from among multiple products that are similar in nature.

Perishables, bulk items, and other FMCG products can be easily sold in this method.

Customers are given a list of products from which they can choose, and make their very own personalized bundle.

This gives the customers the feeling of being in control of their purchases along with choice and convenience.

It’s a great method to induce customers to buy in bulk without coercing them to purchase products they don’t want to.

For example – a footwear store may allow customers to choose 2 pairs of socks with every pair of shoes they purchase, depending on the price.

ALSO READ: What are Backorders?

4. Cross-sell Bundles

Here, you can sell a complementary item as an addition to your main product and is ideal for accessories, lower-priced items, or parts that complement the main product which is more expensive.

Continuing with the example of shoes – let’s say they are expensive branded shoes; the store may sell extra laces bundled with the shoes.

And since it doesn’t cost much in comparison with the shoes, most people wouldn’t think twice before buying that bundle.

5. Gifting Bundles

Such bundles are targeted at people who are looking to give a set of products as gifts to their loved ones.

They are usually sold during festival times, but may also be sought after as birthday and anniversary gifts.

For example, cosmetics companies or makers of personal care products offer hampers that contain a set of skincare products or makeup items that complement one another. Like: a body wash, shampoo, conditioner, lotion, loofah, and face scrub, can be bundled and beautifully packed to make it more appealing.

ALSO READ: What Are the Challenges Facing Purchasing and Supply Management?

6. Inventory Clearance Bundling

When there are slow-moving items in your inventory, it is a good idea to bundle them with a fast-moving item to reduce your carrying costs and clear space in your warehouse.

Usually, such bundles have a slightly lower price so that the customers are motivated to buy them.

Let us say there is a garment store that sells several pairs of trousers every day, but belts are very slow-moving.

In such a case, the store can bundle a belt with a trouser to ensure that the belts are taken off the shelves and into customer shopping carts – of course at a slight discount, but it is still better than having dead stock.

7. Buy-one-get-one Bundles

Nearly every supermarket has these offers, and they are probably the most common type of product bundling followed.

These are especially useful for FMCG, perishables, or items prone to becoming obsolete.

It is also a good strategy to be used on items that most people are likely to buy only once – say, a hair straightener.

By offering it at 50% off, you are encouraging customers to add more products to their shopping cart because they are saving money on this product.

Summary

There is no doubt that product bundling can lead to increased sales for you and added convenience to customers. It can lead to increased customer loyalty and attracting new customers too. Bundling products needs to be done properly to gain the maximum benefits. With the right software, you can ensure better revenues for your company.

At Tranquil ERP, we have robust inventory management software that gives you real time insights into your stocks, helping you make informed decisions regarding product bundling. Schedule a demo at your convenience to know more.

 

Businesses use financial information to report forecasts and conduct audits, and hence this information must be current, precise, and complete.

Inventory control plays a critical role in ensuring the correctness of this information.

One of the most crucial elements in an effective inventory system is stock adjustment; if properly executed, it can save you time and free you from tension.

ERP systems like Tranquil have robust inventory management modules that can help you perform effective inventory management.

What is a Stock Adjustment?

A stock adjustment is the increase or reduction made to the stock so that the actual quantity on hand matches the stock shown in the system – basically, a correction in the records so that they agree with the physical count.

Inventory levels don’t always change because of sales; which is why it becomes necessary to update your records to reflect the difference in the physical inventory count that may not be in your system.

The three types of inventory adjustments commonly performed by businesses are:

1. Increasing Quantity

The physical count is greater than the recorded quantity, so the quantity will have to be increased in the records using the cost price or average cost as of present.

ALSO READ: How Does Landed Cost Affect the Cost of Inventory?

2. Decreasing Quantity

The physical count is lower than what is in the system, so the total value for that item will need to be adjusted.

3. Revaluating

The physical quantity as such is not different but the management changes the average cost and therefore the total value of a particular item.

Stock adjustment reasons can be positive or negative. Positive Inventory level changes take place due to several reasons – like when there is an excess stock that is as yet unsold but it can be sold, new merchandise comes in either through production or purchase – the company needs to update its records to reflect the increased quantity.

Negative inventory adjustments are required because of:

• Wastage – obsolete or expired inventory (perishables, electronics, etc.)
• Shrinkage – stocks lost due to theft
• Breakage – damaged inventory that isn’t capable of being sold
• Internal consumption – stock that was not sold by consumed internally by the company
• Write-off – inventory lost to other reasons

Many of these changes can remain unnoticed in manual inventory processes, and hence obviously, unrecorded – till the inventory is physically counted.

Adjustments recorded during such counts include the number of items, unit cost, and other information, and it is used to calculate the value of the current inventory.

This helps in the accurate calculation of the cost of goods sold.

Businesses that follow the periodic system record the cost of the previous year’s inventory in the inventory counts, and don’t change it.

All goods produced or purchased in the current year are recorded in a temporary account which is used for making the requisite adjustment entries at year-end when accounts are closed.

When the accounts department finalizes records for the current year, inventory adjustments are used to change the opening balance in the inventory account so that the cost of closing inventory is reflected.

ALSO READ: Factors for a Successful ERP Implementation

Overstated and Understated Inventory

It is essential that your stock records are neither understated nor overstated when you make inventory adjustments.

Understated inventory means the physical count of goods in your warehouse is lower than what is recorded in your system.

This often happens because of improper tracking of inventory or accidental omission of products on warehouse receipts.

Recording lower inventory levels in the accounting system lead to decreased closing stock, thereby pushing up the cost of goods sold.

Overstated inventory happens when the physical count of goods in your warehouse is more than what is recorded in the system.

This can happen because of counting errors, theft, damage, etc.

Overstated inventory records can affect income statements by reducing the cost of goods sold, and also leads to the overstatement of total and current assets, and retained earnings.

ALSO READ: Benefits of Having an Employee Self-Service System

Example of an Inventory Adjustment

In case there is an understatement or overstatement of inventory, it must be immediately rectified through an inventory adjustment.

This will help management and employees to make informed decisions about replenishing inventory and forecasting demand.

Inventory adjustment needs to be calculated carefully, and you need to use the formula for the cost of goods sold or COGS.

COGS = opening inventory + purchases – closing inventory.

Let us suppose a garment seller has accurate records. Their opening inventory is SAR 12,000, and they purchased goods worth SAR 4000; if their closing inventory is SAR 3000, then as per the formula:

COGS = 12,000+ 4000 – 3000. SAR 16,000 – 3000 = SAR 13,000.

Now let us suppose that the inventory records were overstated, and the closing stock was SAR 4000.

Then the COGS would be = SAR 12,000 + SAR 4000 – SAR 4000 = SAR 12,000.

The closing inventory was overstated by SAR 1000, and the cost of goods sold in the system will need to be reduced by SAR 1000

If instead the inventory was understated, and the closing inventory shows SAR 2000, then the COGS would be SAR 12,000 + SAR 4000 – SAR 2000 = SAR 14,000.

This shows that SAR 1000 is overstated in the closing inventory, and the relevant personnel must increase the COGS by SAR 1000.

ALSO READ: What is Pipeline Inventory and Decoupling Inventory? 

Why Inventory Adjustments Matter

Changes in inventory levels can happen because of unexpected or external factors like inventory loss, errors in counting, or administration.

Variations in inventory can impact more than your warehouse.

When inventory levels are understated, the cost of goods sold is artificially increased, and when inventory is overstated, the COGS is artificially reduced.

In both instances, the adjustment entries required to reflect the authentic state of affairs can significantly impact your profits, income statements, the competitive edge your company has, its financial agility, and overall health.

Your budgeting, auditing, reporting, and decision-making can all be badly affected if you are working with incorrect or incomplete information.

The management needs to account for any inconsistencies and alterations to their stock levels so that they have an effective inventory management system and precise financial information.

With the use of appropriate and meticulous inventory adjustment procedures, the relevant personnel can ensure that records of products and their levels are accurate.

This will eventually lead to improved reporting of data, better decision-making, and immaculate financial statements.

ALSO READ: What is Dead Stock?

What is a Stock Transfer?

A stock transfer or inventory transfer is nothing but the physical movement of inventory items from one warehouse to another.

Retailers may need to transfer stock in the following circumstances:

• For improving the availability of inventory when you have stores in multiple locations and multi-channel sales; usually such companies have central warehouses, and goods are sent from there to the stores that need it. However, if there is a sudden demand for a particular item in a store, the company may choose to transfer stock from a nearby store instead.
• Sometimes businesses send products to partners for consignment activities; these items are as yet unsold and still business assets, and hence their movement needs to be tracked as warehouse transfers.
• To deal with damaged, spoiled, or expired products, warehouse employees need to move them out to another location; this is also considered a stock transfer.

ALSO READ: What is Batch Tracking?

Warehouse Transfer Process

1. Planning

Managers or employees in charge of transfer requests have to know when the transfer is to be effected, the items to be transferred, and the source or destination.

Consider the situations below:

• Stocked out items – you have to find a way to restock; this can be done from a central warehouse or stores close by.
• Low stock alert – when the stock in hand goes below the minimum level, you can reorder from suppliers, or transfer from other warehouses.
• Demand forecast – if the forecast is a higher demand for specific items, you can transfer them from stores where the demand for those items is low
• Consignee request – you will need to fulfill consignee requests by transferring items out to the consignee’s site so that their products are in stock to be sold.

Once the necessity of transfer is ascertained, the relevant employee or manager sends a proposal for inventory transfer to seek approval.

2. Creating Inventory Transfer Request

The personnel in charge generates a stock request document and it is sent to the sending warehouse; the document includes the following information:

• The source warehouse
• Destination warehouse
• Product name
• Measurement unit (number, kilo, liter, etc)
• Transfer quantity
• Serial number or stock request no.

ALSO READ: Why is Cycle Stock Important for Your Business?

3. Delivering Items

Once they receive a request for stock transfer, the warehouse staff prints a slip, and checks the stock to make sure that the requested items are available on hand to transfer.

Inventory is usually managed with RFID or barcode so that during the picking process, all they have to do is just scan the RFID or barcode to record what items are being transferred.

Once the items are picked and packaged, the items can be transferred between two warehouses either via third-party services or internal transportation.

4. Receiving Items

When the goods are delivered to the destination warehouse, the staff there will count or weigh the quantity to ensure that it is as per the delivery slip.

This step is very important as some items can get damaged or lost on the way from the source warehouse.

This difference has to be recorded and the relevant personnel has to be informed.

They will then scan RFID or barcodes to record the items they receive and issue a goods receipt.

5. Store

It is imperative that when you store the goods you receive, it should be done properly so that your employees can easily locate them when there is a customer request for those items.

Most warehouses have multiple layers like racks, shelves, bins, and so on.

Here, the bin code and item type, and quantity in each bin are recorded. This helps employees to know where exactly to find a specific item.

ALSO READ: Top Tips For Efficient Stocktaking

Inventory Transfer Vs Inventory Adjustment

Let us encapsulate the differences between these two activities:

• Inventory transfer is the physical transfer of goods between warehouses or from one warehouse or store to another store, while inventory adjustment is just a correction made in the records to reflect the actual physical count in the warehouse.
• Inventory transfer is made to fulfill sales, separate damaged, expired, or spoilt items from good ones; the only purpose of the adjustment is to match the records with the actual stock in hand.
• Stock transfers can be made whenever required, but the stock adjustment is done only after taking a physical count – usually once a month, quarterly, or yearly.

Summary

Inventory is the lifeblood of any business, and hence it is essential that you need to have precise inventory information. Understanding and implementing adjustments to inventory at appropriate times will ensure that you have the information you need for precise financial statements, improved decision making, and enhanced business processes.

With the right software, you don’t need to wait or do the guesswork for making stock adjustments. Tranquil ERP with its impeccable Inventory management module will do all the heavy lifting for you. Schedule a demo at your convenient time, and we’ll show you how it works.

 

Nearly every company today uses fixed assets to provide services to customers and make profits.

However, fixed assets have life cycles and limitations.

This makes fixed asset lifecycle management very important.

For steady revenue generation, it is essential that assets become more accessible and are managed better.

Businesses will be able to understand and evaluate asset life cycles with digital tools like asset management software like the one offered by Tranquil.

But let’s first have a good understanding of the main terms.

Asset

An asset is anything that can add value to an organization.

A fixed asset is something that is purchased to be used in the long term, without being converted into cash quickly – building, machinery, furniture, and so on.

Asset Management

The various activities undertaken by an organization to extract value from assets are referred to as asset management.

These are usually managed by specific professionals, like say a facility manager for elevators and furniture, and repairs and regular servicing or maintenance help to increase the life of an asset.

Why is Asset Management Necessary?

In addition to delivering value from an asset, taking the right decision regarding the assets is also a part of asset management.

Assets can fail or get damaged if not cared for and maintained properly – which makes maintenance an important part of asset management.

One of the chief aims of asset management is generating the minimal life cost of the asset overall.

Remember that it can be impacted by factors like business continuity, or risk in the decision-making process.

Thanks to asset management, an organization can observe and analyze asset performance in various stages.

It also includes striking a balance between the costs and the threats against the performance level of the assets, which is important to get the maximum ROI and to maintain organizational goals.

What is Asset Life Cycle?

The most important part of asset management is to understand the fixed asset life cycle properly.

There are a few important phases in the asset’s lifecycle, which begin when your business purchases an asset and end when you decide to dispose of it.

Repairs, upgrades, depreciation, operation – all these are included in an asset’s life cycle.

Throughout the asset’s life cycle, several accounting issues may crop up, depending on the accountant’s need for decisions to be made about the value of the asset or financial reporting.

What is Asset Life Cycle Management?

Assets are critical to a business, and hence it’s crucial that you know exactly what assets you have, what their value is, where they are located, and in what condition they are.

This will help you to plan for future tasks and also fulfill your business obligations.

Asset life cycle management is where the profits the assets deliver are optimized, and held or used by the organization across its life cycle.

The services delivered by a business normally address every stage in an asset’s life cycle regardless of the industry, scale, opportunity, or scope.

ALSO READ: Guide on How Do ERP Systems Work

Why Asset Life Cycle Management Is Important?

Understanding the life cycle of fixed assets is essential for a company, from the time it is acquired till its disposal.

Regardless of the business size or what industry it is in, a company depends on its fixed assets.

While assets are useful over several years where it provides immense value to the business, it does go through wear and tear, decreasing its efficiency and slowly, its life itself.

Repairs and maintenance services can extend the life of an asset, but eventually, it will need to be replaced, as the repairs may outweigh the cost of a new asset.

When asset management is carried out strategically, a business can predict the time an asset is likely to reach its peak performance, and how long it will last before it requires maintenance or replacement.

An in-depth data-driven approach to fixed asset life cycle accounting helps businesses to ascertain that they extract the maximum life and value from an asset. It also helps to:

• Calculate the value of asset depreciation
• Develop strategies for preventive maintenance
• Define operational roles of assets
• Ensure compliance with regulatory standards
• Calculate the cost of purchasing and replacing
• Integrate assets into tracking systems

ALSO READ:  Important ERP Modules and Functions 

Stages of a Fixed Asset Life Cycle

Now that we have gained clarity regarding what fixed assets are and why their life cycles should be properly managed, let us understand the various stages of a fixed asset in some detail.

Most experts agree that there are four stages in the life cycle of an asset -, but some add one more. To have a thorough understanding of an asset’s life cycle, let us examine all five.

1. Planning

The very first phase in the life cycle of an asset. Here, you need to plan what assets your business requires, after evaluating the condition of the assets you have at present.

You also need to plan how you will deploy the asset, how it will impact your services, and whether it will help you achieve your business goals.

This helps you to have a very clear understanding of what role the asset is expected to play in your business for the coming 10, 20, or more years.

2. Acquisition or Procuring of the Asset

Individual businesses will have their own strategies for asset acquisition – for example, some companies may internally develop or construct their assets using their own employees; here they need to consider what percentage of the wages given to the employees should be calculated as part of the asset.

If it is outrightly purchased from outside, of course, the entire cost is allocated to the asset itself – including transportation charges if any.

Once the asset is installed, regardless of whether it was internally developed or purchased, it is placed under real property inventory and tracked through its life cycle.

ALSO READ: Ways to Improve the Procurement Process

3. Usage and Depreciation

Over time and with use, your asset value starts dropping.

You can avail tax benefits by accounting for asset depreciation and thereby reducing your net profit.

4. The Operation, Repairs, and Maintenance

This is a crucial phase in the life cycle of a fixed asset.

When any piece of machinery or equipment has been in use for long, it undergoes wear and tear and necessitates repairs.

If not regularly serviced and maintained properly, the asset may require expensive repairs which can throw your budget out of gear, and also impact your everyday operations.

With regular servicing, the lifespan of the asset can be increased, so you need to focus on ways to optimize operation to enhance its potential.

Once the asset is deployed, it is used or operated, and this is the longest phase in the life cycle of the asset.

It shows the way in which the asset is applied and managed, including the necessary repairs and maintenance activities.

When the asset is put to work in the business, it improves operations and helps in revenue generation.

An asset should be monitored and examined for unexpected performance problems that could crop up.

Without this, expensive repairs and replacement of parts.

ALSO READ: ERP Software in Warehouse and Fixed Asset Management

As the asset’s life progresses, wear and tear also increases, and you may need more frequent maintenance to prolong its life and the value it can offer your company.

This is not limited to repairs; it also includes upgrades and modifications so that the asset stays relevant in relation to the dynamic work environment and business requirements.

Approaches to maintenance differ from company to company; while some may take the reactive approach, others may prefer a proactive or preventive strategy of maintenance.

However, every strategy has some common ends, like:

• Maximizing uptime
• Decreasing expenses related to emergency repairs
• Reducing downtime
• Enhance life expectancy of the asset

By focusing on areas that have the potential to be improved, maintenance activities can even cause an asset to improve its performance from its original level.

5. Disposal

Regardless of how well you optimize asset operation and maintenance, there comes a stage in the asset’s life when it is no longer of use to the business.

While the most common reason is that it has aged and is no longer capable of performing well, it could also be due to reasons like technology change, or shutting down operations in that location, and so on.

Whatever the case, disposal of the asset should also be handled properly. There are several options, like:

• Donate it to some charity
• Sell it outright or as scrap
• Exchange it for a more advanced version or model of the same machine or equipment

It is essential that the value of the asset is properly calculated in order to get the tax benefit – you need to account for depreciation here.

Of course, this needs to be distinguished from a new asset that was defective or got completely damaged within a few days of its purchase – mostly in such cases, the manufacturer or seller may give you a replacement free of charge.

What is the Priority of the Asset?

Some assets may need more maintenance than what you expect.

Frequent repairs or servicing is time-consuming, uses up your resources, and reduces organizational productivity.

If you find this happening with any asset, the wise thing would be to dispose of the asset.

Another instance you may have to dispose of or exchange the asset would be, a surge in demand which has been increasing at a steady pace.

The asset you have currently may not be capable of helping you fulfill the demand, and you may need to trade it in for one with higher capacity – or you could just purchase an additional one.

ALSO READ: Challenges in Procurement and Supply Chain

What Are the Benefits of Asset Life Cycle Management?

Asset life cycle management offers several benefits like:

• Helping you define your requirements more efficiently
• A reliable system will help you in making data-driven purchase order decisions
• Improved dynamics for resource restoration
• Enhance the quality of IT services in your organization
• Knowledge about the total ownership cost of an asset every time
• Asset managers can make the appropriate decisions about assets like when to retire or dispose of them, and so on.

Summary

Fixed asset lifecycle management is a vital activity for any business as it allows you to manage your valuable assets and prolong their life, helping you be more productive. An asset management software and application can help ensure that the asset is properly maintained, with timely upgrades being affected, being maintained and repaired in time, and disposed of effectively at the end of its life. Asset management software can help optimize the life cycle and the value addition of an asset. The right software can help asset managers to make data-driven, informed decisions that can lead to better outcomes.

See how it works for yourself! Schedule a demo with us at a time of your convenience, and we will explain how your assets can be managed more efficiently.

 

Most companies today use an ERP system like Tranquil to streamline and automate their business processes and be more efficient and agile.

One of the important modules in an ERP is HR .

It helps HR personnel to focus on more critical tasks and leave the mundane tasks to the software.

Additionally, they also have an employee self service module for the use of employees; this is sometimes incorporated a part of ERP or HCM systems or as a standalone solution.

What is an ESS System?

ESS allows employees to handle many of their administrative needs by themselves through a specific web or internet portal.

Employees can easy to update all their personal information, access hr-related information concerned to them, download payslip, enroll for benefits, apply for expense compensation, etc.

Several portals have now become advanced and managing insurance plans and other employee benefits can also be handled by employees.

Previously, these tasks were performed manually by the HR department, and on paper.

ESS portals save time, effort, and money, leaving little scope for error.

Decreased expenses in administration allow employers to offer better benefits to employees.

ALSO READ: Must Have HRMS Modules and Features 

Why Employee Self-Service?

The employee market is becoming increasingly competitive, and it is essential for companies to create a positive and vibrant work atmosphere.

One way of doing this is to give employees direct control over important information that pertains to them.

Today these solutions are optimized for mobile and networking platforms, and are an important part of employee retention and engagement plans; other programs and activities are recognition, continued learning through e-learning systems, social activities across the organization, health checkups, wellness programs, and so on.

How to Create Self-service Experiences for Customers and Employees?

Content and delivery are the main elements in any system that allows for self-service – software and knowledge.

Software is used to deliver the knowledge (which you load into the system) to employees).

A self-service experience is called a portal, as it literally is a gateway to a particular topic or information set.

That brings us to the next question as to how they actually work.

ALSO READ: Benefits of ERP in Accounting and Financial Management

How Do Employee Self-Service Portals Work?

An ESS system provides the full range of features by combining searchable databases and interactive web apps.

Automated systems are often combined with ticket-based help desks or live chat in the interactive sections of ESS portals.

The knowledge bases include discussions or Q&A sessions where employees answer questions posed by other employees regarding IT and HR.

While each company may have different requirements for an employee self-service system, there are quite a few common features, making it easy for companies to purchase third-party software rather than getting unique solutions made.

Features of HR Self-Service Software

Most ESS solutions will have these features:

• Payroll functions – changing tax deduction and withholding amounts, accessing pay slips online, logging hours worked, scheduling days off, etc. by employees themselves
• Benefit programs – browsing through different plans offered by the employer and choosing what the employee likes, managing enrollment into the programs, and updating details like major life events
• Allowing employees to alter plans for retirement investment, like withdrawing money, setting up loans, modifying contributions by employees, and so on
• Managing expenses
• Managing business travel and filling for reimbursement

ALSO READ: Guide on How Do ERP Systems Work

Additionally, an ESS portal may also have these features:

• Employee recruitment – employees can search for available positions, apply for jobs, and check the status of applications; they can also get alerts when similar jobs are posted in the future
• Onboarding employees through virtual orientation, where they get important information necessary to be able to perform their jobs well. It enables companies to track new recruits and make them feel welcome and connect with them virtually regardless of their location.
• Providing training for continued education and upskilling of employees through e-learning and computer-based testing. Their progress in the course and performance in tests can be easily tracked.
• Employees can also complete self-evaluation exercises, update their training and development activities, set goals, etc. They can also examine, reply to and sign their yearly performance evaluation reports.
• Some companies are encouraging employees to adopt healthier lifestyles by including wellness surveys in ESS platforms.

Benefits of ESS

Not only do ESS solutions grant employees greater economy to manage their leaves, payroll, and benefits configurations, they help HR personnel to save time from routine tasks and focus on more important work.

ESS helps employees feel valued, more connected by their companies, increase their productivity, and be relatively happy by creating a more collaborative and inclusive work culture.

1. Managing Shifts in Employee Expectations with Self Service

Every employee wants to be heard today – which while easy in smaller firms, may be near impossible in large companies.

Thanks to ESS systems, however, it is now possible for departmental and/or regional managers to hear every employee, thereby making it easy for them to fulfil employee expectations and resolve their grievances.

2. Anywhere, Anytime Accessibility

Most self-service portals are cloud-driven, enabling employees to access the portal from wherever they are, on any device, and whenever they need to.

There is no longer any need to be at the office computer to log in to the portal.

They can also post queries or update information at whatever time is convenient for them as well.

ALSO READ: ERP vs CRM

3. More Streamlined Systems

In earlier times, every bit of information relating to human resources was manually entered in a system by a specially trained employee; payroll information was handled by either a different department (say accounts) or outsourced to a third party.

Other revenue information was again the responsibility of a different department.

With self-service systems, however, all of these activities are integrated and streamlined, enabling easy access to all the stakeholders.

4. Fewer Errors

While the ESS portal enables quicker and more efficient entry and transfer of data, it also helps minimize and even eliminate errors.

One of the main drawbacks of manual data entry is the presence of human errors.

Thanks to self-service systems and almost 0 errors, HR managers can easily pick out errors in recent additions of applicant or employee information.

5. Improving HR Function

By implementing an ESS system, HR departments can significantly improve their functionality.

They need not focus on mundane, repetitive, and time-consuming activities, and can instead concentrate fully on issues where the human touch is important.

Data entry and providing responses to simple employee inquiries is no longer an activity that necessitates time and efforts from HR managers or other staff.

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

6. Decreased HR Workload

The biggest advantage of the self-service portals for employees is that it helps to reduce the workload of HR employees – who have mountains of work to do every day.

Any activity that can be performed by employees themselves is a great help to the HR department.

With employees updating their personal information, going over their schedules, checking payroll and printing pay slips, logging their work times, choosing benefit programs, adjusting timesheets, and so on, it takes a load off the minds of HR personnel.

Without a self-service portal, all of these tasks would have to be completed by the HR department – and they can be pretty time consuming.

This is more so the case in larger companies with a lot of employees.

Now HR managers can focus on more value-adding tasks with the time freed up from such mundane tasks.

7. More Empowered Employees

Thanks to self-service portals, employees are more empowered now than ever before.

They can access and edit their personal information, and they can do this from any computer or mobile device with an internet connection.

They can access make changes in:

• Paid leave requests
• Personal and contact information
• Vacation days
• Information on pay rate
• HR inquiries, reports, and other information
• Performance evaluations
• Benefits programs like insurance, medical, and so on

With direct access to their information, employees have more control, and it gives them greater satisfaction.

They also stay more engaged with their employers.

They get information regarding training opportunities to enhance their knowledge and skills and have better career growth.

Employees who engage more are more likely to be loyal to the organization and have enhanced productivity as well.

Employees who are serious about their careers are likely to look for opportunities to upskill and improve themselves, to advance their careers.

Such employees contribute more to the company and also help to reduce employee attrition and turnover.

ALSO READ: Understanding Different ERP Systems

8. Easier Self Service Compliance and Auditing

Thanks to the easy data entry and more efficient HR functions, auditing has become much simpler.

It has resulted in improved integrity of data, as well as ensuring better compliance with existing regulations as well as company policies.

Here are a few other benefits in short:

• It simplifies communication between organizations and employees with regard to employee communication materials like carrier directories, summary plan descriptions, new recruit forms, handbooks, and benefit books, for example.
• Improved relationships with insurance brokers and carriers with information sharing, leading to more diverse and enhanced health plan options for the organization and employees.
• Reinforces corporate culture
• Accurate tracking of hours logged by employees

Optimize Your Employee Self-Service Portal

For your ESS to be successful, it is essential that you have a knowledge base that contains important information for employees.

Only if it has the information your employees require, can it be useful. How will you know what to include and what is relevant?

Look at the most searched information by your employees, and create related content, keeping those topics in mind.

Google will help you identify other topics employees are looking up.

Also, remember that this database will have to keep evolving – just like your business.

You will need to keep updating it so that your ESS is used to its full potential, and you also help your employees be well informed, and thrive in their careers.

Review your content regularly to ensure that it is up-to-date and relevant. Consider letting employees rate the content so you know what to improve.

ALSO READ: Factors for a Successful ERP Implementation

Challenges of Employee Self-Service

While it offers numerous benefits, there are some challenges associated with the ESS as well.

It is technologically complicated to integrated multiple self-service channels like retirement accounts, wellness programs, portals, intranet, and so on, as login procedures and data formats are likely to be vastly different.

It can take a long time to educate employees about the capabilities and features of the system and to motivate them to start using the portal.

Upgrading to new systems from legacy self-service systems can pose several problems – mainly regarding which vendor to choose.

Companies have to think whether to purchase different systems from different vendors to server the multiple purposes, and then whether they may be compatible, or whether to have a specialized module in an ERP.

At Tranquil, we can provide an ESS solution that is a perfect fit for your specific business needs. Schedule a demo with us at your convenience, and we will show you how it works. We will be happy to answer any queries that you may have for us.

 

If we talk about any company that deals in products, inventory is the most critical part of their business operations; it is absolutely essential that you manage your inventory properly to keep your operations running smoothly.

Inventory management is not limited to the products on your shelves or in the warehouse.

It is a complex, multifaceted activity.

In this article, we will examine two important types of inventory: pipeline inventory and decoupling inventory.

What is Pipeline Inventory?

The term pipeline inventory means whatever stock of products that have not yet reached the business warehouse but is on the way, or in the ‘pipeline’.

When a business purchases stock from a manufacturer, it is viewed as pipeline inventory as it is in the course of being transported, provided the payment is made.

It is called pipeline inventory until it reaches the buyer’s warehouse.

It is important to know what is your level of pipeline stock as it enables you to ascertain how much of your money is otherwise engaged in inventory and holding costs etc.

Businesses that deal in products with long lead times; say handmade clothing, for example, have to be especially attentive about pipeline inventory; production may take months if not weeks, and inventory levels are not accurately ascertained by counting stock at hand.

ALSO READ: What is Batch Picking? 

Functions of Pipeline Inventory

Products in the supply chain of a business, that have been paid for and have been shipped, from the pipeline inventory of the buyer.

However, if the buyer hasn’t paid for the goods, they are considered to be the seller’s or manufacturer’s inventory; the moment the payment is made, regardless of whether the buyer has got custody of the products, it becomes the pipeline inventory of the recipient.

Example of Pipeline Inventory

Often it happens that the products stay in the transit pipeline for weeks, or even months together – especially in the case of overseas shipping.

Let’s suppose a shipment of smartphones manufactured in Korea is on its way to Saudi Arabia.

If the buyer has already paid the manufacturer, it is part of their inventory as pipeline stock and remains their inventory till they are sold to the end-users.

A company needs two values to arrive at the pipeline inventory: lead time, and demand rate.

Lead time is the time taken for the goods to arrive at the buyer’s facilities after placing the order.

Demand rate is the quantity of products sold by the same company between two orders.

Once the buyer (wholesaler or retailer) has these two values, pipeline inventory can be easily calculated.

The formula is:

Pipeline Inventory = Demand Rate x Lead Time

Let’s say the lead time.

Let us assume that the same company in KSA – their lead time for this product is of 4 weeks; they place orders once in seven days, and every week they sell 300 Smartphones. Their lead time would be:

4 weeks x 300 units = 1200 Smartphones or level of pipeline stock.

ALSO READ: What is Dead Stock – How Can You Avoid It?

Pipeline Inventory Vs Work in Progress

Pipeline inventory is often mistaken for work-in-progress inventory.

WIP is simply the products of a company that are in various stages of manufacture, and are not complete yet – unlike pipeline inventory which is a ready stock that has been paid for but is still in transit.

While both are part of the inventory, WIP is unfinished goods in the factory, while pipeline inventory refers to goods that have completed the production phase and are in the distribution stage.

ALSO READ: A Detailed Guide to Batch Tracking

Pipeline Stock in Inventory Management

Inventory management can be significantly enhanced by gaining a thorough understanding of the products in transit.

Here forecasting means, making data-based predictions based on a range of factors with regard to order placement.

Organizations that are aware of where exactly and how much quantity of their products are in transit are better placed to forecast demand – or order amount, with the pipeline stock affording clarity with regard to the position of the product within the manufacturing process.

What is Decoupling Inventory?

Decoupling inventory is that stock that is kept aside for emergencies, like a stoppage of production.

It provides a buffer or cushioning that helps to mitigate risks associated with production hitches – especially due to the shortage of a few components.

ALSO READ: Things to Know about Job Costing 

Functions of Decoupling Inventory

The stock kept aside to be used in the event of slowed or paused production due to the non-availability of some components, is called decoupled stock.

It provides a cushion for the inventory of the business against possible production problems.

Often, different lines in the production function at different speeds, and this can cause the production to be halted.

A lot of products remain unfinished (work in progress) and this brings down the inventory stock renewal rate.

Examples of Decoupling Inventory

Let’s continue with the Smartphones example.

It is made up of several small and sensitive components like CPU, GPU, screen, hard drive, ports, and so on.

Let us say that the manufacture of the processor (CPU) slows down for some reason, like machinery breakdown – it can bring the entire production to a stop, as obviously one cannot have a Smartphone without a processor.

If the manufacturer has decoupled inventory of processors, they will still manage to ship the phones on time, while working on speeding up the production of the CPUs.

Decoupled inventory can be either finished goods, components, or batches of raw materials, and this strategy is implemented by many businesses to ensure uninterrupted production.

Manufacturing units that make products in bulk often have numerous holdups in their assembly line which could be caused by internal or external factors, leading to cessation in production, and consequently, delayed shipments.

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

Advantages of Decoupling Inventory

By setting aside stocks of components or raw materials, businesses can enjoy the following benefits:

• Neutralize negative effects of changing vendors or systems internally in the business
• Create a cushion for supplementing the expenses required to fix problems without spending out of the profits of your business
• In case of insufficient employees, decoupling inventory provides a safety net
• Buy time to identify and fix machinery and technical issues
• Reduce pressure on internal processes and carry out routine maintenance activities
• Maintain steady output
• Optimizing production lines for parts and/or finished products to meet demand variations
• Improve flexibility and agility and scalability in case of unprecedented delays in supply chain
• Mitigate risks related to procurement, vendors, and external factors not in their control.

Will My Holding Costs Increase with Decoupling in Inventory Management?

It is natural to think that your inventory costs will go up with decoupled inventory, and well, they could – or not, depending on how you approach it.

With intelligent demand forecasting from robust ERP software like Tranquil, and by accurate calculation of your pipeline inventory, you can gain excellent visibility into your inventory turnover and other activities over a period of time.

The analysis of historical sales figures enables companies to plan for seasonal demand fluctuations so that they are not caught unawares.

You could say that by keeping in mind your pipeline inventory and setting aside decoupled inventory, you can easily achieve a good balance between affordability and risk alleviation – an extremely important part of good inventory management and continuous business growth.

ALSO READ: Ways to Improve the Procurement Process

Decoupling Inventory VS Safety Stock

Often, people use the terms safety stock and decoupled inventory interchangeably; while both terms have similar meanings, they are two different functions that serve two different purposes.

We have seen that decoupling inventory aims at preventing production delays or stoppages by having extra stock of components or raw materials – it is meant for meeting unexpected internal demands.

Safety stock, on the other hand, is the extra stock kept aside that is used to meet unexpected demand surges from customers – external demands.

While both provide a safety net to meet sudden demands, one is for internal and the other for external demand.

How Does Decoupling Work in The Supply Chain?

Decoupling in the supply chain works along with two pipelines – informational as well as material flow.

Without decoupling inventory, any issues on the production front can negatively impact supplies to customers, and eventually on further demand.

The change in demand can conversely, also affect suppliers if they are not able to fulfil demands.

Decoupling works within the supply chain to a major extent, by focusing on minimizing downtime, or stoppage time in production.

Implementing manufacturing automation can simplify and streamline the production process.

The various automation tools help in creating more efficient and smoother workflows, regardless of the number of locations your business has.

Some of the features included are production management , inventory management, reporting, order management, shipping, and so on.

ALSO READ: Challenges Facing Purchasing and Supply Management

Differences between Pipeline Inventory and Decoupling Inventory

While both pipeline inventory and decoupling inventory are quite similar, they do have some differences, and they serve two different purposes.

It is essential that you learn how both function, what their benefits to your business are, and how they differ.

Similarities

• Both inventory types aim to improve the efficiency of operations
• They serve to mitigate the risk of not being able to meet demands
• They offer the chance of business continuity in the face of resource shortages
• The basic approach is to make up for lost time
• They include the cost of lost opportunities
• Negate the harmful effect of shortage of supplies
• Churn out precise inventory data
• Deliver clear, effective insights into the analytics of your inventory

ALSO READ: What are Backorders?

Differences

• Decoupling is an internal system, and pipeline inventory is for external implementation
• Pipeline is a standalone inventory system while decoupling is an approach employed to house inventory
• Pipeline inventory is a business process while decoupling inventory is an internal strategy of operations and inventory management used for dealing with possible bottlenecks
• Pipeline is in transit and outside the business whereas decoupled inventory is stored in the premises of the business
• Pipeline inventory is found in almost all businesses but decoupled inventory is likely to be found only in large companies.

Conclusion

Both types of inventories are helpful to maintain business continuity and fulfil customer demands in time. At Tranquil, our robust ERP system has several modules including a feature-rich Inventory Management module that can be customized to meet your specific demands. If you are a manufacturer or retail business that gets components or finished goods from overseas suppliers, you need to think about decoupling inventory and other inventory strategies to enjoy business efficiency and growth.

Do schedule a demo at a date and time of your convenience, and our representatives will walk you through the system so that you gain a thorough understanding of how it can benefit your company. Get in touch with us today!

 

Warehouse managers are always on the lookout to reduce operational expenses while increasing output.

In this, one of the major steps that need optimizing is the batching process. The longer time needed for order fulfillment, the lower the profits on that order.

It is an essential part of inventory management.

What is Batch Picking?

Batching is also called warehouse batching, or batch picking.

It is a methodology that aims to boost the efficiency of picking, as it is an important step in the process of order fulfillment.

It involves grouping several similar orders into a single picking instruction.

Often, a great deal of time is lost by employees spending time picking for one order.

This method can be effectively used to reduce time when there are similar orders from multiple customers.

It reduces employee movement inside the warehouse and speeds up picking.

A single employee retrieves a batch of orders, eliminating the need for repeated trips to the same locations for different orders.

Of course, it’s not feasible to use this method if the order combinations vary to a great extent.

Let us suppose that there are two items in a single order, that are usually ordered together, but are stored far away from each other in the warehouse.

The inventory or at least part of it can be moved so that both items are closer to each other, and eliminate walking up and down unnecessarily.

ALSO READ: Important ERP Modules and Functions

How Batch Picking Works

When you get orders from customers, the items have to pick from a warehouse; rather than assign a single order at a time to one picker, multiple orders with the same items are assigned. Let us now see the main steps involved in batching:

1. Creating Picking Lists for Every Order

A picking list contains the detail of items ordered by a customer, like the quantity, SKU, and location in the warehouse.

When there are similar picking lists, batch picking works perfectly.

The picker has a bunch of picking lists that contain orders from various customers.

Though earlier lists were printed, today warehouses leverage technology and mobile or wearable devices for picking and order fulfillment.

A consolidated list is churned out by the software, simplifying the entire process.

ALSO READ: What is Negative Inventory?

2. Grouping Orders by Same Items

The picker groups orders with exactly the same items in a batch.

With an order or warehouse management software, they can automate this task.

3. Assigning Batches to Pickers

The software generates batch pick lists for every employee so that they can pick items efficiently; in the absence of software, you will need to draw up the optimal route for every picker so that they can retrieve all the SKUs in minimal time.

Some items may require equipment or tools to be picked – like if they are large, or stored at a height, a forklift; otherwise, carts, trolleys, mobile scanners, and so on are used.

4. Picking Items in the Order

Pickers need to stick to the recommended route as per the picking list so that they don’t waste any time.

Each warehouse may have different batching rules; some have several totes in one cart for separate orders, while others may just gather all the SKUs into a single bin, which is then sorted later.

Whatever the method used, pickers follow their lists according to the path and concentrate on one SKU at a time.

Mobile scanners help to track items picked and their quantities.

After the SKUs have been picked for specific batch orders, they can be handed over to packers, and the pickers can start on the next batch of picking lists.

ALSO READ: ERP software in Warehouse & Fixed Asset Management

5. Packing and Shipping

If the picking method is gathering everything into one bin, sorters will first sort the items as per the orders, and then hand them over to packers.

Once packed properly, the orders are sent to the shipping department. Pickers start on their next batch of picking, and the entire cycle repeats.

Top Advantages of Batch Picking

Batch picking aims to reduce the footsteps warehouse employees take to retrieving items for orders; to manage your supply chain and fulfillment centre successfully, it is imperative that you boost efficiency in picking.

1. Less Foot Travel for Pickers

Warehouses are usually huge and walking to and can be very time-consuming.

When pickers have to pick items from numerous locations all far from each other, order fulfillment becomes slow.

Thanks to batching, operations can be centralized, reduced travel, and complete several tasks simultaneously.

For example, there could be 10 similar orders; when batched together, pickers need to go to that zone just once instead of 10 times.

2. Increase Picking Speed

Rapid order fulfillment is crucial if you want to conduct warehouse operations successfully.

Batch picking reduces the time and distances your employees have to move inside the warehouse, and so are able to complete their tasks quicker, increasing productivity decreasing the average time needed to fulfill a single order.

ALSO READ: What is Cross-Docking and How Does it Work? 

3. Reduced Costs

As productivity increases, you need less man-hours for picking, and hardly any overtime, which means a reduction in labor costs.

4. Avoid Crowding and Reduce Fatigue

Batching can help avoid your employees crowding in a zone, as each employee is assigned separate zones.

It also helps reduce the fatigue of your employees as they have to walk less.

Zone Picking vs. Batch Picking vs. Pick-To-Order vs Wave Picking

Each of these techniques has its own advantages and disadvantages.

Pick to order is usually followed in small businesses with a low volume of orders, and you have to send out orders in time.

When you have only a few items, or your entire inventory fits in a small storage area, your pickers won’t have to walk a lot to retrieve each item on the picklist. Often, the picker also packs the order in such a firm.

Warehouse managers schedule windows for picking called waves throughout the day – this is wave picking.

Orders are fulfilled depending on the items in the list so that several orders can be filled simultaneously.

It is somewhat similar to batch picking.

ALSO READ: What is Dead Stock – How Can You Avoid It?

Zone picking is used by large businesses that deal with a high number of SKUs, and have their own warehouse and software to group similar orders together and figure out storage locations and proximities.

Here several pickers retrieve different products in the same order.

Let’s say the order has 6 items in it, with each item in far-flung sections.

Here, you can assign various pickers to each section so that the order is completed quickly.

Ergo, one employee doesn’t have to cover multiple areas.

Zone picking does not require that there be multiple orders with similar items.

While it does increase efficiency, it can be tough to ensure even workload distribution.

We have already seen what batch picking is – grouping multiple orders with similar items so that pickers don’t have to walk much.

This method is ideal for large companies with multiple or very large warehouse facilities.

What Are the Two Different Strategies for Batching Orders?

There are two main batching strategies.

Let us examine both of them.

1. FIFO or First in First Out

This is the traditional method followed in most warehouses, where a picker is sent along a circuitous path to retrieve the items in an order.

It does not consider the travel distance, fatigue, crowding, or speed of execution.

Order 1 is batched with Order 2 – the first in first out sequence of the conventional batching algorithm.

This is still better than the old method of discrete picking – picking one order at a time, but still not at the desired level.

ALSO READ:  Ways to Improve the Procurement Process

2. AI-Based Intelligent Batch Picking

This is used in modern warehouses that use technology; it uses algorithms based on artificial intelligence, to create optimized order batches, and hence it is also called intelligent batching.

The software gathers data about inventory, its location, orders, and so on, and optimizes the data in real-time to churn out batch assignments.

It takes into consideration matters like priority of orders, travel time and distance, pick locations, attributes of products, and so on to generate optimized batches.

The software goes through millions of combinations to figure out the best batching combination from the orders received.

To Sum Up

To ensure maximum benefits from batching or batch picking, you need to consider investing in sophisticated work execution systems and warehousing so that you can optimize the batching. Businesses that implement this batching method find significant improvements in productivity, reduction in costs, and faster order fulfillment, without making drastic layout changes in the warehouse, or making huge investments in robotics and automation.

Are you operating a warehouse for your eCommerce business? Are you a big company dealing with a large number of products? If yes, then it is time you moved on to batch picking and implemented the right software to ensure optimal operations in your warehouse.

At Tranquil, we have the right solution for you. Our ERP system is not just robust, but also flexible, and it can be tweaked and scaled to fit the unique requirements of specific businesses. Our ERP has a powerful inventory management system that can greatly benefit your business by helping you with automated and optimized batching and picking processes.

If you are unsure how it works, schedule a demo at a time of your convenience, and our team will explain how the software can help boost productivity and increase your revenues. Our experts will be at hand to answer any questions you have regarding the software.