When was the last time something you ordered didn’t show up? Can you remember the frustration you felt? The anger that surfaced when what was promised wasn’t delivered – made even worse if that in turn prevented you from fulfilling a promise you’ve made to someone else. You are powerless. A victim of someone else’s failed system.
We can talk delivery statistics all we like but at the end of the day when an order isn't delivered on time, or is wrong for whatever reason, there is a very human outcome; we turn a perfectly good customer into a victim. You are as powerless as any other victim of circumstance and feel equal measures of frustration, anger and betrayal. And as a victim, you are very unlikely to come back for more of the same treatment.
Inventory applications often boast about their ability to deliver a wide array of key performance indicators (KPIs), metrics or measurements. But to the customer that is sitting waiting for a delivery that never happens, or opens a box of goods that wasn’t what was ordered, there is really only one metric that matters: Delivered In Full and On Time (DIFOT).
DIFOT gives a very clear indication of the quality of your service provided to customers. It confirms whether your customer has received the right stock at the right time, in line with their expectations. At face value, it provides a measure of wether you have the right stock on hand at levels to meet order requirements.
But DIFOT is so much more than a measure of inventory availability, it is a measure of an organisations ability to successfully bring together all of its line functions and suppliers to meet customer demand – each and every day! Most businesses fail to achieve 100% DIFOT not because they don't care, but because they don't have the capability to ensure all the critical factors required to guarantee delivery are in place.
Inventory is more than counting stock
Most inventory software easily supports picking, shipping, prioritisation and visibility; many do that extremely well as it is their single purpose in life.
It's not until you get to predictability and forecasting that the options begin to narrow dramatically as it takes a really good, fully integrated inventory system to help you anticipate future inventory needs. This is where a business can obtain real cash flow and service advantages, and really make a difference to your DIFOT (Delivered In Full and On Time) statistics – but it is a far more complex task than simply knowing what's in the warehouse.
Anticipating customer needs and order patterns requires knowledge of activity outside the warehouse including information about purchasing and future order patterns to ensure appropriate lead times for replacement stock and avoid out-of-stock disasters.
Without real-time production, ordering and sales updates from your business system, it’s difficult to achieve any real improvement in customer service. When standalone Warehouse Management or Inventory System projects are put together, much of the effort, cost and risk are associated with building these critical interfaces back to the core business system. For many such projects, this is often a point of pain, if not outright failure – with an integrated system it is simply business-as-usual functionality.
Taking an enterprise view
Customers today expect your business will understand and anticipate their demand. When they approve a quote, they expect the order will be fulfilled on time, regardless of how long they sat on the quote. This means it is imperative to ensure linkages between CRM and quoting systems, to allow the inventory management system to obtain a three-to-six month advance view of likely order requirements – right down to individual line items.
For these reasons, inventory management software must be considered an essential and imbedded component of the overall business system. Far from simply existing in its own space, inventory software must be capable of real time data sharing with key systems across the business. And the easiest way of achieving this is with a single, fully integrated, solution that can help you to effectively manage your business delivery against your customer’s expectations.
Most customers will accept if you can definitively tell them when an out-of-stock item can be delivered. It is your inability to answer their questions with any certainty that raises alarm bells. I find it incredible the number of relatively large businesses still working on an end-of-day batch system environment that blindly accept that they will get a certain percentage of orders wrong. Many of the customers we work with in a Greentree environment believe that anything less than 100% DIFOT is unacceptable, simply because they know it is achievable.
All of the systems that feed your supply chain create these inter-dependencies. It’s only when you have true intergration across your purchasing systems, production, delivery, and resourcing that you can start delivering to your customers’ expectations, with good real time forecasting being the icing on the cake.
But at what cost?
Collaboration and visibility at all points in the supply chain is essential to achieving dramatic improvement in efficiency and customer service. There is an increasing importance placed open real collaboration with supply chain partners. Invariably, the businesses that perform best today are those that successfully manage their role in the greater supply chain.
Many organisations are now opening up their systems to provide critical partners with visibility into stock and forecasting to ensure that their partners are able to predict their needs. These businesses understand that in a collaborative world, if they can add value to their suppliers business and take costs out of the supply chain, all parties stand to share in the benefits not to mention the improvement achieved in SIFOT (Supplied In Full and On Time).
But this can't come at any cost. You still need to turn a profit, so you equally need to manage the cost of supply, production, delivery and resourcing while delivering to your customers’ expectations and service levels. Full integration gives you the reporting power to ensure you are getting your pricing and margins right. You can test out scenarios that take into consideration shifts in the cost of raw materials, petrol, labour costs or foreign exchange and how that will play out across your business.
Stand-alone, best-of-breed inventory applications will undoubtedly deliver improvement in your warehouse. But if you are looking at implementing a profound and sustainable level of improvement to your business and customer service performance, then you need a lot more. Selecting an integrated ERP system with a very strong inventory management component, will ensure that you are not only breeding satisfied customers but continuing to build a sustainable, profitable and growing business to boot.
Rob Sheldrick is the Business Development Manager at Greentree Partner, GT Business Solutions.