IDIS 344 EXAM 1
why do we need to read MDM?
Business intelligence drives business operations
What is the EOQ purchase method?
Buy a larger quantity less often. Savings must be greater than cost.
MDM: "NetPlus Alliance Embraces Change in Distribution"
Buying as large group gets discounts, being able to share technology and ideas, smaller companies are able to start doing these things to compete with larger companies. Smaller companies have even started buying shared systems in order to stay competitive.
List the 2 methods of purchasing inventory items for a Distributor.
CYCLE EOQ
MDM: "The E-commerce Challenge for Small Distributors"
Challenge for small distributors - its expensive, they have to hire more technical and marketing people, if they hire a partner to do their marketing are they going to have a good understanding of their business.
Who normally gets the best price and why?
Charge customers normally get the best discounts because you're building trust in an established relationship. And expect return business from them. Next discount goes to cash customers, and the least discount goes to new customers.
Effective Quantity On Hand:
(minus) - Allocated (Now) - Reserved (Future) - Transfers Out - Backorders (plus) + On order (Purchase Orders) + Transfers In = Effective quantity - amount actually available to sell
Summary of ERP systems
- All have similar functions -Takes time and money to implement -Must have hardware and software -Training and buy in are both critical -Initial costs vs sustainment -We use Infor
What are the support services in supply chain planning?
- Information Technology - Human Resource Management - Finance management
What should a business do before implementing new technology
- conduct a SWOT analysis (identify strengths and weaknesses) -develop an implementation plan -determine ROI and measurable objectives -Get buy-in from employees (make sure everyone is on board) -Ensure that you budget completely (factor in training and maintenance) -Stay the course
Order point
-Based on Lead Time, Safety Stock , & Desired Stocking Level. - ERP reminds you to order and recommended amount. - Distributor's knowledge and experience can determine actual order amount.
What are the advantages of using a cloudsuite distribution ERP?
-Browser Based - windows and mac compatible -Cloud-based -Easy to use -Integration -Flexibility -Efficient & effective management - Monitoring & Analysis of all facets of a distribution company - Manage from local branch to entire enterprise
What are the 3 C's of pricing?
-Cost -Competition -Customer
Carrying Cost: "K Cost"
-Cost of carrying an item in your warehouse -Expressed as a percentage
MDM: "How Data Helps Distributors Overcome Profit-Squeezing" It listed four types of analytics to help Distributors. What are they?
-Descriptive analytics -Diagnostic analytics -Predictive analytics -Prescriptive analytics
Distributors using traditional order processing (NOT AN ERP) have several problems, what are some of the problems?
-Difficult to track order from acceptance to fulfillment. -Difficult to make purchase orders, inventory receipts, and costs -Room for human error and mistakes -increase paperwork implies increased non value added activities -There's more delay which increases lead time -Negative impact on customer service - Lack of integration which causes business to run less efficiently
Market Cost
-Higher than replacement cost - Allows for damage, freight, and theft - "fudge factor" - More accurately reflects the 'true cost' of an item - Most distributors will use this "cost" to determine the "price" of an item.
Why do you receive new items?
-Initial stock of a new item - Re-stock of an existing inventory item - Special order of an item
What are some of the advantages of a Distributor using an ERP system?
-Integrates all your key functions -Helps you do your job better -Enhances customer service -Increases visibility to enhance management
What are the three trends driving growth in the wholesale distribution industry?
-Investment in technology - A renewed focus on the basics - "blocking & tackling" - E-Commerce is critical - but the backend is just as important
What are ways to add money to a sales order for items you cant touch?
-Labor - Rental - Free promotional items
Order Point: "Red Line"
-Low stock report -The quantity I do not want to drop below before my review cycle.
What is the impact of e-commerce on pricing
-Need for price transparency - More difficult to compete purely on price - Have to do your 'homework' to get it right - Loyalty and relationships become more important. - Valued-added services
A typical ERP system includes
-Order processing -Pricing -Inventory control -Sales analysis -General Ledger -Acct Receivable -Acct Payable -Truck routing -Transfers -Receiving -Purchasing -Inventory Management
What are some Supply chain security issues?
-Recent study found 3 terrorist attacks per week on supply chains • Inventory Theft • Compromise of Customers' Critical Data • Compromise of Proprietary Information • Smuggling and Piracy • Outdated Legacy Systems • Physical Tampering • Cloud Access - Security and Back-up • Trusting Data to Third Parties • IoT Sensor Compromise
Why do you need a product catalog?
-Tells employees what i can sell -Tells customers what they can buy (includes pricing and cost information and product description)
What are real world factors that impact inventory management?
-The Market - The Economy - Competition - Vendors - Customers - Mother Nature - Man-Made Events
Lead Time
-The time elapsed from when an item is placed on a purchase order until the first receipt of that item. "Time between ordering and receiving an item" -How reliable is my vendor -How much will I use during this time
What is the Effective Quantity?
-This value is calculated by the Recommended Replenishment Action Report (RARR). - This field represents the "actual" quantity of an item. - It's primary function is to be compared against the order point and line point to determine if the item is in need of ordering
Weighted average cost
-True cost of your inventory - Used for tax and accounting purposes. - Re-calculated each time that a purchase order is received
Pricing Hierarchy
-Tug-of-war between between sales department and accounting department -Hierarchy is series of "guidelines" inputted by Distributor that includes various discount options.
Safety Stock
-Used to "pad" the order of an item to prevent stock outs. "safety net" -What is your risk tolerance -What is the "criticality" of this item to your customers?
Why do we not just stock everything?
-Waste of resources: people, money, warehouse space -Expensive -Reduces flexibility
What are the four major questions the catalog answers?
-What is it? -What is the cost/price? -Where is it? -Where did it come from from?
Replacement Cost
-the cost to replace an inventory item in its identical form -Cost of the item from the vendor - What I paid for it. - Doesn't reflect 'true' cost of an item - Have to make-up actual costs in another way. - Most distributors will not use this a part of their pricing calculations.
There are various sales order types for the Infor Distributionsuite ERP. Which type does not allocate inventory and why?
A quote. A quote does not allocate stock because it is only a potential order not an actual order.
What is cybersecurity?
A set of principles and practices designed to safeguard your computing assets and online information against threats
What is product line?
A specific group of products
What is Inventory Management
Activities employed in maintaining the optimum number or amount of each inventory item.
Inventory management is described as a combination of what two things?
Art - (Industry knowledge and experience) Science - (Technology and the ERP)
MDM: "The Benefits of an Online Presence for Small Distributors"
Competing with large distributors that have an established e-commerce is becoming easier and more affordable for small distributors. the playing field is leveling software and hardware costs are becoming more reasonable. The ability for distributors to get the right combination of internal resources and external partners is getting easier. The top 3 roadblocks - money, experience, and lack of internal talent. there's difficulty in translating online efforts into actual new customers. Even without making a sale having an online presence still helps companies communicate about their products and services.
Summary of Davis Duren's lecture
Creating your own unique value Always selling yourself to people value proposition - leaving your mark Core values "your filter" Distinguishing you, your business, and your value. Leadership disciplines - consistent and effective communication visionary thinking embrace criticism embody culture respect the dignity of people fight hard for whats right respect effort and honor achievement don't quit on objectives
Hierarchy is normally determined by the following variables:
Customer Type • Seller's Item Rank • In-stock vs Special Order • Customer's Item Visibility • Item Unit Cost • Historical Gross Margin Levels
What is involved in selling an item?
Customer requests an item: - Determine status • In-stock • Due-in • Back-ordered • Available at another Branch - We sell the item requested. • In addition to the requested item: - Always offer Associated items - "Upselling" • If we don't have the requested item: - We offer a Substitute Item.
What are the two purchase methods?
Cycle and EOQ
Ordering Cost: "R Cost"
Dollar cost of placing an order for an item
Goldilocks theory of pricing
Don't make your price too high Don't make your price too low Make your price just right
Remember **
ERP provides you recommendations, but Distributors' knowledge and experience provides final decisions.
What does ERP stand for?
Enterprise Resource Planning
Retail
Everyone "normally" pays the same price
Wholesale
Everyone does not "normally" pay the same price
Inventory control and management
Filter through - What you have -What you use -What you get to = the amount of inventory you want to have
What is the first step in inventory management?
First step is determining what items that you will stock and in what quantity - the ERP will help you determine when to order and how much to order.
what is the Recommended Replenishment Action Report (RAAA)?
Generates a printed report and a database file of what to order.
What is one of the most fundamental and important management functions?
Getting the price right
Lead time usage
How many do I sell during my lead time
Cycle usage
How many do I sell during my review cycle?
Review cycle
How often do I want to look at this product line
Cycle Item
If effective quantity < line point order "up to" line point
EOQ Item
If effective quantity < or = Line Point order "up to" Line Point or EOQ, whichever is greater
EOQ ITEM
If effective quantity is greater than or equal to the line point, order up to the EOQ or the line point whichever is greater.
CYCLE ITEM
If the effective quantity is LESS THAN the line point, order up to the line point
What is the "heart" of an ERP System?
Inventory control and management
Why do you need an ERP system?
It improves operational efficiency. • It reduces costs & increases profits. • Reduces "non-value add" steps in the process. • Helps with customer & inventory stratification • Integrates all aspects of your operations • Improves customer service • Provides analytics • It still takes people to make this work. • Focused on wholesale distribution
What is demand?
Item usuage -sales + loss of sales
What is the cycle purchase method?
Just in time buying - as one is going out the door, one is coming in the door. Regular buying pattern based on Inventory Management - Routine Method
The difference between the Cost that a Distributor pays for an item from a Vendor, and the Price charged to a Customer for the item is called what?
MARKUP
The difference between what you pay for an item, and how much you charge a customer for the item.
Markup
What is the Goldilocks Theory of Inventory Management?
Not too little Not too much Stock just the right amount of inventory
What are the two primary factors Distributors use to determine pricing and discount setup.
PRODUCTS CUSTOMERS (also vendors)
MDM: Don't Confuse Reducing Customers' Inventory with a Reduction in Profit"
Reducing inventory for customers is a good thing. today's customers don't want to buy from big box stores. - they want competitive pricing, guaranteed availability, and fast delivery. Think bigger and put customers first. offer value to your customers, help them reduce inventory purchases cut down on waste and then captivate additional spend in other areas. inventory control solutions less waste and shrinkage and fewer unnecessary purchases. Distributors should remember they are not in the business of selling products but problem solving. this builds trust with customers.
What is used to "pad" the order of an item to prevent stock-outs.
SAFETY STOCK
What are some reasons you would not order the recommended order quantity (ROQ) provided by your ERP system?
SEASONAL MARKET & ECONOMY COMPETITION MOTHER NATURE CHANGE IN CUSTOMERS NEEDS MAN MADE EVENTS BUYERS KNOWLEDGE AND EXPERIENCE
What are the 5 S's of supply chain planning
Source Stock Store Sell Ship
Why does pricing matter?
The fastest and most effective way for a company to realize its maximum profit is to get its pricing right.
What is inventory management in a perfect world?
The last item on the shelf is shipped out to a customer as the replacement is received from the vendor
Line point
The order "up to" quantity
Economic Order Quantity (EOQ)
The order quantity that minimizes the total inventory carrying cost and ordering costs.
What is Recommended order quantity (ROQ)?
The suggested amount of an item to be ordered.
What are the main objectives of inventory management?
Uninterrupted: o Production o Sales o Customer-Service Levels At the Minimum Cost
MDM: "Commentary: Market Leading Strategies for 2020"
What the top 3 distributors have in common- process (the way you do things) Metrics (the way you measure things) and change management (adapting to change)
Davis Duren's guest lecture talks about "filtering" your decisions. what did he describe as your filter.
Your personal CORE VALUES are what you should always filter your decisions through to make sure you're making the best decision for yourself
MDM: Finding Opportunity in the 'Forces of Change'
going to win by being "not amazon." Diversity of business models will emerge for distributors, and they will get there through innovation. How to turn that number of 350,000 distributors from a weakness in competing with the scale of amazon and other distributors into a strength "what" and "how". 3 categories - technology, human, and commerce. Thats called "storytelling" a skill for leaders by telling your story you develop foresight & build your brand. you help your company and people transition from today to tomorrow. "distributors must seek not just to catch up but to get a ahead" innovation = think wide before you think narrow "non distributive innovation"
purchase order
how you buy from the vendor
sale order
how your customer buys from you
Cost
is what you pay for an item
Price
is what your customer pays for an item
MDM: "How Analytics are Democratizing the Distribution Market"
its important to know what your companies doing for the next decade. biggest impact analytics advanced cost and profit analytics to companies of all sizes is now democratizing the market the most important metric in distribution is % of money losing invoices Tools to turn the tables - if you feel like you're losing business of key accounts to competitors you're up against competitors that are using 20/20 vision that comes from advanced analytics. They know what customers pursue and how to price those items to take business away from you. Advanced analytics gives you clarity and confidence to make decisions.
MDM: How Data Helps Distributors Overcome ProfitSqueezing
profit squeezing : sales people with too much leeway on pricing, the tendency to treat all sales the same, a resistance to technology. Distributors are always at a constant race to the bottom on price. you need data and the right analytics. The 4 types of analytics - Descriptive, Diagnostic, Predictive, Prescriptive
Technology ROI
resources investment + time investment = reduced costs, increased profit, and improved customer service
MDM: "Better sales means better training"
time is a big commitment towards training - don't worry about how long it takes just make sure that everybody gets it
price
what the customer pays for your item
cost
what you pay for an item
Vendor
who are you buying from
KEY TERMS IN WHOLESALE DISTRIBUTION: Customer
who is buying from you
Purchaser/Buyer
your representative that buys from the vendor