Outsourcing vs. Onshoring Manufacturing: What’s Best for Your Company?

August 2, 2013 at 2:24 PMHeidi Bragg

The decision whether to outsource or onshore (“re-shore”) your manufacturing operations is a complex one. Executives have to evaluate not just the labor costs of various areas, but also what the decision will mean as far as quality control, logistics, and public opinion are concerned.

“A few years ago, manufacturers were tripping over themselves to outsource to China,” says Ian Benoliel from NumberCruncher, makers of All Orders inventory software. “Not so much anymore, as unit costs are steadily rising due to the price of oil and workers’ demands for higher wages and more benefits.” Benoliel continues, “Engineering has also been a nightmare, where any change in design causes major production delays. Customer service has also been impacted due to increases in delivery time.” While no two companies face all of the same challenges, there are some common considerations for every firm that goes through this process.

Wherever you choose to establish your production facilities, shipping methods and costs need to be considered, along with how to ensure that only quality products leave your factory. Also, the political and economic stability of an area can directly affect your bottom line. Even if wages are significantly lower, risks to your supply chain and operational stability may make some locations far more desirable than others. It’s critical to do your homework and analyze all possible issues that can arise in a particular country or region before basing operations there, regardless of how enticing that location may seem based solely on labor costs. Some of the major considerations include:


Shipping

In an article about outsourcing in The Economist earlier this year, the author states that, “… Companies are increasingly factoring in the rising cost of shipping goods across oceans, and the risk that natural disasters or geopolitical shocks could cut off essential supplies.” How much will shipping add to your production costs? Does established transportation infrastructure exist in your desired location? If not, how much will you have to invest to build the necessary channels to receive supplies and distribute finished goods?


Quality control

In order to realize the gains offered by lower wages, good quality control has to in place at the source of manufacturing. How can you ensure that the goods produced in your factory meet company quality standards? What kind of oversight is provided at the manufacturing facility, and by whom?


Skill level of the labor force

Certain areas of the world have a greater percentage of highly trained laborers. Does the area offer a well-educated work force? How technical are your products? Do nearby vocational or technical schools work with companies to provide skilled laborers for specific needs? Are there enough workers available to fully staff your manufacturing facility?


Political and economic stability

Can you reasonably expect your supply chain and distribution channels to operate uninterrupted by political or economic events? What is the government’s attitude toward overseas companies who do business in their area? For example, North Korea’s refusal to allow workers to return to factories in the Kaesong Industrial Region (which is jointly operated with South Korea) has caused close to a billion dollars in losses so far.


Incentives

Many areas, both in the U.S. and worldwide, offer incentives to attract new businesses.  After President Obama’s 2012 “State of the Union” address, the New York Times reported that the President had, “ … Called for a wide-ranging package of policies to help create American manufacturing jobs, including trade enforcement measures, business tax breaks, and worker training programs.” What kinds of incentives are available for your particular firm or industry? Do tax benefits exist that can help offset labor costs?


Public perception

For your customer, how important is the location where the product is made? To some, having a “Made in the USA” sticker can determine whether or not they purchase a particular item. Others simply want the best possible quality product at the lowest possible price, regardless of the product’s origin. If you know your customer base well, you’ll know how much of a factor this is for your clients. Many consumers, especially after the Rana Plaza tragedy, are concerned about conditions in overseas factories and make buying decisions accordingly. What will the working conditions in your factory be like? Are employees paid a living wage based on the local economy? Does the facility meet basic standards of safety and health?

While not an exhaustive list, these are some of the basic factors that must be evaluated before making a decision to move your manufacturing overseas or to bring it back to the U.S. Each company will weigh these factors differently to meet the unique considerations of their organization, their products, their employees, and their customers. After a thorough analysis, you’ll know which choice is right for you.


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Inventory Management Serial Number Tracking Tools Aid Utility Equipment Manufacturers

July 22, 2013 at 3:32 PMHeidi Bragg

The term “infrastructure” encompasses everything from power grids and water lines to streets and highways. Since communities and businesses are dependent their underlying infrastructure, utility management entities work to make sure these systems operate as efficiently and cost-effectively as possible. One way both public and private utilities are addressing these needs is through the use of pro-active asset management Asset Manager Asset management is the key to getting the best use out of existing systems and equipment.

In order to properly manage and maintain their equipment, or assets, utility companies require specialized instruments. Vivex-Metrotech Vivax Metrotech, a mid-sized business based in California, manufactures test and measurement tools designed specifically to meet these needs. The company makes water leak detectors, buried pipe/cable locators, and cameras used by waste water utilities. These instruments help utility workers locate equipment and identify components that need repair or replacement.  As a result, utilities can properly maintain and operate crucial assets, prolonging the usability of each component and reducing life-cycle costs.

Vivax-Metrotech uses serial numbers to track its products through each stage of the production process. However, this was not an easy task in the early days of the company’s development. Rich Jordan, product manager and IT department staff at Vivax-Metrotech, says, “When I came on board at Vivax, we were a small company. We had two employees using QuickBooks and sharing a single laptop.” Jordan knew they needed to transition to a multi-user, client server environment. He continues, “We also recognized that we needed enhanced functionility as far as kitting, bills of materials (BOM), purchase order (PO) expediting and serial number tracking were concerned.”

After evaluating various inventory control and order management software programs, Jordan chose All Orders by NumberCruncher to better meet the company’s needs.   In early 2002, NumberCruncher was the first company to offer a solution for small to medium-sized businesses (SMBs) that was specifically designed for QuickBooks. Since then, over 1500 companies have used NumberCruncher’s products and services to better manage their businesses. All Orders’ latest upgrade includes both return material authorizations(RMA) and repair tracking modules.

Vivax merged with Metrotech in 2009 and since then, the company has grown significantly. They now have a 30-seat license, with about 15 users on the system at any given time, and can track each product to ensure it meets the needs of their customers.

Quality control is an important element in gaining a competitive advantage, especially for SMBs. Tracking problems in finished products and their component parts is a crucial part of keeping expenses low and customer satisfaction high. These days, computerization allows manufacturing and quality control procedures to be implemented and tracked more easily than ever before. “From purchasing all the way through to financial reporting, computerization exists to give to business owners, managers, and accountants the tools to be successful faster, easier, and more efficiently,” says Ian Benoliel, CEO of NumberCruncher

The benefits computerization offers are clear at Vivax-Metrotech. Jordan says, “With All Orders, serial number tracking is per item. In other words, you decide if an item should be serialized and turn on that function. This is especially useful with export items.”

He describes their process as follows: "When a unit comes in for repair, we input that unit’s serial number at the time we enter the repair order. The program will then shows us a history of that item, including the date, invoice number and airway bill that the unit was received under, when it was sold and to whom, and if it has any history of being repaired by us or by any of the 12 authorized repair centers we have in the USA and overseas. That’s important because Vivax-Metrotech and its repair centers should guarantee any repair for a period of 90 days. We’ll also check to see if the unit was returned to us from the same customer who bought it, which helps track down stolen equipment.”

Jordan continues, "If the item has been previously repaired at an off-site service center and then comes to us, we can see what's wrong, what the off-site provider fixed, and make sure that the workmanship of our service providers is up to our standards. If there's shoddy workmanship involved, we can address it.”

Vivax-Metrotechrecently installed All Orders’ RMA/repair module upgrade and appreciates the functionality these new modules offer. They provide yet another tool to help the company “ … meet and exceed (their) customers' needs … providing top quality, well engineered, innovative products at competitive prices.”

Download your trial version of All Orders today and find out how Repair Order and RMA functionality can help your business.

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Audiovisual Equipment Manufacturers Using QuickBooks Integrated RMA and Repair Order Software

July 9, 2013 at 7:34 PMHeidi Bragg

The market for audiovisual equipment is highly competitive and continually expanding. According to InfoComm International, an organization that represents the commercial audiovisual industry worldwide, “The … industry currently generates $78 billion a year … and is projected to be a $115 billion global industry by 2015”  (see The Growing Audiovisual Industry). U.S-based audiovisual firms face competition not only domestically, but also from overseas firms. Given these industry projections, both large and small audiovisual manufacturers need a variety of tools to optimize their processes and increase their market share.

Quality control is an important element in gaining a competitive advantage. The ability to track problems in finished products and their component parts is a critical part of keeping expenses low and customer satisfaction high. Thankfully, computerization allows manufacturing and quality control procedures to be implemented and tracked more easily than ever before. “From purchasing all the way through to financial reporting, computerization exists to give to business owners, managers, and accountants the tools to be successful faster, easier, and more efficiently,” says Ian Benoliel, CEO of NumberCruncher. There are a variety software programs which can assist manufacturers in these tasks, but many are priced beyond the reach of small- to medium-sized businesses, or “SMBs”. However, these are often the very firms that are driving innovation in the audiovisual industry and need these tools.

One such company is Earthworks, a New Hampshire-based manufacturer of precision-engineered, high definition audio equipment. Year after year, the company’s products are nominated for technical achievement and industry excellence awards. Specialized equipment like Earthworks’ requires accurate tracking of every aspect of manufacturing in order to insure consistent, high-quality results. Because inventory control, order management, and repair/return merchandise authorization (RMA) tracking are critical to their business, Earthworks needed an affordable tool that would help them manage all these processes. The company uses QuickBooks accounting software, so the new system had to integrate seamlessly with QuickBooks financials.

Two years ago, Earthworks began using All Orders, an inventory control and order management software from NumberCruncher (a QuickBooks Gold Partner). In early 2002, NumberCruncher was the first company to offer an enterprise resource planning (ERP) solution specifically designed for use with QuickBooks. Since then, over 1500 companies have used NumberCruncher’s products and services to better manage their businesses. All Orders’ latest upgrade includes both Return Material Authorization and repair tracking modules.

Earthworks, like many companies, use serial numbers to track their products. This enables them to trace an item back through the production process to the source of each component used in the finished product. When a microphone or other piece of equipment is returned, serial number tracking helps Earthworks identify where problems lie – whether there’s an issue with a particular batch of component parts or a certain supplier, if a certain tech needs additional training, etc. Three months ago, Earthworks added All Orders’ RMA/repair tracking modules to their existing software to help them streamline these processes.

Daniel Blackmer, the company’s Director of Engineering, explained how these new capabilities have helped streamline operations. "All Orders’ RMA/repair module allows us to keep track of repairs independent of returns, and the problem description and technicians’ notes sections for each serial-numbered item help us optimize our repair process,” he says. “This is critical since multiple departments may handle different aspects of a repair. Each tech can record and reference exactly what they see in front of them.”

Some SMBs also refurbish products, either their own or those from other manufacturers. By using All-Orders’ Repair Order module, Earthworks can track repairs and add costs to their company-owned products. Blackmer continues, “When an item comes in to be fixed, we can use the serial number to track who built the product, when it was built, and exactly which components were purchased from each vendor. We can also see where the product is in the warranty cycle, if it’s been returned before and why, and know which repair parts were used previously (along with where they were purchased)."

“Technology exists to ease the tracking burden,” concludes Benoliel. Through utilizing affordable tools for serial number tracking and accurate recordkeeping, even highly technical SMBs can optimize their manufacturing processes and better manage repairs of returned merchandise. The resultant gains in quality and customer satisfaction save both time and money, and help firms gain a larger share of their respective markets.

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Serial Number Tracking

July 5, 2013 at 9:47 AMIan Benoliel

What is a serial number?

A serial number is an identification number assigned to a distinct unit of a product from a single manufacturer. A serial number may be found on the packaging or on the unit itself.

A product will typically have an identifier often referred to as an SKU (stock keeping unit). For example a cellular phone made by RIM may have an SKU of 64905 which is BlackBerry Bold 9000. In addition to the SKU, each phone will have unique serial number. In the cell phone, wireless business its called an IMEI or International Mobile Equipment Identity. So whereas there may be thousands of 64905s there will only be one with IMEI 353958803-121326-9.

Why should my business track serial numbers

Serial numbers enable the manufacturer to trace a product back through the production process to the source of the components used in the finished product.  In our example of a cellular, the serial number allows the manufacturer to determine which components where used and from which supplier. So in the case where a certain batch of components may have been faulty, the manufacturer can recall only the serial numbers affected instead of a total recall.

Another reason is for warranty purposes.   Through its serial number you can trace which customer purchased a particular phone and if that phone is still under warranty.

In the cell phone business IMEI are also used for a blacklist of stolen devices.  Through the Central Equipment Identity Register an cell phone can be prevented from making calls through its IMEI.

How can All Orders by NumberCruncher help track serial numbers?

Technology exists to ease the tracking burden. These solutions include electronic records handling to help streamline the handling of bills of material and work orders, as well as technology such as barcodes and labels for serial traceability and warranty dates. But this technology has typically been out of reach for the small manufacturer. However All Orders by NumberCruncher provides sophisticated yet cost effective means to track serial numbers through the supply chain to the consumer and its integrated with QuickBooks.

Bill of material

A bill of material (BOM) is a list of the raw materials, sub-assemblies, intermediate assemblies, sub-components, components, parts, and the quantities of each needed to manufacture the final product. It may be used for communication between manufacturing partners or confined to a single manufacturing plant.

A BOM can define products as they are designed (an engineering bill of materials), as they are ordered (a sales bill of materials), as they are built (a manufacturing bill of materials), or as they are maintained (a service bill of materials). The different types of BOMs depend on the business need and use for which they are intended.

An electronic BOM provides greater control over production costs. The ease in creating and editing an electronic BOM helps in maintaining product quality—the actual vs. expected product output.

Using BOMs ensures engineering designs are adhered to during production.  The BOM has production instructions and routing steps, including one that can be called quality control. You wouldn’t believe how many small companies keep their BOMs and production notes on paper in a file cabinet (or in the owner’s head). Paper, or even basic Excel spreadsheet systems don’t allow companies to easily update and instantly communicate changes throughout the entire organization.

Small electronics and computer manufacturers need vital inventory and order management features to effectively track inventory quantities, production, and customer orders. All Orders by NumberCruncher for has the necessary tools that QuickBooks Inventory for manufacturing and manufacturers does not have. From bill of materials to tracking warranty dates, these electronic manufacturers have the same compliance and operational requirements as larger companies. They need much, but not all, of the functional technology solutions [that are available to larger companies]. Too often this type of BOM functionality is found in costly software and hardware solutions.

Work Orders

Paper work orders do not allow production data to be shared throughout a central database. Quality processes cannot be effectively documented and saved to create standard operating procedures critical to electronics production. The ability to save and attach the serial number being manufactured ensures quality processes.

The electronic work order is used to create finished product. Each step in the work order is completed before the work order can be finalized. Too often lower-cost technology solutions lack the needed custom fields required per work order that allow the quality control checklist to be integrated with all other functions, and retained in the same database as order and inventory information.

Without the work order, the impact on quality will be significant, because the internal quality metrics cannot be documented. The work order is the internal document that manages production of a specific BOM for a specified quantity.

Bar Codes

Just as they use clipboards to keep track of inventory levels, many electronics manufacturers use a grease board, dry erase board, or a spiral notebook to track orders from suppliers, inventory, location transfers, customer orders, shipping information, work order picking, and inventory counts and adjustments. All of these can be done via mobile bar code scanning, but until now, many electronics manufacturers have found this critical technology inaccessible because they were priced out of these solutions.

Using bar codes for components ensures that the correct ingredients are picked and overall production efficiency increases. The level of efficiency and reduction of errors decreases by an average of 10 percent

Serial numbers and Warranty or Acquisition dates

No one wants to keep inventory on the selves for too long.  Nor do electronics manufacturers or wholesalers want repair a unit with an expired warrant period or better still a unit that they did not sell.   By not tracking serial numbers you are loosing money by

  • Spending to much time researching serial numbers
  • Repairing units that are not under warranty
  • Repairing or allowing a return for something you did not even sell!

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Food manufacturing software for small businesses

May 2, 2013 at 5:27 PMIan Benoliel

Food manufacturing software for small businesses does not have to be expensive or complicated with the All Orders Inventory and Order Management system.

1.    Create Bill of Materials for your Recipes

In process industries, such as food manufacturing, the BOM is known as the formula, recipe, or ingredients lists. It is simply a list of the ingredients and the quantities of each needed to manufacture the final product. It may be used for communication between manufacturing partners or confined to a single manufacturing plant. Using BOMs ensures recipes are adhered to during production. In addition to the ingredients and yields, the BOM has production instructions and routing steps, including one that can be called quality control. You wouldn’t believe how many small companies keep their formulas and production notes on paper in a file cabinet (or in the owner’s head). Paper or even basic Excel spreadsheet systems don’t allow companies to easily update and instantly communicate changes throughout the entire organization.

In business the only constant is change.    So you should regularly review you bill of materials to ensure you have the correct ingredients and proportions.

2.    Use Work Orders for Production and Quality Control

Paper work orders do not allow production data to be shared throughout a central database. Quality processes cannot be effectively documented and saved to create standard operating procedures critical to consistent food production. The ability to save and attach the batch and lot number being manufactured ensures quality processes. .

The electronic work order is used to create finished product. Each step in the work order is completed before the work order can be finalized. Too often lower-cost technology solutions lack the needed custom fields required per work order that allow the quality control checklist to be integrated with all other functions, and retained in the same database as order and inventory information.

Without the work order, the impact on quality will be significant, because the internal quality metrics cannot be documented. The work order is the internal document that manages production of a specific BOM for a specified quantity. The work order can track yields of raw materials and reworks.

3.    Track Lot or Batch #s

Lot numbers enable the manufacturer to trace a product back through the production process to the source of the raw materials used in the finished product. In our example of tomato sauce, the lot number on the cases allow the manufacturer to determine which tomatoes where used and from which supplier. So in the case where a certain batch of tomatoes may have been contaminated, the manufacturer can recall only the lot numbers affected instead of a total recall.

For food and beverage manufacturers, electronic traceability will become an industry requirement. On July 31, 2009, the House passed the Food Safety Enhancement Act, which has been touted as the most far reaching reform to food safety legislation in 50 years. The legislation outlines the requirements for all companies who produce, manufacture, process, pack, transport, or hold food to maintain full pedigree of product information and electronic traceability records. On Oct. 5, 2009, 55 food-service manufacturers, distributors, and operators launched the Foodservice GS1 Standards Initiative outlining the adoption of a common timeline for implementation of GS1 global standards for company identification, item identification, and product description.

4.    Put Labels on Finished Goods

This seems obvious but many manufacturers don't bother to put the appropriate label on finished goods. A label should at a minimum have the SKU, description, quantity and date. Other useful information would be the lot/batch number, work order # and best before date or expiration date. It would be extremely beneficial to you and your customers if your labels have bar codes. This would allow both you and your customers to use scanner to ship and receive product.

5.    QuickBooks Integration

With one of the first ever Quickbooks integrations being built by NumberCruncher in 2001, saying that the solution was designed for Quickbooks would be an understatement. With a powerful bi-directional synchronization, updates to entities, such as items and customers, that occur in one system will always roll into the other. No need to enter anything twice! Whenever Quickbooks needs to get notified of items going into inventory, such as receiving, or out of inventory, such as shipping, All Orders will make sure Quickbooks knows about it. Bookkeepers handling AR/AP in Quickbooks cannot even tell the difference between documents generated by actual users or All Orders! It is also as flexible as it is powerful. Choose what you want to sync and when you want it to happen. Trigger syncs manually, automate them to happen at specific intervals, or update data in real time. Users that only need All Orders for inventory and order management can even have Quickbooks uninstalled allowing a reduction in Quickbooks licenses (translation: more money in your pocket!) and fewer security concerns with your sensitive financial data being accessed by the wrong people.

 

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Forecasting Inventory Needs

February 1, 2013 at 12:31 PMIan Benoliel

If you are a manufacturer, wholesaler, or retailer and have repetitive orders of the same products, you have undoubtedly asked yourself at what stock level you need to replenish your inventory. The goal is to reduce inventory levels while being able to fill most of the orders that come through the door. Here’s how.

Lead Time

When you place a purchase order with a supplier, it will take some time for the inventory to reach your door. This is called lead time. A local supplier’s lead time may be one to four days, while an overseas supplier’s may be four weeks. Therefore, you should have at least enough inventory to last during the lead time.

Many things can happen during the lead time period. The supplier may delay in delivering your order, for example, or you may get an unexpected bounce in sales. So in addition to having enough stock during the typical lead time, you should also keep a bit extra, known as safety stock.  The reorder point, therefore, is calculated as follows:

Reorder point = lead time demand + safety stock

Lead time demand is what you expect to sell during the lead time period and is calculated as follows:

Lead time demand = lead time (usually in days) x forecasted daily unit sales.

If the lead time is 14 days and the forecast is three units per day, for example, the lead time demand is 42 units.

Reorder Point

To calculate the reorder point, you need to know forecasted daily unit sales. Some businesses know this exact number because they already have standing orders from their customers. Other businesses, such as retail, look at past sales to determine this number. When looking at past sales, consider seasonal fluctuations. For example, if you sell snow boots, you would not look at January sales when forecasting for July; you would base the forecast on the previous year’s July sales.

The final piece of the reorder point calculation is safety stock, which is that bit extra just in case. The calculations for safety stock can be simple or extremely complicated, depending on whom you ask. Many people opt for the simple solution:

Safety stock = lead time demand x 50%

This simply states that your safety stock is half of the lead time demand. So if the lead time demand is 42, safety stock is 21. So now you can calculate the reorder point, which is 63 (42 + 21).

Reorder Amount

There are a number of calculations for determining what the report point might be.   One is using the Economic Order Quantity (EOQ) which I describe below.    Another approach uses the Min/Max.      When the inventory stock level reaches a certain minimun quantity the minimum (min), the order quantity should bring the quantity to the maximum allowable.    The 'min' is the Reorder Point calculated above.  The Max could be a percentage of the reorder point.   Assume in the Min=63 and Max is 80 and there are 40 unit in stock, the order amount will be 40 as follows:

If Stock is less than 63,  Reorder amount = Max - In Stock

EOQ is designed to minimize inventory carrying costs. Inventory carrying includes interest, taxes, insurance, and temporary storage (not rent, which you must pay regardless of inventory level).

Reorder Amount ==( 2 x AU x OC ) / (ACC)

AU = annual usage in units
OC = order cost
ACC= annual carrying cost per unit

This formula looks more complicated than it is. The annual usage is an easy number. This is how much you sold or used in production in a year. The order cost represents the cost of processing a purchase order from quote to payment. For a small business, you can use $15; for larger businesses, use $30. For the annual carrying cost per unit, use the cost of the product multiplied by 10 percent.

Continuing from the previous example, let’s see the following values.

AU = 1000
OC = 15
ACC= $2 ($20 cost of product x 10%)

Reorder Amount =( 2 x 1000 x 15 ) / (2) = 123 units

So when the stock level reaches 63 units, you place a purchase order for 123 units.

The good news is that inventory software will do most of the calculations for you.  Morever, software like All Orders by NumberCruncher will calculate the reorder points and lead times and also generate purchase orders for multiple vendors with one click of the button.

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Taking a physical inventory count

November 22, 2012 at 11:47 AMIan Benoliel

Taking at least one physical inventory count throughout your fiscal year is critical part of your internal control procedures.  An inventory count can

  • Confirm the quantity of inventory for financial statement purposes.
  • Identify sources of shrinkage and theft.
  • Confirm 'back flush' rates for your bills of materials.

Generally at least one full count is conducted at the end of each fiscal year.  Many companies do 'cycle counts' whereby certain areas or products are counted on a rotating basis.   Doing cycle counts eliminates the need to do a complete inventory count at the end of the year.

The following is a general guideline for conducting a physical inventory count.

1.    What areas are you counting?

Many businesses have multiple warehouses and indeed multiple areas within the same warehouse.  Generally it is recommended that you count contiguous areas together so the count can proceed in an organized fashion.   Many companies have a 'map' of their warehouses. Using a map to identify which areas need to be counted is a great tool to visualize the count.  Consideration should also be given to segregate damaged products within their own area.     

Special consideration should be given to the following areas:

  • Pending shipments to customers that have been packed but not shipped are technically part of your inventory and should be counted.
  • Receipts from suppliers received from suppliers should be counted.
  • Stock that has been allocated be production should be counted.

A good idea is to tag or otherwise mark an area after it has been counted.   

2.   Establish a count date

If you are counting to verify quantities for financial statement purposes your count date should be as close to your year-end date as possible.    Counting is time consuming so doing a count on a busy day is not advisable.   Pick a day and time of relative calm. 

Your count date will also be the 'cut-off date'.   The cut-off date is used determine the quantities shown on the physical count worksheet. Meaning that all transactions on or before the cut-off date should be reflected in the count and transactions occurring after the cut are excluded.

3.    Who will be counting?

Usually company staff will be doing the counting although there are numerous firms that can be contracted to conduct your count.     Schedule your staff appropriately and allocate them sufficient time to complete their work.  Staff should be assigned to certain areas of the warehouse.    Counters should be paired up; one person will do the count and the other record the results.    The count would go faster and there would be less likely to fudge the number.   A supervisor should also be assigned.   The supervisor should spot check counts conducted by every staff member.    If the spot checks show persistent discrepancies certain areas may need to be re-counted.

4.    Physical inventory count worksheet

The physical count sheet is provided to counter.   Such count sheet should include the item or sku, description, area or bin, lot / serial # if applicable and a blank spot for quantity counted.     Management should know the 'quantity per books' which will be compared to actual count.  It is not recommended that the 'quantity per books' be shown to counters to discourage them just writing in the number.   The count sheet should also include extra lines so the counter can write in parts in their areas that are not on the count sheet.    After each count transpose the quantity counted onto the count sheet.  

5.   Investigate discrepancies

After all the count sheets have been tallied it's time to compare 'quantity per books' with the actual count.    Invariably there will be differences between book and actual.      Here are some things to investigate:

  • Shipments that are packed but not yet shipped. These should be included in the count.
  • Receipts from suppliers BEFORE the cut-off date that have not been put away. These should be included in the count.
  • Receipts from suppliers AFTER the cut-of date.  These should not be included in the count.
  • Inventory on the shop floor that may have not yet been consumed in production.  These should be counted.

Some more serious reasons for discrepancies include:

  • Theft
  • Shipments going out without invoices.
  • Receipts from suppliers which understates accounts payable.

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Sales Orders why are they important?

October 24, 2012 at 6:34 PMIan Benoliel

Sales orders are fundamental to any inventory and order management system. When a customer sends you a purchase order or clicks buy on your web site your company becomes obligated to fullfill the order. Therefore a sales order should be entered into your system as soon as possible.  

I have seen some companies that instead of entering a customer PO as a sales order, they enter it as an invoice even though they have not yet shipped the product.    This is not advisable for a number of reasons:

1. A sale is not yet made: Generally accepted accounting principles require that you ship the product before you record a sale.   Since you have created an invoice you have incorrectly recognized revenue in your accounting records.

2. You may not have the inventory to ship:  You may have generated the invoice but you make actually be in backorder.  This is especially possible if your system allows you to go into negative inventory (like QuickBooks does).  Now you have an invoice and the only way for you do determine what is in back order and what needs to be ordered from your suppliers is to painstakingly go through each product that shows negative inventory.  Ouch!

So the correct procedure would be to enter a sales order and a minimum the following data should be captured:

  • -Customer's legal name
  • -Billing to address
  • -Shipping Address
  • -Order date
  • -Expected shipping date
  • -Customer PO #
  • -Terms of payment
  • -Each product that was ordered (SKU and Description)
  • -Quantity ordered of each product
  • -Price per for each product
  • -Shipping method

Once a sales order is in the system you can use to answer a variety of questions like:

  • -When do I need to ship products?
  • -Which products do I need to order from my suppliers and how much do I need to order?
  • -Which sales orders do I ship first?

If you are not using an inventory and order management system things are probably slipping through the cracks. Here are some points to consider:

  • -Paper gets lost or destroyed.
  • -Excel needs to be manually updated.
  • -Without a system it's hard to share data within your organization.
  • -You have limited visibility as to open orders, backorders, available inventory and such.

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O Canada - QuickBooks Inventory Software for Canadian Companies

October 15, 2012 at 12:11 PMIan Benoliel

Canadian companies, who are more export oriented than their U.S. brethren, have specific needs when it comes down to inventory and order management. NumberCruncher addresses those needs in its flagship product All Orders. How you may ask does a U.S. based company have so much knowledge of Canada. Well that is because its founder and president, Ian Benoliel, is from Canada. Born in Montreal, Ian grew up working in his father's manufacturing business. Ian's familiy moved to Toronto there he started his career as a Charted Accountant. Although he now lives in South Florida, his mother, brothers and sister live in Canada.

So when selecting an inventory software that is integrated with QuickBooks Canada, make sure you select one that have those features required by Canadian companies like those contained in All Orders by NumberCruncher.

Support for GST, HST and PST

U.S. and Canadian sales tax a coniderably different. U.S. taxes are generally exigible on the sales of goods whereas Canadian sales tax is exigible on both goods and services. The tax authority in the U.S. is on the state, county and city level and in Canada the tax authority on the federal and provincial levels. Finally, and most importantly, the U.S. system is not a value added tax therefore for taxes are whereas in Canada, companies received an input tax credit for taxes paid to suppliers and other vendors.

Foreign Currencies

Its rare that U.S. companies have anything but U.S. dollar bank accounts. In fact you would be hard pressed to find a bank that can offer a Canadian currency bank account. (By the way you may want to try Harris Bank which is a subsidiary of the Bank of Montreal). Conversely I would be hard pressed to find a Canadian manufacturer, wholesaler or distributor that does not have both Candian and U.S. dollar bank accounts. Canadian companies need foreign currency because they export to the U.S., Canada largest trading partner and when importing from Asia.

Multiple locations

Many Canadian, particularly manufacturers, have many customers in the U.S. as such they may have third party logistics holding inventory so lead times can be minimized.

Other features

All Orders by NumberCruncher contains an array of features designed for manufacturers, wholesalers and distributors using QuickBooks like bills of materials, work orders, vendor management, reorder point forecasting, sales orders and shipping automation, lot and serial number tracking and barcode printing and scanning.

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QuickBooks Manufacturing Software - How All Orders can improve your manufacturing process

August 22, 2012 at 5:56 PMIan Benoliel

1.    Do not allow negative inventory

Many small businesses allow their inventory to go negative. SMBs are frequently short on staff so they bypass the receiving or build process and ship or use stock. After the fact they try to correct quantities but by then it’s hard to trace back to the correct on hand quantities so their inventory become a mess. QuickBooks allows you to go into negative inventory. You will get a warning but that's it. All Orders on the other hand has a preference to disable negative inventory. This small preference will force staff to complete the receiving or build process beforehand. Some may argue that this would delay the shipping process and take more time. However one could also argue that it takes MUCH more time to have to circle back to correct negative quantity instead of doing it right the first time.

2.   The bill of materials should be a management tool

QuickBooks is a great accounting program and that what the build assembly allows you to do, account for components and cost rollup. However your assemblies together with your bill of materials should also be a management tool.

The bill of materials should be able to store critical information about the production process. All Orders allows you to use routing steps, build instructions, component level instructions and associated documents like drawings.

The bill of materials can also be a valuable costing tool and therefore there should be a cost roll-up when the cost of your components change or even when the cost of the a components of a sub-assembly changes; QuickBooks assembly does neither.

3.    Allocate stock for a build

Normally when you start a build (i.e. work order) you would like to be able to be able to allocation available stock then do a purchase order for the rest.     In QuickBooks if you do not have sufficient stock the entire build assembly goes to 'Pending' mode which makes it extremely difficult to determine required stock and plan production.  

All Orders allows you to 'Allocate' stock to a work order thus preventing another user from mistakenly believing that the stock is available. In addition All Orders uses status to inform the user on the readiness of a particular work orders. A work order can easily be de-allocated if the stock is required elsewhere. The ability to allocate stock avoids the pending build issue so common in QuickBooks.

4.    Auto create work orders and build them in batches

Creating a build assembly can only be done one at a time and it could be extremely time consuming. All Orders has a couple of tools that make the job easier. Firstly you can use the "Reorder Analysis" to create work order based on different criteria like deficiency, required and reorder point. Secondly the work orders can be processed in batch from the work order list on which you can allocate, change status and finish work orders. In All Orders you can process 100 work orders at the same time!

5.   Use the work order for scheduling and quality control

The work order lists and reports have various programmed information that help you track their progress.  In addition, All Orders work orders contain up to 30 custom fields each which can augment the status tracking and/or provide data storage for your quality control procedures.

6.    Use labels with barcodes

This seems obvious but many manufacturers don't bother to put the appropriate label on finished goods. A label should at a minimum have the SKU, description, quantity and date. Other useful information would be the lot/batch number, work order # and best before date or expiration date. It would be extremely beneficial to you and your customers if your labels have bar codes. This would allow both you and your customers to use scanner to ship and receive product.

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