Wednesday
Jan042012

Drive Quality, Cost, and Delivery for a Happier 2012

Happy New Year to all. May 2012 be a year of health and prosperity to you and yours. May it also be a year of health and prosperity for our businesses.

As has been the case in the past few years, we like to reflect on the past year and provide a business theme for the coming year.

As we end 2011 and begin 2012, we note a few observations and news items form the past month that have shaped how we are looking at the new year:

As we were doing our holiday shopping we noticed that every single store, except The Apple Store, advertised discounts across the board. We were seeing a few such signs in early December when we were reading about the retailers being optimistic about the holiday season. Also the stores were open all kinds of hours opening at 6 am and closing at midnight. Retailers were aggressively vying for consumer traffic and dollars. They also wanted to move as much of their inventory as possible before the holiday and thus not have to discount it even more.

Click to read more ...

Thursday
Dec222011

DonorsChoose.org - Our Charity of Choice

On behalf of all of us at Cadent Resources, Inc., we would like to wish all of our readers, clients, and supporters a wonderful Holiday season and a healthy and prosperous New Year!

This year, we decided to do something different. Instead of giving our clients and business partners the customary gift of candy, wine, or some other edible, we decided to make a donation on behalf of each of them to DonorsChoose.org. It was fun to give a gift of good that allows our clients to select the school project they would like to support using the money we donated.

DonorsChoose.org is an online charity that makes it easy to help students in need through school donations. We are firm believers that a strong primary education system secures a bright future for all of us, and this is one small way we can help our schools meet this challenge. Click here to learn more about this worth charity. 

Happy Holidays!

Monday
Dec122011

Increased DemandCaster Selection Interface Speed

One of the ongoing challenges in DemandCaster has been the speed of some of its data heavy user interfaces and the overall speed of analysis. Over the next few weeks we will be working on addressing these issues.


As of today, our users have experienced a noticeable difference in the speed of the selection interface. The selection interface is the most often used and data heavy interface within DemandCaster. We have made two changes 

Monday
Dec122011

Supply Chain and Finance: Part 2 - Costing Methods

Let us continue with more financial based definitions for inventory.

There are five ways that Finance can value the inventory. Most companies choose a method and rarely change. The methods ar:

  • First in, First Out (FIFO)
  • Last in, First Out (LIFO)
  • Average Costing (also called Moving Average)
  • Standard Costing
  • Order Specific Costing

Click to read more ...

Thursday
Dec082011

Finance and the Supply Chain

There is a relationship between Finance and the Supply Chain in almost any company. The Supply Chain has a majority of the assets of the company and is responsible for managing the lions share of the costs. The assets include factories, warehouses, and all the equipment and machines used in this facilities. The costs include the Cost of Goods Sold, labor, conversion costs, transportation, and distribution costs. When we add to all of this the value of the inventory being held, it is easy to see why Finance focuses on the Supply Chain.


It is the role of the Supply Chain to effectively and continuously manage the above mentioned assets and costs to help deliver the profit goals of the company. It is the role of Finance to ensure that exactly this happens. Finance accomplishes this by a mixture of partnering with and policing the Supply Chain. Finance prepares reports, briefs senior management, and oversees audits both internal and external to ensure that the company is being properly managed financially.


We have seen and experienced situations where Finance and the Supply Chain form a team and work together to achieve the company objectives. We have seen other companies where the relationship is more adversarial and Finance basically plays the role of a policeman. This often has to do with the culture of the organization and the personalities of the two executives leading the functions. It is in the power of the President or CEO of the business to nurture either partnership or adversity between Finance and the Supply Chain. There are CEOs that believe a little adversity, butting of heads, is good and the resulting course of action is more optimal for the vigorous debating.


Either way, it is imperative for the Supply Chain to understand exactly how finance views and calculates inventory. Let us look at few financial definitions regarding inventory management. While it might seem odd when first reading this, it is true. The Supply Chain does not have full control over the inventory as reported. When it comes to reporting, the Finance reports are what senior management and Wall Street tend to look at. Therefore, it is imperative for Supply Chain personnel to fully understand some basic Finance definitions.


There are two ways of recording and reporting inventory:  Perpetual and Periodic.


Perpetual:  This is the real time reporting, the day to day, hour to hour, reporting of what is on-hand in terms of Raw, Pack, WIP, Finished Goods, E&O, and what is in transit in each of these categories. Because of the sophistication of ERP systems, we can look at perpetual inventory levels in total, by part, and category any time we wish from any PC in the company. This inventory, these records and transactions, is what Supply Chain personnel deal with all the time. It is the inventory that is tangible and real. You can go out to the factory or warehouse floor and see this inventory.


Periodic:  As the name suggests, this is the periodic reporting of inventory. This is more the space Finance controls. The most common periods are months, quarters, and fiscal years. This is less about transaction records and much more about reporting. The periodic reports are the official reports of the company. They are based on the perpetual inventory at a set close point e.g. 11:59 pm of the last day of the month. If this was all Periodic inventory was about, there would be no difference between what the Supply Chain sees and manages and what Finance reports. This is rarely the case. Finance takes this base data and makes adjustments and accruals. They add and subtract dollars, not units, to inventory accounts  to fund or account for things such as scrapping obsolete goods, returns, warranty related transactions, in transits at the end of the period, and a variety of other bookkeeping details. This does impact the inventory levels positively or negatively depending on the nature of the adjustments.  Supply Chain personnel need to know exactly how since these final numbers are what the inventory objectives of the company are set on.


Many companies use the term Consolidated instead of Periodic.  Finance takes the Perpetual view at the end of a Period and “consolidates” all of the reserves, accruals, and other adjustments.  We prefer the term Consolidated to Periodic.


The Supply Chain lives in the Perpetual world.  Yet, the Supply Chain is measured against Consolidated objectives. Therefore, it is imperative that the Supply Chain be bilingual. We must know what we can control which is the Perpetual inventory. But, we must know what happens in month end Consolidations. The Supply Chain leaders need to know exactly what is consolidated at month end to better manage the Perpetual. They must also know how and why reserves, accruals, and adjustments are made and why. If a policy is flawed or will have a long term negative impact on operations, we can better advocate for a more balanced policy. Finance and General Management can and do use inventory as a cistern, sometimes, for costs that are in a gray zone from a Supply Chain perspective. The business decision may supersede Supply Chain logic, but at least we know what is being done and why. At least, we can make a good knowledgeable case for the Supply Chain point of view.