Guest post by Howard W. Coleman, Principal, MCA Associates

I was pleased and honored to recently present at TUG Connects 2012: The Future of Inventory & Supply Chain Management—The Change in Thinking.

Despite the fact that I noticed a few “furrowed brows” in the audience during my session, I was encouraged by the number of requests for my white papers as a follow-up. Also Tim Earnest of Earnest & Associates (an Infor channel partner) shared with me that one attendee proclaimed it was “the best presentation I heard at the event.” I can only be subjective, but am gratified none-the-less.

So why the “furrowed brows?”

The stated objective of the presentation was to:

• Challenge the conventional wisdom of our inventory and supply chain practices.
• Provide some insight and understanding into what others are doing.
• Overcome the hesitation to change.
• Accelerate the adoption of some new “DNA” in our supply chain practices.

In trying to improve our practices, we can either add more complexity or we can change our reality. Unless our reality is changed, there’s no reason to believe that our hard work will produce a different/better result. So that’s the initial “call to action”—to consider strategy and more radical change.

Back to the 90s

Historically, distributors relied on forecasts to drive inventory planning and ordering and to use safety stock to mitigate the variability in forecasts and lead times. These are really tactics as opposed to a better strategy. Overlooked at the time were just-in-time (JIT) concepts. Somehow we didn’t take JIT seriously enough in distribution, or maybe didn’t fully understand its major premise of using simple demand signals from customers and passing those up and down the supply chain. We continued our practice of pushing inventory to our stocking locations, primarily based on forecasts. (In informal polls, generally only a few companies know what their level of forecast accuracy really is.) Most companies never considered the concept of pulling inventory into stocking locations based on the customer’s buy signal—reacting to the drum beat of the customer and letting that drum beat pace the rest of the supply chain. Rather, we have accepted “incremental improvement” versus radical change.

A picture worth a 1,000 words

This picture is meant to illustrate the inventory in your supply chain under different paradigms. On the right, inventory peaks are much lower and the intervals between the peaks are shorter, meaning average inventory is substantially less. Because replenishment cycles occur more often, actual demand drives your replenishment needs and there’s less reliance on forecasts, less exposure to forecast variances, and therefore less safety stock needed.

The future practices

Consider PULL similar to JIT. Think of it this way—the grocer replaces stock on the shelves as product is actually bought by the customer (customer’s buy signal). As product is sold, a replacement is pulled throughout the supply chain and we get a “continuous flow of product” and an “increase in the velocity of the supply chain.”

Target inventory levels

If we could establish target inventory levels for products (see our white paper for a full explanation), we could monitor our inventory planning activities by describing it visually; a “business intelligence approach,” or as the folks at Infor call it—“changing the way work is done.”

The effects on supplier relationships

So if we can visualize the information, why shouldn’t we be able to communicate it to suppliers? Maybe suppliers should think differently too. This is already occurring in vendor managed inventory (VMI) relationships where companies share actual consumption data. What if you could help your supplier smooth out their production, maybe help reduce their work-in-process, and decrease their lead times? The result would foster a more continuous flow of product and would increase the velocity of the supply chain. In supplier relationships, a win-win occurs only when there are aligned interests.

Finally…

Look at Pull as a business intelligence system and a way to support “changing the way work is done”—a strategy for the future of distribution inventory and supply chain management, execution, and supplier collaboration.

Your call to action

What should you be doing right now about your supply chain strategy, your collaboration with suppliers, and your competitive advantage? How can you Pull your supply chain into the future? I welcome your thoughts and comments.

About MCA Associates
MCA Associates, a management consulting firm since 1986, works with wholesale distribution and manufacturing companies that are seeking and committed to operational excellence. Our staff of senior consultants provides operational excellence—idea leadership—and implements continuous improvement solutions focused on business process re-engineering, inventory and supply chain management, sales development and revenue generation, information systems and technology, organizational assessment and development, and family-business succession planning. Visit www.mcaassociates.com.

There’s an energy that pervades a space … hard to describe, but you know it when you feel it. Stadiums have anticipation, airports exude chaos and impatience, and elevators are sometimes awkwardly silent. 

But this year’s TUG Connects! 2012, presented by TheUserGroup.org (TUG), was special. Not only did the conference realize its biggest showing ever—topping off at over 800 attendees—but it was also the most engaging. Its energy was filled with excitement, confidence, camaraderie, and curiosity. It was an environment where people were willing to open up and share with one another. During meals where no one knew each other at a table, within a short time, strangers were sharing experiences and all walked away with great nuggets of information. People discussed what they heard, made recommendations for a session, or pointed out people to sync up with later, and often could be heard commiserating about the keynote speaker’s commentary on Gen Y and how it’s affecting business today.

When I tell people that this event offers more than 20 concurrent, 75-minute sessions over the course of three days—specifically to address all aspects of distributors’ needs—most jaws tend to hang open. It’s not the volume of sessions that’s so critical though, but the quality of the sessions. And in many sessions, customers either presented the session itself or actively participated in Q&A. For any customers that are not yet TUG members, it really is worth your investment.

TheUserGroup.org has created a diverse yet united community. I have to take a moment to sincerely thank the TUG board and subcommittees for their commitment to delivering an event like no other, while still holding down their “real” jobs. I know they continue to reap the rewards from this ever-expanding and interactive community, but it is a big responsibility. And, Conferences by Design does a phenomenal job in orchestrating the vision TheUserGroup.org has for this event. The overwhelming interest this year goes to show that you’re all doing something so right. 

OK, so I’m in marketing and I do admittedly tend to see ‘”sunshine, lollipops, and rainbows” everywhere like in the old Lesley Gore song. But, there is absolutely no denying that TUG Connects! 2012, presented by the Infor Distribution user community, was one of the best events I ever attended. It was the perfect mix of new content, interesting speakers, engaging vendors, tons of great sessions, lots of fun, and really good people. People, that once met, you wanted to hang out and chat with longer. 

I thought it was kind of funny that the videographer asked the conference coordinators if he could just stop interviewing attendees because he kept getting the same footage from every person he spoke with—basically that conference was either “great” or “excellent” and “not to be missed.” Congrats to all involved on having such a wonderful problem. 

Check out our Facebook page—www.facebook.com/InforDistribution—to see pictures from the event.

Posted by Lisa Russell, Director of Marketing, Infor Distribution

TheUserGroup.org (TUG) invites all licensed users of Infor10 Distribution products to attend its annual conference, TUG Connects 2012 in San Antonio, Texas. The conference will run from February 15-18, 2012, at the JW Marriott San Antonio Hill Country Resort & Spa. Special interest group meetings will convene on-site on February 15 and the full conference will follow from February 16-18. Guests will be able to enjoy the 36-hole TPC San Antonia Golf Course, the six-acre River Bluff Water Experience, the 26,000-square-foot Lantana Spa, and seven distinct dining options.

The conference offers you an opportunity to connect with other Infor10 Distribution users, Infor10 Distribution product management and key personnel, industry consultants, and technology experts. You will be able to participate in roundtables, distribution business sessions, and technical training, and have a chance to see product roadmaps and demos. You can also check out what’s new with exhibitors at the trade show. With a reception at a working Longhorn cattle ranch and an evening on the Riverwalk of San Antonio, you’re sure to have a great time. View the full agenda here.

You can register now for TUG Connects 2012. Hotel room reservations are now available online through this link starting at the group rate of $179 a night. (Upgrades are available at discounted rates as well.) This rate is not available anywhere else online.

If you have registration inquiries, please call (410) 543-2158 or email info@theusergroup.org. For speaker, sponsor, or exhibitor inquiries, please contact Gary Brown, gbrown@conferencesbydesign.com or (410) 603-9007, or Karen Brown, kbrown@conferencesbydesign.com or (410) 713-1007. To learn more about TUG, visit http://theusergroup.org/. 

Go to www.TUGconnects.com today for more information and to register.

As 2011 winds down and tax season preparations kick off, most of us will soon be groaning and trudging through pulling together the necessary documents. Small businesses have another issue to deal with—depreciation. Infor does not offer tax advice, but I wanted to make sure you were aware of some of the ways businesses are investing and saving

While cumbersome at best to calculate, the tax codes surrounding depreciation have not always favored the little guy. But the government has extended help to small businesses with an increase in bonus depreciation through the Tax Relief Act of 2010 and the expansion of Section 179 of the US Internal Revenue Code.

“Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It's an incentive created by the US Government to encourage businesses to buy equipment and invest in themselves.”¹

Taking advantage of section 179 is a great way to directly benefit from investing in your company. With many businesses looking in the short term for ways to cut deeper, it’s important to consider that a true competitive advantage may be gained through investments in equipment and software if you’re able to make them. With these incentives in place, now may be the best time to act. 

According to Section179.org, many small businesses are taking advantage of this legislation and reaping the benefits. ² Is it in your plans? 

Important to note -- Section 179 is not an automatic deduction as you must specifically elect to take it.

Posted by Tony Jacobs, Infor Distribution

¹ The Section 179 Deduction, http://www.section179.org/section_179_deduction.html.

² Ibid.

Guest post by Howard W. Coleman, Principal, MCA Associates

Recent research has shown that the smartest organizations—and those that want to be smarter—are seeking to capitalize on increased information richness and business intelligence (BI) to gain a measurable competitive advantage. They’re trying to learn more about their businesses as well as how to act on those insights—from strategy making to day-to-day front-line activities. In other words, they’re turning information into insight and insight into action.

If you believe that there’s a clear connection between performance and the competitive value of the data and information stored by your company, then using BI and its associated analytics can be a marketplace differentiator. Why leave the numbers and information you have to interpretation or just to your experience—or to languish because of uncertainty about how to act?

Have you ever questioned whether you’re getting full value from the massive amounts of information (some call it a “data deluge”) that comes from your ERP and/or CRM system investments? In fact, I’m willing to bet that you already have more data than you know how to use effectively. This question of getting full value from data is emerging as companies start to focus on a rebounding marketplace after focusing on expense control for the past few years. So, I believe there’s a growing trend toward exploiting data and computational power, supplementing standard historical reporting, absorbing the meaning of it to “get smart and get ahead” in new and different ways—and innovating in ways they never could before.

One caveat: For BI and analytics to be “operationalized”—triggering new actions across the organization—they must be closely linked to business strategy or a significant organizational challenge, relatively easy to understand, and integrated with your organizational processes so you’re taking the right actions at the right time. So, the next question becomes how to integrate BI with everything you do, from warehousing and distribution, purchasing and supply chain management, manufacturing, marketing and lead generation, and even into inside and outside sales, customer service, or credit and collections, for that matter.

I find that most organizations are in an “aspirational” mode regarding BI analytics. That is, they use the data they have to justify actions rather than prescribe actions, and have limited capability to capture, aggregate, analyze, or share information, rather than take a rigorous approach to data to guide future actions.

To migrate from an aspirational to a “transformed BI analytics organization,” future analytics will probably mean you have to possess capabilities like data visualization (dashboards and scorecards) and the modeling of predictive and prescriptive actions and techniques (what-if scenario development).

For instance, where your standard reporting reflects actual last-quarter sales, a transformed dashboard approach might also show sales forecasts for the next quarter under various conditions, e.g., price changes, changes in the sales team, or your potential inventory position based on different inventory and supply chain rules and drivers. In fact, I believe these latter areas could take root sooner than others because of their inherent data-intensive nature.

Ask your software vendors what BI analytics solutions they provide or are developing as their overall information agenda. Furthermore, are they integrating it with Smartphone applications and an ever-increasing stream of emerging Internet-based solutions? Keep in mind there could be third-party solutions in the marketplace that can map your data and provide the BI capabilities you need.

Where to start? If you’re one of those aspirational organizations, assemble your best people and the resources needed to make a case for investing in BI analytics. Identify your biggest business challenges that analytics could address, and find the data you have that fits the challenge. Seek out the available solutions that build on the data and other capabilities you may already have.

Does your company use BI and analytics to direct planning, forecast sales, or manage your supply chain? How could BI streamline your operations and provide more visibility into your business processes? I welcome your thoughts and comments.

About MCA Associates
MCA Associates, a management consulting firm since 1986, works with wholesale distribution and manufacturing companies that are seeking and committed to operational excellence. Our staff of senior consultants provides operational excellence—idea leadership—and implements continuous improvement solutions focused on business process re-engineering, inventory and supply chain management, sales development and revenue generation, information systems and technology, organizational assessment and development, and family-business succession planning. Visit www.mcaassociates.com.

Guest post by Jen McMahon, Marketing Programs Manager, Infor Distribution

The Caribbean is known for its rich history and beautiful beaches. But, it’s also home to one of the largest distributors in Puerto Rico. Celebrating its 65^th anniversary this year, Puerto Rico Supplies Group (PRSG) is a family-owned business that serves over 8,000 customers in Puerto Rico.

In order to meet its objectives of continuous growth and diversity, PRSG took advantage of more technology to better manage its growing list of merchandise. Implementing new technologies and tools at the same time the company consolidated and standardized its processes helped PRSG streamline its operations, consolidate its five warehouses into one, and realize increased productivity and revenue growth. The company saw its gross revenues increase by 10% in one year, and improved on-time deliveries by 23%. Click here to watch PRSG in action.

Guest post by Eric Ryerson, Director, Development, Infor

Have you had a conversation like this with your customers:

Customer: “Are you able to manage my inventory, no matter where it’s stored?”

You: “You mean even if I don’t supply it?”

Customer: “Yes. I don’t have the time or capability to do it, and I want you to handle everything.”

If you have one minute, take a look at this short animated video. I bet you can relate.

http://www.xtranormal.com/watch/7283311/storeroom

As we move into this next decade and put the recession behind us, those that have survived and want to thrive look for ways to gain a competitive advantage.

One topic always near and dear to any distributor’s heart is inventory management. So what does that really mean? The old classic model is easy to understand: The manufacturer makes something and holds it until they sell it to the distributor. When the distributor receives it, title transfers to the distributor and they warehouse it. Once the distributor sells it, title transfers again to the consumer or retailer. There are variations to this with consignment and certain flavors of vendor-managed inventory (VMI).

From a distributor’s perspective, what do you really want? Ideally, you can profitably sell product to your customers without ever having to house it or manage it. You can source it from either the manufacturer or any company further up in the supply chain and bill for it immediately, optimizing return-on-inventory without tying up your cash. Sounds great, and it works in some cases. The problem is, value-add by the distributor is limited to minimal. This method relies on customers that can’t access product directly or who are willing to pay the premium for the convenience of ordering from you.

Distributor value-add comes from doing things that are difficult or that you don’t want to do. That’s why the customer is willing to buy from you. The reality is—for various reasons—inventory still has to be purchased, stored, and shipped when the time is right. Successful companies in any sector meet difficulties by turning them into a competitive advantage. Managing inventory is one of those things where distributors should naturally excel. Now, how can you grow and profit from it?

I contend that opportunistic use of distributor-managed inventory (DMI) can and should be used by the savvy distributor as a competitive advantage. And, it could be if DMI was as easy to use as your ERP is for your own inventory.

DMI for the next decade should mean this: The distributor can manage the inventory that’s needed by its customer anywhere up and down the supply chain, regardless of who owns it. If the customer wants to have title to the inventory while it’s still in the distributor’s warehouse, fine. Think bill-and-hold or 3PL services. If the customer wants to keep distributor inventory on the customer site and get billed when it’s consumed, the distributor should easily accommodate that. Think consignment. If the customer wants the distributor to manage the customer-owned inventory on the customer site, then you need to do that, too—even if you haven’t supplied it. Keep in mind that you might supply it someday, and then you can charge for it.

Back to the value-add. What if the customer wants to combine its inventory with what the distributor provides and have the distributor use its advanced tools and techniques to optimize what the customer needs and when? Do it.

Think of it this way: As a distributor, you should be armed with the tools to walk into any scenario and compete aggressively and profitably for the business. Keep the proposition simple and the service high.

• Inventory storage: Your place or ours.
• Inventory ownership: Keep yours here or we can keep ours there—or both.
• Comingled inventory for burn-off? No problem.
• Manage inventory sourced from other suppliers? Happy to do that. (For a small fee, of course).

Point is, as a distributor, you’re the best in the business at sourcing, tracking demand, optimizing on-site quantities, and providing custodial services for what you hold for the customer. Use your strength as a weapon!

I’d love to hear your thoughts and ideas about inventory management. Please leave a comment to this post.

As a distributor, you continue to face a number of challenges as you strive to extend your business to gain market share. But these initiatives or additional services may not always work out or be as profitable as you’d expected.

What can you do to ensure the success of new initiatives and add to your bottom line? Implementing new processes and programs takes planning to make sure all of the pieces are in place. And you need to consider many factors—from addressing changing customer expectations to using the right technology tools, and even taking on a new role to move toward success.

First step: Join Industrial Distribution and a panel of distribution experts, including Steve Epner of Brown Smith Wallace Consulting, Dale Ohsberg of Marco Rubber, and Andy Berry of Infor, as they engage in an interactive discussion on the primary challenges distributors are encountering today. This on-demand webcast highlights some of the best practices distributors can use when they implement new initiatives to gain a competitive advantage and create additional sources of revenue.