If you Google Saba University, you will actually come across a website called Saba University School of Medicine in the Netherlands-Antilles region. The Saba University I’m referring to however, offers a rather different type of training.

When a Saba client purchases one of Saba’s products, they receive the regular end-user training offered by most software vendors. Saba, however, goes one step further by offering their clients the ability to enroll in Saba University’s learning programs.

When Kenyatta first mentioned Saba University, a few thoughts came to mind. Either this was a university that offers courses to anyone who wants to learn about software implementation and deployment readiness in general; or it was a place where Saba employees went to learn everything they need to know about Saba software before selling or deploying it. This, I found out, was not the case.

Saba’s training programs are geared towards:

* clients
* new users
* experienced users looking for additional training
* project managers
* business owners

Through their learning portal, Saba provides blended learning opportunities for users whenever and wherever they choose. Its learning programs are designed around the client and the specific job roles within their organization. So depending on the needs of your staff, your training program can be customized in such a way that it works for you or your team.

If you Google Saba University, you will actually come across a website called Saba University School of Medicine in the Netherlands-Antilles region. The Saba University I’m referring to however, offers a rather different type of training.

When a Saba client purchases one of Saba’s products, they receive the regular end-user training offered by most software vendors. Saba, however, goes one step further by offering their clients the ability to enroll in Saba University’s learning programs.

When Kenyatta first mentioned Saba University, a few thoughts came to mind. Either this was a university that offers courses to anyone who wants to learn about software implementation and deployment readiness in general; or it was a place where Saba employees went to learn everything they need to know about Saba software before selling or deploying it. This, I found out, was not the case.

Saba’s training programs are geared towards:

* clients
* new users
* experienced users looking for additional training
* project managers
* business owners

Through their learning portal, Saba provides blended learning opportunities for users whenever and wherever they choose. Its learning programs are designed around the client and the specific job roles within their organization. So depending on the needs of your staff, your training program can be customized in such a way that it works for you or your team.

As a TEC research analyst, I get to see a lot of really interesting (and some not so interesting) stuff when it comes to enterprise software and the like. With technology changing at the speed of light, there’s always something new that I haven’t seen before, that grabs my attention and makes me say “Wow, that’s cool”!

Like this past week for instance. I had a product briefing with a company called Saba to get an overview of their learning management solution (LMS). I was fortunate enough to have Kenyatta Berry (Saba’s Director of Product Marketing) speak with my colleagues (TEC’s team of analysts) and I to show us Saba’s suite of enterprise software offerings. Along with that we received an overview of the company and its unique strategies for training its clients on how to use its software.

This leads me back to my opening remark about ”something I haven’t seen before”; that something is called Saba University.

What is Saba University?

If you Google Saba University, you will actually come across a website called Saba University School of Medicine in the Netherlands-Antilles region. The Saba University I’m referring to however, offers a rather different type of training.

When a Saba client purchases one of Saba’s products, they receive the regular end-user training offered by most software vendors. Saba, however, goes one step further by offering their clients the ability to enroll in Saba University’s learning programs.

When Kenyatta first mentioned Saba University, a few thoughts came to mind. Either this was a university that offers courses to anyone who wants to learn about software implementation and deployment readiness in general; or it was a place where Saba employees went to learn everything they need to know about Saba software before selling or deploying it. This, I found out, was not the case.

Saba’s training programs are geared towards:

* clients
* new users
* experienced users looking for additional training
* project managers
* business owners

Through their learning portal, Saba provides blended learning opportunities for users whenever and wherever they choose. Its learning programs are designed around the client and the specific job roles within their organization. So depending on the needs of your staff, your training program can be customized in such a way that it works for you or your team.

As a TEC research analyst, I get to see a lot of really interesting (and some not so interesting) stuff when it comes to enterprise software and the like. With technology changing at the speed of light, there’s always something new that I haven’t seen before, that grabs my attention and makes me say “Wow, that’s cool”!

Like this past week for instance. I had a product briefing with a company called Saba to get an overview of their learning management solution (LMS). I was fortunate enough to have Kenyatta Berry (Saba’s Director of Product Marketing) speak with my colleagues (TEC’s team of analysts) and I to show us Saba’s suite of enterprise software offerings. Along with that we received an overview of the company and its unique strategies for training its clients on how to use its software.

This leads me back to my opening remark about ”something I haven’t seen before”; that something is called Saba University.

What is Saba University?

If you Google Saba University, you will actually come across a website called Saba University School of Medicine in the Netherlands-Antilles region. The Saba University I’m referring to however, offers a rather different type of training.

When a Saba client purchases one of Saba’s products, they receive the regular end-user training offered by most software vendors. Saba, however, goes one step further by offering their clients the ability to enroll in Saba University’s learning programs.

When Kenyatta first mentioned Saba University, a few thoughts came to mind. Either this was a university that offers courses to anyone who wants to learn about software implementation and deployment readiness in general; or it was a place where Saba employees went to learn everything they need to know about Saba software before selling or deploying it. This, I found out, was not the case.

Saba’s training programs are geared towards:

* clients
* new users
* experienced users looking for additional training
* project managers
* business owners

Through their learning portal, Saba provides blended learning opportunities for users whenever and wherever they choose. Its learning programs are designed around the client and the specific job roles within their organization. So depending on the needs of your staff, your training program can be customized in such a way that it works for you or your team.

Today's leading ERP systems group all traditional company management functions (finance, sales, manufacturing, human resources) and include, with varying degrees of success, many solutions that were formerly considered bolt-ons (product data management (PDM), warehouse management systems (WMS), manufacturing execution system (MES), etc.). ERP functionality has increasingly been tailored to support the specific needs of vertical industries, e.g. healthcare or automotive.

Recently, the functional perimeter of ERP systems began an expansion into its adjacent markets, such as supply chain management (SCM), customer relationship management (CRM), decision support systems (DSS), and e-business, making systems less inward looking. Other value-added aspects of the newest systems include product configuration, field service modules, and Internet self-service capabilities that extend system access to more users and/or business partners. Finally, ERP can be the means for business-process reengineering (BPR), increasing flexibility and responsiveness by breaking down barriers between functional departments and reducing duplication of effort.

(For more detailed information, see Essential ERP - Its Functional Scope)

ERP has earned the general perception of being exorbitantly expensive to license and implement. Users typically pay an up-front per-user (either concurrent, named or casual) license fee and an annual maintenance charge to use ERP systems (typically 12%-20% of the license fee). The per-seat price for ERP varies greatly depending on the number of users, the number of modules to be deployed and what "bells and whistles" are added, and the company's size and revenue. The per-user price range has been from $1,000 to $8,000 (typically higher values for larger companies), with a continual price decline trend owing to fierce competition and the reduced demand for software. Many vendors offer per-month per-user rental or outsourcing deals as an alternative to traditional up-front licenses. Fixed price, preinstalled, pre-configured ERP is also available and is particularly attractive for the lower-end of the market.

Implementation cycles vary from a few months to years depending on company size, organizational structure (single or multi-site, international or not), and the functional scope of the project. Full-scale ERP implementations generally take between 6 - 12 months on average. As a rule, every $1 of ERP software sales drives on average another $3-$6 of additional hardware, third party integration and consulting, and resellers revenue, although in some cases additional costs can reach $10-15 for each dollar spent on software. The most commonly overlooked or underestimated costs of ERP implementations come from: training, integration & testing, data conversion & analysis, staff turnover, post-implementation turmoil, etc. Total cost of ownership (TCO) as a percentage of company revenue generally ranges from 1.5% to 6%, depending on the industry and the company size (typically higher for smaller companies).

Many customers begin with implementing accounting modules, although manufacturing and human resources are also popular for initial implementations. ERP benefits come mainly from reduced inventories and order lead-times, increased production capacity, lower distribution and procurement costs, etc. However, the first tangible returns on investment (ROI) come only several months after the implementation (eight in the best scenario).

Today's leading ERP systems group all traditional company management functions (finance, sales, manufacturing, human resources) and include, with varying degrees of success, many solutions that were formerly considered bolt-ons (product data management (PDM), warehouse management systems (WMS), manufacturing execution system (MES), etc.). ERP functionality has increasingly been tailored to support the specific needs of vertical industries, e.g. healthcare or automotive.

Recently, the functional perimeter of ERP systems began an expansion into its adjacent markets, such as supply chain management (SCM), customer relationship management (CRM), decision support systems (DSS), and e-business, making systems less inward looking. Other value-added aspects of the newest systems include product configuration, field service modules, and Internet self-service capabilities that extend system access to more users and/or business partners. Finally, ERP can be the means for business-process reengineering (BPR), increasing flexibility and responsiveness by breaking down barriers between functional departments and reducing duplication of effort.

(For more detailed information, see Essential ERP - Its Functional Scope)

ERP has earned the general perception of being exorbitantly expensive to license and implement. Users typically pay an up-front per-user (either concurrent, named or casual) license fee and an annual maintenance charge to use ERP systems (typically 12%-20% of the license fee). The per-seat price for ERP varies greatly depending on the number of users, the number of modules to be deployed and what "bells and whistles" are added, and the company's size and revenue. The per-user price range has been from $1,000 to $8,000 (typically higher values for larger companies), with a continual price decline trend owing to fierce competition and the reduced demand for software. Many vendors offer per-month per-user rental or outsourcing deals as an alternative to traditional up-front licenses. Fixed price, preinstalled, pre-configured ERP is also available and is particularly attractive for the lower-end of the market.

Implementation cycles vary from a few months to years depending on company size, organizational structure (single or multi-site, international or not), and the functional scope of the project. Full-scale ERP implementations generally take between 6 - 12 months on average. As a rule, every $1 of ERP software sales drives on average another $3-$6 of additional hardware, third party integration and consulting, and resellers revenue, although in some cases additional costs can reach $10-15 for each dollar spent on software. The most commonly overlooked or underestimated costs of ERP implementations come from: training, integration & testing, data conversion & analysis, staff turnover, post-implementation turmoil, etc. Total cost of ownership (TCO) as a percentage of company revenue generally ranges from 1.5% to 6%, depending on the industry and the company size (typically higher for smaller companies).

Many customers begin with implementing accounting modules, although manufacturing and human resources are also popular for initial implementations. ERP benefits come mainly from reduced inventories and order lead-times, increased production capacity, lower distribution and procurement costs, etc. However, the first tangible returns on investment (ROI) come only several months after the implementation (eight in the best scenario).

Enterprise Resources Planning (ERP) is the latest phase in over 40 years of evolution of business management techniques and information technology. Up through the 1960's, business had to rely on traditional inventory management concepts, Reorder Point (ROP) and Economic Order Quantity (EOQ) being the most commonly known. The next evolutionary phase, Material Requirements Planning (MRP), developed in the 1970's. It uses bills of material, inventory data, and the master production scheduled (MPS) to proactively calculate time-phased materials requirements and make recommendations to release or reschedule replenishment orders for materials.

In the 1980s, the concept of Manufacturing Resources Planning (MRP-II) evolved as an enhancement to MRP by integrating other manufacturing company's resources, particularly shop floor, accounting and distribution management. In the early 1990s, MRP-II was further extended to cover areas like engineering, finance, human resources, project management, etc. namely, the comprehensive breadth of activities within any (not only manufacturing) business enterprise. Therefore, the new acronym ERP was coined to reflect the fact that these computerized systems had evolved well beyond their origins as inventory transaction and cost accounting systems.

ERP is the current generation of resource planning systems, which replaces "islands of information" (MRP-II being one) with a single, packaged software solution that integrates all traditional enterprise management functions. In simplest terms, ERP systems use database technology and a single interface to control the all-encompassing information related to a company's business. Along with functionality for enterprise and supply chain management, ERP is typically associated with the use of client/server (recently with Internet Computing Architecture (ICA) as well), relational database technology, and UNIX, Windows NT, AS/400 or mainframe operating systems.

Enterprise Resources Planning (ERP) is the latest phase in over 40 years of evolution of business management techniques and information technology. Up through the 1960's, business had to rely on traditional inventory management concepts, Reorder Point (ROP) and Economic Order Quantity (EOQ) being the most commonly known. The next evolutionary phase, Material Requirements Planning (MRP), developed in the 1970's. It uses bills of material, inventory data, and the master production scheduled (MPS) to proactively calculate time-phased materials requirements and make recommendations to release or reschedule replenishment orders for materials.

In the 1980s, the concept of Manufacturing Resources Planning (MRP-II) evolved as an enhancement to MRP by integrating other manufacturing company's resources, particularly shop floor, accounting and distribution management. In the early 1990s, MRP-II was further extended to cover areas like engineering, finance, human resources, project management, etc. namely, the comprehensive breadth of activities within any (not only manufacturing) business enterprise. Therefore, the new acronym ERP was coined to reflect the fact that these computerized systems had evolved well beyond their origins as inventory transaction and cost accounting systems.

ERP is the current generation of resource planning systems, which replaces "islands of information" (MRP-II being one) with a single, packaged software solution that integrates all traditional enterprise management functions. In simplest terms, ERP systems use database technology and a single interface to control the all-encompassing information related to a company's business. Along with functionality for enterprise and supply chain management, ERP is typically associated with the use of client/server (recently with Internet Computing Architecture (ICA) as well), relational database technology, and UNIX, Windows NT, AS/400 or mainframe operating systems.

As you can see in Chart 3 above, the functionality portion of the Showdown is broken down into four main areas: Supply Chain Management (SCM), Distribution Process Management (DPM), Retail & Commerce, and Back Office. Within each area are functional subareas, a total of 13 in all.

In SCM, the backbone of any ERP - distribution solution, Epicor Enterprise has the strongest showing across the board. JDA Supply Chain Planning & Optimization Suite is strong in Transportation Management, Trade Logistics, and Procurement, but gets only average scores in Warehouse and Supplier Management. Pronto Xi is also strong across the board in SCM, except in Transportation Management.

In Retail & Commerce, Pronto Xi scored best, with Epicor Enterprise and JDA Supply Chain Planning & Optimization Suite sharing the second spot.

In DPM, it’s basically dead even. All three vendor solutions score well across the board, although Epicor Enterprise slightly outperforms JDA in Process Management, and slightly outscores Pronto in Purchasing Management.

In Back Office, both Epicor Enterprise and Pronto Xi get top grades, with JDA Supply Chain Planning & Optimization Suite placing third. Again, this is no surprise, since this JDA solution is more of a supply chain optimization, best-of-breed solution.

Conclusion

Each of the vendor solutions we looked at in this Showdown offers a different combination of strengths and weaknesses.

For example, Pronto Xi scored well in every functional area except Transportation Management . If your business requires a strong transportation management module, JDA Supply Chain Planning & Optimization Suite may be the better choice, but that comes at a price: JDA Supply Chain Planning & Optimization Suite is weaker than Pronto Xi in Web Commerce and Financials . Epicor Enterprise also scored well across the board, but was weaker in Retail and POS . (It should be remembered that Epicor Enterprise offers other solutions that have strong retail and POS functionality). If your needs include a strong retail component, both JDA Supply Chain Planning & Optimization Suite and Pronto Xi may be better choices.

Also worth considering is which vendor is best positioned to understand and support your needs. With almost all its business in Asia-Pacific, Pronto has good knowledge and experience in that geographical market. On the other hand, if your company is in the upper part of the mid-market and North American–based, that much more closely fits with JDA’s corporate profile than either of the two other vendors. If your business is in the mid or lower end and North American–based, Epicor is the closest fit in terms of business size and geography. And, of course, functionality, as we’ve seen above, has to be factored in as well.

As you can see in Chart 3 above, the functionality portion of the Showdown is broken down into four main areas: Supply Chain Management (SCM), Distribution Process Management (DPM), Retail & Commerce, and Back Office. Within each area are functional subareas, a total of 13 in all.

In SCM, the backbone of any ERP - distribution solution, Epicor Enterprise has the strongest showing across the board. JDA Supply Chain Planning & Optimization Suite is strong in Transportation Management, Trade Logistics, and Procurement, but gets only average scores in Warehouse and Supplier Management. Pronto Xi is also strong across the board in SCM, except in Transportation Management.

In Retail & Commerce, Pronto Xi scored best, with Epicor Enterprise and JDA Supply Chain Planning & Optimization Suite sharing the second spot.

In DPM, it’s basically dead even. All three vendor solutions score well across the board, although Epicor Enterprise slightly outperforms JDA in Process Management, and slightly outscores Pronto in Purchasing Management.

In Back Office, both Epicor Enterprise and Pronto Xi get top grades, with JDA Supply Chain Planning & Optimization Suite placing third. Again, this is no surprise, since this JDA solution is more of a supply chain optimization, best-of-breed solution.

Conclusion

Each of the vendor solutions we looked at in this Showdown offers a different combination of strengths and weaknesses.

For example, Pronto Xi scored well in every functional area except Transportation Management . If your business requires a strong transportation management module, JDA Supply Chain Planning & Optimization Suite may be the better choice, but that comes at a price: JDA Supply Chain Planning & Optimization Suite is weaker than Pronto Xi in Web Commerce and Financials . Epicor Enterprise also scored well across the board, but was weaker in Retail and POS . (It should be remembered that Epicor Enterprise offers other solutions that have strong retail and POS functionality). If your needs include a strong retail component, both JDA Supply Chain Planning & Optimization Suite and Pronto Xi may be better choices.

Also worth considering is which vendor is best positioned to understand and support your needs. With almost all its business in Asia-Pacific, Pronto has good knowledge and experience in that geographical market. On the other hand, if your company is in the upper part of the mid-market and North American–based, that much more closely fits with JDA’s corporate profile than either of the two other vendors. If your business is in the mid or lower end and North American–based, Epicor is the closest fit in terms of business size and geography. And, of course, functionality, as we’ve seen above, has to be factored in as well.

cc Chart 1 above indicates which industries these three ERP - distribution solutions support. What becomes readily apparent is that all three solutions are broadly based in terms of vertical markets. JDA Supply Chain Planning & Optimization Suite and Pronto Xi support all ten, with Epicor Enterprise supporting eight out of the ten, dropping off only in Food and beverage and Wholesale . However, this should not be taken to suggest that there aren't any important differences between these three vendor solutions.

Chart 2: Breakdown of market segments and geographical areas.

JDA Supply Chain Planning & Optimization Suite
JDA Supply Chain Planning & Optimization Suite is more of a best-of-breed solution, specializing in international trade and in logistics and transportation management, and is less of a full scale enterprise resource planning (ERP) system than the other two solutions. This is evidenced by its comparatively poor showing in back office functionality (a major part of what constitutes an ERP solution), and its relative strength in international logistics and transportation.

Also noteworthy is that JDA specializes in the high and middle end of the mid-market (as shown in Chart 2 above), deriving a full 50 percent of its revenues from companies in the $501 to $1 billion (USD) range, and a full 40 percent of its revenues from companies in the $101 to $500 million (USD) range. Only 10 percent of its revenues come from the low end of the mid-market segment ($51 to $100 million [USD]).

In terms of its customer base, JDA is very much North American–based, with almost 70 percent of its business coming from North American customers, with most of the balance in Europe, the Middle East and Africa, and very little in Asia.

Pronto Xi
Pronto is an Australian-based ERP vendor, so it’s no surprise that 70 percent of its business is in Australia, with most of the balance in the Asian market, and very little in North America. Unlike JDA, Pronto specializes in the mid and lower ends of the market, with 60 percent of its revenues coming from these two segments, and only 10 percent coming from the high end of the market. Pronto offers a full ERP solution with strong back end functionality.

Epicor Enterprise
Epicor Enterprise falls right down the middle in terms of the market segment it most supports, with 45 percent of its business coming from the mid-level companies. Its next strongest segment of the market is the lower end, with 20 percent of its revenues coming from companies in the $51 to $100 million (USD) range.

Sixty-three percent of Epicor’s business is in North America, with almost all the rest in Europe, the Middle East, and Africa.

We’ve included information on the vendors’ market segments and geographical markets because we believe these are important factors to consider when selecting a software solution. Any vendor doing a lot of business with companies of your size and in your geographical market is likely to have the kind of knowledge and expertise necessary to understand and support your company’s special needs and problems.

cc Chart 1 above indicates which industries these three ERP - distribution solutions support. What becomes readily apparent is that all three solutions are broadly based in terms of vertical markets. JDA Supply Chain Planning & Optimization Suite and Pronto Xi support all ten, with Epicor Enterprise supporting eight out of the ten, dropping off only in Food and beverage and Wholesale . However, this should not be taken to suggest that there aren't any important differences between these three vendor solutions.

Chart 2: Breakdown of market segments and geographical areas.

JDA Supply Chain Planning & Optimization Suite
JDA Supply Chain Planning & Optimization Suite is more of a best-of-breed solution, specializing in international trade and in logistics and transportation management, and is less of a full scale enterprise resource planning (ERP) system than the other two solutions. This is evidenced by its comparatively poor showing in back office functionality (a major part of what constitutes an ERP solution), and its relative strength in international logistics and transportation.

Also noteworthy is that JDA specializes in the high and middle end of the mid-market (as shown in Chart 2 above), deriving a full 50 percent of its revenues from companies in the $501 to $1 billion (USD) range, and a full 40 percent of its revenues from companies in the $101 to $500 million (USD) range. Only 10 percent of its revenues come from the low end of the mid-market segment ($51 to $100 million [USD]).

In terms of its customer base, JDA is very much North American–based, with almost 70 percent of its business coming from North American customers, with most of the balance in Europe, the Middle East and Africa, and very little in Asia.

Pronto Xi
Pronto is an Australian-based ERP vendor, so it’s no surprise that 70 percent of its business is in Australia, with most of the balance in the Asian market, and very little in North America. Unlike JDA, Pronto specializes in the mid and lower ends of the market, with 60 percent of its revenues coming from these two segments, and only 10 percent coming from the high end of the market. Pronto offers a full ERP solution with strong back end functionality.

Epicor Enterprise
Epicor Enterprise falls right down the middle in terms of the market segment it most supports, with 45 percent of its business coming from the mid-level companies. Its next strongest segment of the market is the lower end, with 20 percent of its revenues coming from companies in the $51 to $100 million (USD) range.

Sixty-three percent of Epicor’s business is in North America, with almost all the rest in Europe, the Middle East, and Africa.

We’ve included information on the vendors’ market segments and geographical markets because we believe these are important factors to consider when selecting a software solution. Any vendor doing a lot of business with companies of your size and in your geographical market is likely to have the kind of knowledge and expertise necessary to understand and support your company’s special needs and problems.

The average picker spends over one hour per day searching for product. If you have eight pickers that's equivalent to one person per day—and extra person that is probably not needed, or can be used doing something more productive. By assigning product to locations this will eliminate pickers searching for product throughout the warehouse.

Step 6: Allow only warehouse personnel to receive.

Receiving is the most important task your warehouse performs. If an item is received incorrectly, it will be putaway, picked, and shipped wrong. If the paperwork is not processed correctly, the wrong product will be received and given to the customer. When the order is generated, the picker looks for the product and can't find it, so the buyer then orders another while saying "Those warehouse guys are clueless. They just received this product this morning. Now they cannot find it." Eventually, shipping sends the order to the client, but meanwhile, the second order comes in , and the buyer decides to receive the product and personally ship it to the customer. If the product is returned because the customer doesn't need it, a sales person will likely say, "Don't send it back to the vendor. The customer will need another one for another job." The product then just sits on the shelf until it is lost or is counted at the next annual physical. Hopefully the first order was corrected because the customer was never billed for the second one, but for some reason you show two items in stock. Another vicious cycle of inaccurate inventory ensues.

Step 7: Address non-stock and dead inventory.

You have to address your non-stocks and your dead inventory. Non-stocks are a hassle and have to be dealt with. They should be counted regularly, clearly identified, and centrally located. Quite often, non-stocks and dead inventory are not addressed until the end of the year, and then management wonders why there are so many.

Dead inventory is usually DOA, "dead on arrival". New items are the major cause of dead inventory. Climbing up ladders to pick orders or relocating because of space issues does not make sense if you have dead inventory occupying floor space. It is a loss of productivity and should be addressed immediately. Simply put, "If it would stink I bet you would get rid of it." Treat DOA the same way. Get rid of it to streamline your warehouse processes

Also remember, a company has to pay cash for the materials and labor that make up inventory, and until the company gets paid, that outlay of money represents a financial burden to the organization. Your product is worth less each day you hold it in inventory—by the time it reaches the customer, you will have lost significant revenue..

The average picker spends over one hour per day searching for product. If you have eight pickers that's equivalent to one person per day—and extra person that is probably not needed, or can be used doing something more productive. By assigning product to locations this will eliminate pickers searching for product throughout the warehouse.

Step 6: Allow only warehouse personnel to receive.

Receiving is the most important task your warehouse performs. If an item is received incorrectly, it will be putaway, picked, and shipped wrong. If the paperwork is not processed correctly, the wrong product will be received and given to the customer. When the order is generated, the picker looks for the product and can't find it, so the buyer then orders another while saying "Those warehouse guys are clueless. They just received this product this morning. Now they cannot find it." Eventually, shipping sends the order to the client, but meanwhile, the second order comes in , and the buyer decides to receive the product and personally ship it to the customer. If the product is returned because the customer doesn't need it, a sales person will likely say, "Don't send it back to the vendor. The customer will need another one for another job." The product then just sits on the shelf until it is lost or is counted at the next annual physical. Hopefully the first order was corrected because the customer was never billed for the second one, but for some reason you show two items in stock. Another vicious cycle of inaccurate inventory ensues.

Step 7: Address non-stock and dead inventory.

You have to address your non-stocks and your dead inventory. Non-stocks are a hassle and have to be dealt with. They should be counted regularly, clearly identified, and centrally located. Quite often, non-stocks and dead inventory are not addressed until the end of the year, and then management wonders why there are so many.

Dead inventory is usually DOA, "dead on arrival". New items are the major cause of dead inventory. Climbing up ladders to pick orders or relocating because of space issues does not make sense if you have dead inventory occupying floor space. It is a loss of productivity and should be addressed immediately. Simply put, "If it would stink I bet you would get rid of it." Treat DOA the same way. Get rid of it to streamline your warehouse processes

Also remember, a company has to pay cash for the materials and labor that make up inventory, and until the company gets paid, that outlay of money represents a financial burden to the organization. Your product is worth less each day you hold it in inventory—by the time it reaches the customer, you will have lost significant revenue..

James Q Wilson and George Keilling developed the "Broken Windows Theory" which states that "Crime is the result of disorder. If a window is broken and not repaired people will conclude that no one cares. Soon more windows will be broken and a sense of anarchy will move to the street upon which it faces." Replace "broken window" with "dirty shelves" and it becomes the very relevant "Dirty Shelves Theory".

An inaccurate inventory is the result of disorder. If an aisle is messy, a Coke can is left on a shelf, a box is not put away properly, or a light remains broken, people will conclude that no one cares. Soon more aisles will be messy, more cans will be left on shelves, and more product will not be put away. Pretty soon, an order will be picked incorrectly, and an item will be put in the wrong box at the packing station, and then we wonder why our inventory is so inaccurate.

Remember what I said earlier: "People do what you inspect and not what you expect." If your warehouse supervisor can't hold your people accountable for keeping the warehouse clean, it will not be realistic to expect an accurate inventory. Develop a simple aisle maintenance sheet that includes removing empty boxes, checking for broken lights, removing discarded shrink wrap, emptying the trash can etc. to prevent the warehouse from becoming a mess.

James Q Wilson and George Keilling developed the "Broken Windows Theory" which states that "Crime is the result of disorder. If a window is broken and not repaired people will conclude that no one cares. Soon more windows will be broken and a sense of anarchy will move to the street upon which it faces." Replace "broken window" with "dirty shelves" and it becomes the very relevant "Dirty Shelves Theory".

An inaccurate inventory is the result of disorder. If an aisle is messy, a Coke can is left on a shelf, a box is not put away properly, or a light remains broken, people will conclude that no one cares. Soon more aisles will be messy, more cans will be left on shelves, and more product will not be put away. Pretty soon, an order will be picked incorrectly, and an item will be put in the wrong box at the packing station, and then we wonder why our inventory is so inaccurate.

Remember what I said earlier: "People do what you inspect and not what you expect." If your warehouse supervisor can't hold your people accountable for keeping the warehouse clean, it will not be realistic to expect an accurate inventory. Develop a simple aisle maintenance sheet that includes removing empty boxes, checking for broken lights, removing discarded shrink wrap, emptying the trash can etc. to prevent the warehouse from becoming a mess.

Whether you have an automated or a manual system, your people need a vehicle to identify problems and notify the appropriate personnel. A stock check form (figure 2) does just that. It must have certain things on it, such as the order number, picker's name, date, product code, quantity, reason for completing the "stock check" form, etc.

If an item is backordered by a warehouse person, it should be accompanied with a stock check form, which will eliminate the vicious cycle of the backorder fillable report as well. That's when the picker backorders an item, then the purchasing department fills the backorder because the system says its in stock, and another picker backorders it again, causing the buyer not only to fill the order again, but to include a note asking the picker to find the product, all the while muttering obscenities about the warehouse. A new, untrained picker backorders the item again, because no one ever explained what those notes on the pick ticket meant. Now the buyer is livid so he or she goes to get the piece, which he or she can't find, and eventually has to order.

Whether you have an automated or a manual system, your people need a vehicle to identify problems and notify the appropriate personnel. A stock check form (figure 2) does just that. It must have certain things on it, such as the order number, picker's name, date, product code, quantity, reason for completing the "stock check" form, etc.

If an item is backordered by a warehouse person, it should be accompanied with a stock check form, which will eliminate the vicious cycle of the backorder fillable report as well. That's when the picker backorders an item, then the purchasing department fills the backorder because the system says its in stock, and another picker backorders it again, causing the buyer not only to fill the order again, but to include a note asking the picker to find the product, all the while muttering obscenities about the warehouse. A new, untrained picker backorders the item again, because no one ever explained what those notes on the pick ticket meant. Now the buyer is livid so he or she goes to get the piece, which he or she can't find, and eventually has to order.

Now even though this article is about your inventory, you have to document all of the processes that go on in your warehouse. How can you legitimately establish any type of inventory control program if your people are not sure about what they should be doing? The "follow Nancy around" approach to learn processes only works in the restaurant business. Your people need to know different picking (P) and receiving (R) functions: What to do when I go to pick an item and there is no product in the bin? (P) What do I do when the wrong product is in the bin? (P) What do I do when I am receiving and the vendor sends a replacement item? (R) What do I do if the item in the bin is damaged? and What do I do if the item is not in the bin, but I see the item in overstock? (inventory)

Even though some of the processes are picking and receiving-related, improper processes will cause inventory problems throughout the year and will lead to problems during the annual physical. Your people need to know what processes to follow; however, we know your people are not going to consult a training manual every time they encounter a problem so develop "Cheat Sheets" that are brief references showing how to troubleshoot problems. (See figure 1)

Now even though this article is about your inventory, you have to document all of the processes that go on in your warehouse. How can you legitimately establish any type of inventory control program if your people are not sure about what they should be doing? The "follow Nancy around" approach to learn processes only works in the restaurant business. Your people need to know different picking (P) and receiving (R) functions: What to do when I go to pick an item and there is no product in the bin? (P) What do I do when the wrong product is in the bin? (P) What do I do when I am receiving and the vendor sends a replacement item? (R) What do I do if the item in the bin is damaged? and What do I do if the item is not in the bin, but I see the item in overstock? (inventory)

Even though some of the processes are picking and receiving-related, improper processes will cause inventory problems throughout the year and will lead to problems during the annual physical. Your people need to know what processes to follow; however, we know your people are not going to consult a training manual every time they encounter a problem so develop "Cheat Sheets" that are brief references showing how to troubleshoot problems. (See figure 1)

Peter Drucker, the foremost author and expert on enterprise and self-management, and one whom I am sure everyone reading this has probably heard of, stated, "We know little more about distribution today than Napoleon's contemporaries knew about the interior of Africa." I found out just how true this was when I was gathering information for this article. I began by searching to see what other experts had to say about maintaining an accurate inventory. About one week after beginning my search, I was no closer than when I started, so I decided to talk to people in the industry and ask them three simple questions:

1. What are your currently doing to maintain the accuracy of your inventory?
   
   
2. Is what you are currently doing working?
   
   
3. If what you are currently doing is not working then why haven't you changed?

You know what the interesting thing was? Everyone answered number 1 and number 2, but when it came to number 3, I ended up right back where I started: scratching my head and saying, "I can't believe since inventory is one of an organization's greatest asset, why do most companies do so little to maintain it?"

There are some interesting things about inventory that I am sure everyone knows, but before I get to the nineteen steps I'm going to reiterate some key points about inventory.

• Distribution inventory values range between 6 percent and 20 percent of the company's annual revenue.
  
  
• An inaccurate inventory causes several problems: lost sales, decreases in profitability, and lost productivity from searching for products.
  
  
• Companies use inventory as a security blanket to cover deficiencies in their warehouse.

Given all of this, the only thing you really need to know is that it takes $2,500 in new sales to make up $100 in lost inventory, assuming a 4 percent return. I don't think I am the only one in our industry who knows this, but if I am not, then why are so few people talking about how to control the accuracy of their inventory? Think about how much having an inaccurate inventory costing you and your organization.

Again, your inventory is one of the biggest, if not the largest investment you have in your company. The only thing that comes close to it is your people. But you know what I have learned over the years? People do what you inspect and not what you expect! Most leaders expect their people to know why inventory accuracy is important to the company, and it is with this assumption where the problems begin. It is also where I am going to begin the first step.

Peter Drucker, the foremost author and expert on enterprise and self-management, and one whom I am sure everyone reading this has probably heard of, stated, "We know little more about distribution today than Napoleon's contemporaries knew about the interior of Africa." I found out just how true this was when I was gathering information for this article. I began by searching to see what other experts had to say about maintaining an accurate inventory. About one week after beginning my search, I was no closer than when I started, so I decided to talk to people in the industry and ask them three simple questions:

1. What are your currently doing to maintain the accuracy of your inventory?
   
   
2. Is what you are currently doing working?
   
   
3. If what you are currently doing is not working then why haven't you changed?

You know what the interesting thing was? Everyone answered number 1 and number 2, but when it came to number 3, I ended up right back where I started: scratching my head and saying, "I can't believe since inventory is one of an organization's greatest asset, why do most companies do so little to maintain it?"

There are some interesting things about inventory that I am sure everyone knows, but before I get to the nineteen steps I'm going to reiterate some key points about inventory.

• Distribution inventory values range between 6 percent and 20 percent of the company's annual revenue.
  
  
• An inaccurate inventory causes several problems: lost sales, decreases in profitability, and lost productivity from searching for products.
  
  
• Companies use inventory as a security blanket to cover deficiencies in their warehouse.

Given all of this, the only thing you really need to know is that it takes $2,500 in new sales to make up $100 in lost inventory, assuming a 4 percent return. I don't think I am the only one in our industry who knows this, but if I am not, then why are so few people talking about how to control the accuracy of their inventory? Think about how much having an inaccurate inventory costing you and your organization.

Again, your inventory is one of the biggest, if not the largest investment you have in your company. The only thing that comes close to it is your people. But you know what I have learned over the years? People do what you inspect and not what you expect! Most leaders expect their people to know why inventory accuracy is important to the company, and it is with this assumption where the problems begin. It is also where I am going to begin the first step.