Understanding and Interpreting Inventory Turnover Ratio
The Role of Inventory Turnover Ratio in Financial Health
How to Streamline Warehouse Operations With Inventory Management Software
Four key lessons for an effective food recall process from Scott Svihula
How to develop a recall plan – A quick guide for SMBs in the food and beverage industry
Features and benefits of inventory control systems in food and beverage
Exploring inventory management solutions for businesses
Optimising inventory management: Implementing an effective control system
From chaos to control: Implementing an inventory control management system
8 common costing methods for manufacturers
19th July 2023
Learn about eight common costing methods to calculate how much something will cost.
A costing method is simply a way of calculating how much a product, service, activity, production process, or any other cost object costs. There are many different types of costing methods, ranging from first in, first out, and average weighted cost to process and standard costing.
What is a costing method?
Methods of cost accounting or simply “costing methods” are crucial for calculating how much something like a product or service costs. Manufacturers can then use this information to price products for profit, track expenses to see where money is going, and make smart cost-control decisions.
But what exactly is a costing method? This short guide defines what it is and includes nine common costing methods manufacturers use.
What are the different costing methods?
Different industries and businesses will use different methods of cost accounting. The choice of costing method will also differ based on the size of the company, the complexity of operations, industry norms, and other personal preferences. Here are nine costing methods commonly used in manufacturing across two broad categories: inventory and production cost
Inventory costing refers to the costing methods used to assign costs to a specific product. Four common inventory costing methods include:
- First in, first out (FIFO). FIFO assumes products purchased first are sold first. In this costing method, the cost of the oldest product is applied to newer copies of that product, even if it’s not the same. FIFO is one of the most popular costing methods because it provides a more accurate representation of costs, better aligns with the generally accepted accounting principles (GAAP), and conforms with the flow of products in most industries.
- Last in, first out (LIFO). LIFO is the opposite of FIFO and assumes most recently purchased products are sold first. With LIFO, the cost of the most recent product is applied to every other copy, no matter when it was purchased.
- Average weighted cost. Instead of using the amount you spent to produce a particular item, you calculate the average cost per unit. Take the total cost of all items produced and divide it by the total number of items.
- Actual cost. As the name implies, actual costing refers to calculating the true cost of an item by recording the actual costs to manufacture it, like materials, labour, and overhead related.
Production costing refers to the cost accounting method of assigning direct and indirect costs to the production process. Direct costs are specific costs, like direct materials or labour, tied to a product. In contrast, indirect costs are running costs like rent or support labour (HR, accounting, etc.) not explicitly tied to a product.
Four common production costing methods used in manufacturing include:
- Job costing. Costs are calculated per batch or job where products are made to order. Direct labour, direct materials, and other overhead costs are all considered.
- Process costing. Costs are calculated for each manufacturing stage by taking into account the direct and indirect costs. These total costs are then divided by the number of items produced in that production stage to arrive at an item cost. This costing method is used in industries where products are produced in a continuous flow and go through multiple production stages or processes, e.g., cloth production.
- Standard costing. Manufacturers set pre-determined costs for specific elements like parts, labour, etc. They then add up all these costs to arrive at a final cost for each product. Standard costs act as benchmarks to compare actual costs against. Manufacturers can use it to identify cost variances and then take the necessary action to control costs.
- Activity-based costing (ABC). ABC is a more sophisticated form of job costing where costs are assigned to a product or service based on the cost of specific activities involved in the production process.
The bottom line on costing methods
Costing methods help you calculate how much something will cost—whether a product or production process. You can then use this information for accounting, pricing products, and making other important decisions. The most important thing isn’t necessarily which method you use but that you consistently use it.
How to implement a barcode system for inventory
28th June 2023
A barcode system helps improve inventory control, boosts efficiency, and enhances data visibility for your business.
But what precisely is a barcode system? And how do you implement one for your inventory?
What is a barcode inventory system?
A barcode inventory system tracks and manages information around inventory using barcodes, barcode labels, barcode scanners (hardware), and barcoding software.
Let’s take a look at these elements:
- Barcodes: machine-readable codes that contain information about a product, like weight or price. The two most common types of barcodes are 1D and 2D barcodes. One-dimensional barcodes are what people typically picture when they think of barcodes. They’re made of a bunch of vertical black lines stretched out horizontally. Two-dimensional barcodes can encode data vertically and horizontally, storing much more information than 1D barcodes.
- Barcode labels: the labels on which the barcodes are printed. They typically appear on the product or packaging.
- Barcode scanners: a piece of hardware used to scan barcodes.
- Barcoding software: software that captures and processes the barcoding data and can assist with scanning and printing barcodes.
Here’s how this all typically works together in your warehouse: You scan the barcode found on the label with a warehouse barcode scanner. This data is then sent to a central database (software) for tracking, monitoring, and analysis.
Why are barcode inventory systems important?
Implementing a barcode system starts with proper planning upfront. Here are five steps to get going:
1. Decide what warehouse barcode system you need based on your needs
Do you just want to create and print barcode labels without the need for advanced inventory management functionality? Or do you need additional inventory management capabilities?
If it’s the former, then a simple system with basic software and a scanner to create and print labels will likely be suitable. If it’s the latter, you may want a more robust barcode system. Either way, a good barcode system should offer the ability to:
- Print and scan barcodes
- Ship, receive, and count inventory
- Handle order management
- Track parts across multiple locations
- Integrate with your accounting system
2. Choose your hardware
Invest in a barcode scanner and printer, and consider how it will work with your existing tech stack. A few commonly used scanners include the Zebra barcode reader LI2208 and Honeywell Eclipse 5145.
3. Select your software
You typically get dedicated barcoding software that integrates with existing inventory management systems (IMS) and IMS systems with strong barcoding functionality built-in, meaning you only need one platform for all your inventory requirements. Make sure the software aligns with your needs (see step one).
4. Set up the system by choosing barcode types
While the exact setup depends on the choice of hardware and software, all businesses implementing a barcode system will need to create barcodes for their products.
So, select the type of barcodes you want to use based on your needs and industry standards and print them as needed. UPC codes, a type of 1D code, are among the most common in the United States.
5. Train staff on how to use the system and monitor performance
Training is crucial for proper implementation, utilization, and adoption. The more complex the system is, the more ongoing training will be needed. Be sure to also monitor system performance and make adjustments as needed.
Implement a warehouse barcode system today
There’s no denying that barcode systems are crucial in helping improve inventory management, boost efficiency, and enhance decision-making.
Just ensure you’re setting them up correctly by following certain key steps, including considering your needs, choosing the right hardware and software, selecting your barcodes, and bringing it all together with proper training and constant monitoring.
Do that, and you’ll be well on your way to implementing a successful barcode system.
Lot vs. Serial Numbers: What’s the Difference?
28th June 2023
Controlling inventory can be challenging, with thousands of products entering and leaving your production facility daily. How do you keep track of what’s coming and going?
With tracking indicators, like lot and serial numbers, weight, creation date, batch numbers, and expiration date. This post will focus on two of the most common–lot and serial numbers.
Read on to learn what they are, how they’re different, and how they can help with inventory management.
What is a lot number?
Lot numbers are a combination of digits that a manufacturer assigns to a group of products manufactured using the same materials, equipment, and processes. You can find these digits on the product’s packaging.
When to use: For products created in specific batches or groups through a process known as batch processing.
What is a serial number?
Serial numbers are identification numbers that a manufacturer assigns to a single product. No two items, even if they were manufactured at the same time, will have the same serial number.
When to use: For products requiring after-sales service or support, like smartphones, fridges, and washing machines. They allow manufacturers and service centres to easily identify products for warranty claims.
Take note: Many manufacturers will use manufacturing management software to track lot and serial numbers.
How do lot and serial numbers help with inventory management?
Lot and serial numbers help with inventory management in several ways:
Inventory identification and tracking
Lot numbers allow you to trace products back to specific batches, providing information about materials used and other important details. Serial numbers allow you to track products through their entire lifecycle, from manufacture to sale to after-sales support.
Because a lot number lets you trace products back to a specific lot, you can more easily identify the cause of any defect (.e.g., the production process) and determine what control measures to implement to maintain product quality.
Some industries require that you provide serial and lot numbers for all manufactured products to help identify products, keep customers safe, and assist with product recall. These include companies that sell medical supplies, pharmaceuticals, fireworks, and other highly regulated products.
If the need for product recalls arise, lot and serial numbers help identify which products must be recalled. Lot numbers, for instance, allow you to isolate defective batches and identify the responsible components. You can then let consumers know so they can check if their products need to be returned.
Serial numbers allow you to accurately track and manage warranty information and service history to help streamline after-sales support. Simply pull up the serial number to identify the warranty status and full repair history.
Start tracking inventory with lot and serial numbers
Lot numbers help pinpoint products manufactured in the same batch, where serial numbers are unique to a single product.
While both are different, these two tracking indicators are equally valuable in helping you manage inventory, from easy product identification and quality control to legal compliance and after-sales support.
What you need to know about consignment inventory
6th June 2023
What is consignment inventory, and is it the right model for you.
You’re a manufacturer that produces high-end audio equipment, like speakers and headphones. You recently launched a new product line with innovative features.
While you know the technology works and provides value, you’re unsure about the market reception, and so remain reluctant to mass produce this product.
What do you do? You enter into a consignment inventory agreement to test the market.
But, what exactly is consignment inventory?
Consignment inventory is a supply chain approach or business arrangement where a consignor (e.g., manufacturer) provides stock to a consignee (e.g., retailer) without receiving payment upfront.
The consignor keeps legal ownership of the goods. At the same time, the consignee agrees to promote and sell the product, effectively handling the sales process.
The retailer pays for the stock only when it’s sold and typically receives a commission or percentage of the selling price as compensation. This business arrangement is usually governed by a detailed consignment agreement that both parties must sign.
Are there any pros and cons of consignment stock?
Yes, the consignment model has benefits and drawbacks for both consignees and consignors. Let’s take a look.
Benefits of consignment inventory for consignors
- Market expansion. Manufacturers can expand their reach and distribution network without having to set up physical locations, as they can piggyback off existing retailers.
- Market testing. Manufacturers can test interest in their products in different markets. This allows them to gather feedback, iron out any kinks, and assess the potential for success before mass production.
- Supply chain efficiency. Manufacturers don’t need to allocate warehouse space to store stock, so they can control inventory carrying costs.
Disadvantages of consignment stock for consignors
- No upfront payment. Payment is only received from consignees when goods are sold, which can potentially create cash flow problems.
- Great financial risk. If the products don’t sell, the manufacturer carries the losses.
- Sales dependency. The sales are dependent on the efforts and marketing capabilities of the retailer.
- Complex inventory management. Consigned stock needs to be tracked separately from other inventory for operational clarity and easier financial reporting. This can be an extra administrative and logistical burden.
Benefits of consignment inventory for consignees
- Reduced financial risk. Retailers don’t have to pay for stock upfront and don’t incur losses of unsold inventory.
- Greater product variety. There’s an incentive to offer a broader product variety, because there isn’t a financial commitment to one product.
- Competitive advantage. The improved product variety can be a differentiator for retailers.
- Better cash flow. Capital is freed up, because cash is not tied up in inventory.
Disadvantages of consignment stock for consignees
- Lack of control. Retailers don’t own the product, which can limit independent decision making around business areas, like pricing and promotion.
- Limited product margin. Retailers earn a commission or percentage of the selling price for products sold, representing a lower margin than can be achieved with their own inventory.
- Pressure to meet targets. Small commissions can put unnecessary pressure on retailers to meet sales targets.
- Complex inventory management. As with consignors, there’s an extra administrative and logistical burden of tracking and managing consigned inventory alongside owned stock.
How to effectively manage consignment inventory
Given the complexity around managing consignment stock, you’re probably wondering: How do I effectively manage it? Here are two ways:
1. Detailed consignment agreement.
The success of a business relationship depends on a mutually beneficial agreement that clearly establishes expectations. While the exact details will differ between agreements, you generally want to:
- Identify both parties with legal names and contact information.
- Describe the goods being consigned.
- State that ownership remains with the consignor until goods are sold.
- Establish the pricing: Will the consignee receive a fixed amount, commission, or percentage of the selling price?
- Specify the consignment period.
- Detail the consignee’s role in promotion and selling.
- Include details about dispute resolution and confidentiality.
2. Invest in a robust inventory management system (IMS).
An IMS is software that lets you manage and optimize inventory levels from a centralised platform. Use it to automate everything from inventory counts to stock replenishment and access real-time reporting to make better financial decisions.
While basic software exists for managing simple operations, more advanced IMS solutions can handle the complexities of inventory management, like that of managing consignment inventory.
For instance, Fishbowl provides the following features to help you manage consignment inventory:
- Separate consignment inventory tracking for operational clarity and easy reporting (side note: you can assign stock to certain consignees and locations)
- Consignment revenue and purchase tracking to track sales orders and invoices
- Consignment agreement management, so you can store and easily access any agreement and related documents
- Consignment stock replenishment abilities that let you set up automatic reorder points and create purchase orders
- Reporting abilities to analyse consignment inventory performance, sales trends, and other key metrics
- Integrations with essential business apps, like Shopify, QuickBooks, and Salesforce
So, is a consignment model right for you?
There’s no right or wrong answer. The consignment model has pros and cons, and you’ll need to weigh these up when making a decision while also considering your unique situation.
Does your current cash flow situation allow you to withstand payment delays from retailers? Is expanding market reach and testing new products a main priority? Are you comfortable with the financial risk of unsold inventory?
Just know that if you decide to use this model, it’s probably wise to diversify: use the consignment model as one way to get your product into customers’ hands.
8 Effective Ways to Reduce Manufacturing Waste
1st June 2023
In this article, we’ll take a look at what manufacturing waste is and how you can reduce it.
Producing some manufacturing waste is part and parcel of the manufacturing process.
But if left unchecked, it can quickly accumulate to unsustainable levels, leading to environmental damage, costing your company money and potentially damaging its reputation.
Need help getting it under control? Here’s what you need to know.
What is manufacturing waste?
Manufacturing waste refers to any materials discarded during the manufacturing process that doesn’t form part of the final product, as well as unnecessary production steps that don’t add any value to the end item. Examples include scrap material, excess inventory, defective products, redundant inspections, unnecessary transportation, waiting times, and overproduction.
With the introduction of lean manufacturing, organisations have become more aware of wasteful practices and their implications—leading to the development of a company culture that values waste-reduction initiatives.
So, how can you reduce manufacturing waste?
Waste reduction strategies will typically differ between industries, because different manufacturers will generate different types of waste at different stages of the production process.
That’s why, before even considering what strategies to use, it’s wise to map out your waste streams by conducting a complete waste audit.
From there, you can dive into specific strategies to keep waste under control. Here are eight of the most effective ways to do so.
1. Manage inventory more efficiently
Better inventory management helps maintain optimal inventory levels to meet production demand without carrying excess stock that can tie up resources, use unnecessary warehouse space, and increase the risk of spoilage.
A few ways to improve inventory management and minimise wastage include:
- Adopting a just-in-time approach to managing inventory, where you order materials and components just in time for production.
- Investing in inventory management software to help track inventory in real-time, automate manual processes, like stock counts, and gain visibility into stock across locations, so you always know exactly how much stock you have.
2. Reduce packaging materials
Redesign the product packaging so that it uses less materials. You could eliminate unnecessary components, reduce their size, switch to more sustainable and efficient materials, or incorporate reusable or recyclable packaging content, like air packs or corn-based packing peanuts that are non-toxic and decompose in water.
3. Recover, reuse, resort
Recover as much waste as you can from on and offsite locations using techniques like electrolysis, filtration, reverse osmosis, centrifugation, and a popular one—recycling.
Recycle materials, like paper, plastic, and metal, regularly and avoid recycling hazardous materials, as it rarely has any environmental benefits.
Industrial shredders are crucial in this process, as you can use them to reduce waste by condensing asphalt, wood, rubber, and plastics to a fraction of their original size. Sorting the waste into bins ensures recyclable items are getting to the right place.
Just make sure that you assign someone the responsibility of monitoring the bins, that there’s a standard documented recycling procedure, and that everyone is trained on and understands the recycling protocols.
This ensures your recycling process remains efficient and environmentally compliant at all times and that you’re maximising your cost savings.
4. Follow waste volume reduction techniques
Waste-volume reduction refers to waste techniques that reduce the overall quantity and cost of waste generated. Volume reduction can be broadly divided into 2 categories—waste concentration and source segregation.
Waste concentration involves techniques that reduce the concentration of waste, like dehydration and evaporation. This helps minimise transportation and disposal costs while increasing the chances of reusing or recycling materials.
Source segregation, however, involves separating different types of materials for easy treatment and handling. This helps recover any valuable resources from waste, like valuable metals.
5. Establish a preventative maintenance schedule
General wear and tear may be normal in any manufacturing process. But if you don’t perform regular maintenance, you’ll waste time and money on expensive, last-minute repairs. Preventative maintenance (PM) helps reduce waste by:
- Minimising downtime, which leads to production interruptions, unnecessary overtime, and increased shipping costs.
- Improving equipment efficiency to avoid energy wastage.
- Optimising material usage for accurate handling and processing.
- Minimising defective product output caused by malfunctioning equipment.
To set a PM schedule, create an inventory of all your assets, set the maintenance cadence (weekly, monthly, yearly, etc.), and work with the right vendors.
6. Label and organise the warehouse properly
Clearly mark the locations for all tools, supplies, and assets necessary to manufacturing processes in your warehouses. This makes it easy to find items and identify hazardous materials.
Over time, the markings may get faded, non-existent, or outdated. While this may not hinder long time employees, new hires may have difficulty navigating a warehouse that isn’t properly marked and organised.
This can lead to incorrect products being shipped, or more time spent searching for the right tool for an urgent repair. So, replace the faded tags and repaint the floor lines regularly.
7. Adopt a closed-loop manufacturing process
Green chemistry is an excellent technique to reduce waste generated by various processes. But if it isn’t viable for you, consider a closed-loop manufacturing system: a process where used products are recovered and fed back into the system to be reused, recycled, or remanufactured. Closed-loop systems help improve resource efficiency to create more sustainable production processes.
8. Minimise water usage
Industrial sludge and wastewater make up a significant portion of manufacturing waste. You can reduce these elements by minimising water usage through chemical drying agents, reverse osmosis, dry machining, or membrane biological reactors.
The bottom line
An amount of manufacturing waste will always be unavoidable, but you can keep it under control with proper waste management strategies.
We explored several, from managing inventory more efficiently and reducing packaging materials to establishing a preventative maintenance schedule and minimising water usage.
The only thing left to do—if you haven’t already—is to start implementing these strategies as part of your efforts to control manufacturing waste.
How to improve warehouse efficiency
25th May 2023
The efficiency of your warehouse is an integral part of your business. Find out how to improve your warehouse efficiency with these 4 strategies.
A warehouse that’s operating efficiently allows you to control costs, maximise productivity, improve overall customer satisfaction, and ultimately, boost your bottom line.
But how exactly do you improve warehouse efficiency? Let’s take a look.
4 Ways to improve warehouse management and Efficiency
1. Optimise warehouse space
Are you making the best use of available warehouse space?
While you may need a larger warehouse if you’re growing, it’s always wise to first determine whether you can better use existing space. For instance, you could expand vertically using different pallet storage methods, like push-back or single deep racks.
These pallets also allow you to better organize your inventory so it’s easier to track and locate specific products, which reduces picking errors and excess stock. Plus, well-organized pallets, with clear spaces between aisles, provide easy product access for more efficient picking, packing, and inventory replenishment.
2. Redesign your warehouse layout
Warehouse layout is closely linked to warehouse space. But, where space refers to the available square or cubic footage, layout refers to the arrangement and organisation of different warehouse elements that affect the flow of activities and inventory. It includes equipment, storage racks, workstations, inventory, and other key elements.
By redesigning and optimising your layout, you can maximise space while streamlining warehouse operations. For instance, with some warehouse software, you can identify what products are commonly ordered together by customers and what the top products are.
You can then reorganise your warehouse by combining those products to reduce walking and travel time between workstations, improve workflows, and speed up order fulfilment.
3. Improve inventory management
Better inventory management helps improve warehouse efficiency in many ways, including better space utilization and faster order fulfilment thanks to better inventory tracking.
A few ways to improve inventory management include:
- Determining when to replenish stock by calculating the reorder point (ROP). The ROP is simply the inventory level at which companies should replenish stock to avoid shortages and stockouts.
- Accurately forecasting demand by using historical data and market trends. This helps maintain optimal inventory levels.
- Investing in the right technology, like inventory management systems (IMS), to streamline the warehouse process and help with real-time inventory tracking.
4. Invest in technology to automate
Technology helps automate warehouse processes, removing manual input while minimizing human errors that cost you time and money. Examples of technology that can improve warehouse management include:
- Conveyor systems to transport products within the warehouse
- Robotic systems for picking and packing
- RFID technology for inventory tracking
- Warehouse management systems (WMS) for streamlined order processing and fulfilment, as well as reliable automated purchasing and vendor management.
For instance, using software like Fishbowl, you can streamline order fulfilment by implementing routing capabilities for picking, automating documentation for packing, and printing labels directly from the platform to eliminate manual steps. You can even expedite the order process with preferred vendors and automatically create important documents, like purchase orders.
Improve warehouse management today
Improving warehouse efficiency doesn’t have to be hard. You just need to take the right approach—from optimising warehouse space and redesigning your layout to improving inventory management and investing in the right technology.
Do that, and you’ll not only run a more efficient warehouse but reduce costs and maximise profits.
A Guide to Eco-Friendly Shipping
18th May 2023
Read about the importance of sustainability in e-commerce and describe how businesses can implement more eco-friendly packing and shipping protocols.
Today, e-commerce plays a more significant role in our economy than ever. The COVID-19 pandemic seemed to accelerate the shift toward online shopping in 2020, but worldwide yearly e-commerce sales have steadily increased since 2014. This trend is expected to continue even as the pandemic fades from headlines, with online sales in multiple industries projected to keep growing through 2024.
While e-commerce is making our lives easier in many ways, it undermines global sustainability efforts and poses a substantial environmental threat. One of the most concerning effects of e-commerce on sustainability is the increasing use of packaging materials to ship products. Along with creating more waste, this trend may accelerate the destruction of trees by increasing the demand for paper materials like cardboard.
Additionally, transporting and delivering all of these goods requires companies to use a greater number of vehicles, most of which are still powered by fossil fuels. Because of this, e-commerce produces a significant amount of greenhouse gas, contributing to climate change and adversely impacting public health.
Fortunately, growing concern about the environment among consumers and businesses has led to a stronger emphasis on sustainability that will likely shape the shipping industry’s future. To prepare for the future and ensure continued success, e-commerce businesses must take proactive steps to make their shipping and packaging processes more sustainable.
For most e-commerce businesses, the best shipping strategy for their online store is the one that’s the most efficient and makes the most money. However, you don’t need to sacrifice profitability for sustainability. There are several ways to improve sustainability that simultaneously tackle efficiency. Specifically, there are several distinct business benefits associated with implementing eco-friendly shipping and packaging practices.
Benefits of Eco-conscious Business Practices
Integrating eco-friendly practices into your business strategy can offer a wide range of benefits. Reducing your business’s environmental footprint can positively impact the fight against global issues like pollution, climate change, and resource depletion. You can set a positive example, leading other organizations to do the same. It can also help you save money, build your brand, and improve the efficiency of your operations.
As awareness of environmental issues has grown, sustainability has become a major concern for many consumers. According to a 2020 consumer sentiment survey, 60-70% of U.S. consumers said they would pay more for a product that used sustainable packaging. For businesses, this means committing to sustainable products and practices that can build customer loyalty and increase revenue.
Recruiting and Retention
In addition to being a prominent issue for consumers, sustainability is also a priority for a significant portion of workers. In 2022, around 70% of employees and job seekers reported that sustainability programs make employers more appealing. In a competitive labour market, this can help employers attract and retain a more motivated and skilled workforce, comprised of people who share their brand values.
Engaging in unsustainable business practices can damage your brand’s reputation over time, but it can also increase your risk of a surprise public relations scandal related to your environmental impact. In many cases, these scandals can attract negative media attention that may seriously harm a business’s recruiting and customer relations efforts.
Additionally, dealing with such a scandal can cost you directly by forcing you to divert money, labour, and attention away from your core business. Implementing and adhering to sustainable practices before a scandal occurs helps minimize risk and protects your organisation’s resources and reputation.
Costs of Eco-Friendly Packaging and Shipping
Though more e-commerce businesses across industries recognize the benefits of eco-friendly shipping and packaging practices, many leaders are still concerned about the initial costs of switching to more sustainable methods. While becoming more sustainable requires an initial investment, implementing green shipping and packaging practices can save your business money over time.
For example, switching to green packaging methods can reduce the amount of material needed to pack and ship each item, which can help you save money when purchasing these materials. Additionally, many types of green packaging materials are lighter than more traditional ones, allowing you to save on your total shipping costs by reducing the weight of each package.
Throughout their lifecycle, sustainable materials tend to have a more minimal impact on the environment. Because of this, products made with these materials can be produced with less energy, and disposed of or reused more efficiently when they reach the end of their usable life. In the long term, investing in green packaging and shipping can yield significant financial returns and enable you to reduce your business’s impact on the environment.
Best Practices for Eco-Friendly Packaging
If you’re considering switching to eco-friendly packaging materials, it’s important to plan carefully and make sure that your implementation strategy fits your organizational needs and goals. Efforts to become more sustainable can backfire if you don’t have the right information. There are several things to keep in mind to ensure the success and profitability of your green packaging initiative.
Recyclable, Reusable, and Biodegradable Compostable Materials
The primary consideration for eco-friendly packaging is the type of material you’ll be using. A significant portion of all packaging is still made from materials that are not fully biodegradable, like plastic, making it a major contributor to pollution around the world. In fact, 40% of all plastic produced globally is made for single-use packaging.
To avoid adding to this problem, it’s essential to use packaging that incorporates recyclable, reusable, and biodegradable materials that are safe and responsibly sourced. Single-use plastics, polystyrene foam (Styrofoam), and microplastics should be eliminated whenever possible, as these materials contaminate soil and water and cause serious long-term damage to ecosystems.
On the other hand, several sustainable materials can be just as durable, secure, and cost-effective. All the while, users don’t have to worry about polluting the environment. One of the most widely used is corrugated fibreboard, an alternative to traditional cardboard that’s made from mostly recycled paper and does not contain bleaches or dyes. Corrugated packaging is highly renewable and is recovered from the recycling process more than any other packaging material.
There are also some revolutionary alternative materials derived from unconventional sources. For example, packaging material made from mycelium has been developed as an alternative to traditional plastics. Also called ‘mushroom plastic,’ this material breaks down naturally after use and can be made cheaply with minimal processing.
As an additional sustainable alternative, bioplastics are a category of plastic-like materials made from renewable biomass sources, such as vegetable oils and starches, rather than fossil fuels. Unlike conventional plastics, these materials are biodegradable in most cases, and can be recycled naturally through biological processes.
Even if you use environmentally-friendly materials, your business’s sustainability efforts may still be compromised if your packaging methods aren’t designed to minimize waste. Optimising your packaging strategy to prevent waste can help you save money, reduce your environmental impact, and fulfil your orders more efficiently.
One of the most common ways to reduce waste is to eliminate excess packaging. While many businesses prioritize secure packaging as they prepare their client’s orders for shipping, using too much unnecessary packaging can increase waste without providing any practical value for the business or the client. To avoid this, you should use only enough packaging to keep a product safe as it’s being transported to the consumer.
For some items that are already secured in their own packaging, it might be worthwhile to consider shipping them ‘in their own container’ rather than replacing or adding to the existing packaging. If feasible for your business, shipping pre-packaged items as they are can save you a significant amount of money, time, and materials.
When minimizing waste, ensure you’re shipping items in the smallest possible box needed to keep them secure. Along with creating more trash, packing and shipping orders in oversized boxes can waste transportation and storage space, drive up shipping costs, and create unbalanced loads that increase the risk of accidents.
Best Practices for Green Shipping
E-commerce shipping is a major source of emissions around the world, and this is likely to stay the case as the industry continues to grow. To help address this issue, any businesses that sell goods online should consider implementing more eco-friendly shipping practices.
While it will likely require some reorganization, making your shipping methods more sustainable can greatly benefit your profits and brand. Not every strategy will work for every organization, but there are several green shipping best practices that all e-commerce businesses should understand.
Consolidating Orders Into Single Shipments
In many cases, e-commerce customers will order multiple items to the same shipping address at the same time. If these orders aren’t handled correctly, multiple delivery vehicles may need to make trips to the same house over a short period, which can create a significant amount of unnecessary pollution. However, these issues can be mitigated through order consolidation.
Order consolidation is sending out several items from the same order in a single shipment. In addition to reducing shipping costs and fulfilment times, consolidating orders can improve customer satisfaction by ensuring that buyers receive their complete order in one delivery, rather than waiting for some items to arrive later.
When delivering packages to multiple e-commerce customers, the efficiency of your driving route can substantially impact your bottom line. This is especially true for e-commerce websites offering last-mile delivery, as they must transport orders directly to their customers’ homes. While highly advantageous for customers, last-mile delivery can complicate the fulfilment process for businesses.
To reduce their environmental impact and support efficient deliveries to all customers, e-commerce businesses must optimise their driving routes to avoid waste and maximise the number of orders they can fulfil each day. Creating an optimal route can help you keep your customers satisfied with on-schedule deliveries and avoid producing unnecessary emissions.
Return shipments are a major source of e-commerce-related pollution. Retail return rates have increased as online shopping has grown in popularity. From 2020 to 2021, the average retail return rate jumped from 10.6% to 16.6%, fuelled heavily by rising e-commerce sales. As e-commerce returns become more frequent, retail inventory management will become more important for businesses.
There are several ways to implement a more sustainable return policy for your e-commerce business. One such method, omnichannel delivery, gives customers multiple options to return products, including bringing them to a nearby store location (if one exists) rather than shipping them back to a centralized warehouse.
It is also highly beneficial to combine multiple return orders into the same shipment, similar to how you would consolidate deliveries to customers. Doing this instead of shipping returns individually can help you substantially reduce emissions by completing the same number of returns in fewer trips.
Use Ground-based Shipping When Possible
While everyone loves next-day delivery, a significant environmental impact is associated with faster shipping methods. Fulfilling next-day shipping orders gives e-commerce businesses far less room to be efficient, as they must keep more vehicles in service at once, and will likely have fewer opportunities to consolidate shipments.
Ground-based shipping is considered a much more sustainable alternative to expedited or next-day shipping. Switching to ground-based shipping can reduce the emissions created by delivery vehicles. Although it is slower, customers may be incentivised to choose ground-based shipping because of its lower cost, or because of their own environmental concerns.
Just as technology has brought about the rise of online shopping, it has also given businesses new tools to manage their e-commerce orders more effectively. Tracking your orders and inventory can be very tedious, especially as your business grows.
However, using the right technology can help you save money, operate more efficiently, and reduce waste within your organisation. Integrated tools like enterprise resource management (ERP) software can help businesses streamline essential processes and consolidate important information into a single platform.
There are a variety of specialised ERP software programs with features designed for businesses of different shapes and sizes, including inventory management systems for warehouses that offer features like automated purchasing and vendor management, and small business inventory software created to meet the needs of growing organisations.
What are the primary reasons for holding inventory?
9th May 2023
You’re a manufacturer who produces high-end furniture for your clients. You source raw materials from suppliers with three to four weeks lead time, and your entire production process takes another two.
To ensure you can meet customer demand quickly and efficiently—and to keep customers happy—you keep raw materials and the finished products on hand.
This ability to meet customer demand without delays is but one reason for holding inventory.
Five additional reasons for holding inventory
Holding inventory offers a host of other benefits—from helping you reach your profit targets and avoiding costly stockouts to reducing costs and protecting against unforeseen supply chain disruptions that can really throw a wrench into your operations.
- Reach your profit targets. Meeting customer demand promptly means you’re better poised to reach your revenue and profit targets.
- Reduce customer lead times. You can fulfil orders immediately without having to order from suppliers and wait for delivery. Faster order fulfilment keeps customers satisfied and loyal.
- Avoid stockouts. Stockouts occur when you run out of a particular product, which can be costly, leading to lost sales and customers. This is a distinct possibility during busier periods, and it’s why, for example, retailers hold extra inventory during the festive season.
- Reduce costs. You avoid having to place last-minute orders, which usually cost more, and you can take advantage of quantity discounts and reduced shipping costs by ordering in bulk.
- Avoid supply chain disruptions. Unforeseen disruptions in the supply chain can lead to order delays, unhappy customers, and lost profits. Maybe a manufacturer had to shut down their operation for a few days due to health and safety concerns.
Perhaps the lead time on a particular component is longer than usual due to labour strikes in a factory. Regardless, by having safety stock on hand, you protect against these scenarios—avoiding delays in shipping and production—and can continue to meet customer demand.
A word of caution on holding inventory
As important as holding inventory may be, carrying too much can be detrimental. With too much capital tied up in stock that you could use elsewhere, your carrying or holding costs will soar, where:
Carrying cost refers to all the costs of storing and maintaining inventory, including warehousing, wages, transportation, insurance, security, depreciation, rent, utilities, and taxes.
You can calculate it using the inventory holding cost formula:
Total Holding Costs / Total Annual Inventory Value* 100
For example, if you hold £200,000 worth of inventory and your total holding costs are £15,000, then your holding cost percentage is 20%.
By analysing your carrying costs, you can make better inventory management decisions to boost your bottom line, including determining the optimal amount of inventory to hold and pinpointing strategies to control holding costs.
One way to keep carrying costs in check is to calculate the correct reorder point: the inventory level at which you should replenish stock.
Decentralised vs. Centralised Manufacturing: What’s the Difference?
2nd May 2023
It’s no secret that manufacturing is crucial to the global economy. It transforms raw materials into goods we consume daily, drives economic growth, creates jobs, boosts innovation, and helps countries participate in global trade.
But not all companies use the same manufacturing approach, with some opting for decentralisation over centralisation and vice versa.
What’s the difference? Which approach is better? Here’s what you need to know.
What is centralised manufacturing?
Centralised manufacturing is a production model where manufacturing occurs in a single central facility.
What are the pros of centralised manufacturing?
- High economies of scale. Companies that produce large volumes of standard products often use centralised manufacturing. Higher product volumes in a single factory lead to lower per-unit costs as fixed costs can be spread across a larger number of units.
- Consistent product quality. Products are produced in the same factory with standardised processes and procedures, allowing you to better control quality.
- Lower initial capital and investment costs. A single facility generally requires a lower capital investment than multiple ones.
- Easy coordination and management. It’s easier to manage production processes in one location compared to many.
What are the cons of centralised manufacturing?
- Inflexibility due to the cost of customisation. A product change often requires an entire system change.
- Longer lead times. Because production is centralised, products must often be transported to various distribution points before reaching customers.
- Higher transportation costs. Shipping distances can be longer, leading to higher transportation costs.
- Greater supply chain risks. Any disruptions in one central facility can significantly impact the entire supply chain, as production cannot easily be shifted to a new location.
What is decentralised manufacturing?
Decentralised manufacturing is a production model where manufacturing is distributed across multiple plants to provide coverage to larger areas. Plants are usually located near customers.
What are the pros of decentralised manufacturing?
- Shorter lead times. You can more easily set up production closer to your market so products reach customers quicker.
- Lower transportation costs. Shorter shipping distances between production and customers lead to lower transportation costs.
- Flexibility to meet local demand. You can quickly scale production up or down across facilities, making you more flexible and responsive to meeting demand.
- Lower supply chain risk. The impact on the supply chain from a disruption in one factory is less severe because production is spread across facilities.
What are the cons of decentralised manufacturing?
- Higher production costs per unit. You don’t achieve the same economies of scale compared to centralised manufacturing.
- Higher investment costs. It generally costs more to set up multiple locations compared to one.
- Inconsistent product quality. Different locations have different standards and processes, so maintaining product quality can be tricky.
- Difficulty in coordinating production. It’s harder to manage different processes across multiple locations.
Centralised vs. decentralised manufacturing
By now you can likely infer what the differences are, but for clarity here’s a side-by-side comparison. Keep in mind that these differences may not always hold true.
Concentrated in one or a few facilities
Dispersed across multiple plants
Economies of scale
Better due to standardized processes in one facility
Can be inconsistent across locations
Longer as production may be farther away from the market
Shorter as production may be closer to the market
Higher with longer shipping distances
Lower with shorter shipping distances
Lower for one location
Higher for multiple
Coordination and management
Easier to manage processes in one location
Harder to manage operations across locations
Supply chain risk
Higher as a disruption in one location can impact the entire supply chain
Lower as production is spread across locations
Production cannot easily be scaled up or down to meet demand.
Production can more easily be scaled up or down to meet demand.
Which manufacturing approach is right for you?
Neither approach is right nor wrong. The answer to this question will depend on thoroughly analysing all relevant factors. First, weigh the pros and cons of each approach by considering all factors like lead time, economies of scale, and supply chain risk.
Next, consider other factors like market demand, customer base, company culture and values, type of product, and growth strategy. For instance, if you have a concentrated market, it may make sense to centralise manufacturing. But if your market is spread out across different regions, decentralization is probably the better choice. Similarly, if your company prioritises sustainability, decentralised manufacturing may be more practical in helping you keep emissions down due to shorter shipping distances.
You may even choose to embrace both approaches. In fact, it’s common practice to begin with a single, centralised location at launch and then transform into a decentralised structure in response to growing demand.
Regardless of what approach you choose, Fishbowl is here to help. Gain complete visibility into your manufacturing workflows, streamline processes, and grow your manufacturing business with the industry’s most flexible ERP software solution.
Reorder point formula and calculator: A quick guide
What is the reorder point?
Constantly experiencing stock shortages? Unable to meet demand? Need more cash? The reorder point (ROP) can help.
The reorder point or ROP is the inventory level at which a company should replenish stock to avoid shortages and stockouts. This level varies depending on factors like demand variability, lead time, safety stock, basic stock, and supplier reliability. For instance, if a supplier always delivers a product promptly—and sometimes even ahead of time—you’ll have a lower ROP.
Knowing the ROP benefits established businesses that have been selling products for years and new ones that are just starting.
But why exactly is the reorder point important?
There are several reasons:
- Avoid stockouts: The correct ROP helps you order stock at the right time to replenish it promptly to avoid stockouts and shortages.
- Optimize inventory levels: Replenishing stock at just the right time helps you maintain an optimal inventory level where you have just enough stock to meet demand without having too much capital tied up.
- Boost cash flow: Minimizing the capital tied up in stock improves your cash flow, giving you money for other important business purposes like expansion.
- Reduce lead times: Having the correct ROP ensures you receive new inventory on time to fulfil customer orders promptly.
How do you calculate the reorder point?
You can calculate your ROP using our handy reorder point calculator. Simply fill out the fields and click Calculate.
This calculator is based on the following ROP formula:
(Lead Time + Safety Stock + Basic Stock) * Unit Sales Per Day
- Lead time = the days between issuing a purchase order and receiving the product(s).
- Safety stock = the number of days’ worth of inventory you keep in case of emergency.
- Basic stock = the number of days’ worth of inventory you usually keep on hand.
- Unit sales per day = The average number of products you sell daily.
For example, let’s assume that for a particular product, you have a lead time of 5 days, a safety stock of 15 units, and a basic stock of 35 units. If you sell an average of 80 units per day, your ROP will be:
ROP = (5 days + 15 units + 35 units) x 80 units per day
ROP = 55 x 80
ROP = 4400 units
To avoid stockouts, you should order new stock when you have 4400 units left.
Easily calculate reorder point with Fishbowl today
Fishbowl’s reorder point calculator helps you maintain the right inventory levels to meet demand without carrying excess stock. It’s a small part of the advanced inventory management features in Fishbowl Manufacturing and Fishbowl Warehouse.
How inventory management software can help set your brand apart
For SMBs looking to create a website and build a brand, it can be difficult to reach new customers. After all, the marketplace is competitive, and large e-commerce heavyweights can justify a lower price point due to large volume purchases.
How do you compete?
One way is to invest in the right inventory management software (IMS) to improve efficiency, reduce costs, and make better business decisions.
What is an IMS?
At a high level, an IMS is a software that helps you manage and optimize inventory levels. Use it to track purchase orders, sales, shipping information, and inventory levels. Then access all this information from a centralized database.
Many systems are available on the market today, each offering different features. These include everything from basic software for managing simple operations like stock counts to full-fledged advanced IMS solutions tailored to handle all complexities of inventory management.
So, be sure to do your due diligence when choosing an IMS by considering everything from pricing and usability to integration options and how your business requirements align with the software’s features.
Key features to look out for include:
- Real-time inventory tracking and traceability across all locations
- Detailed reports for better decision-making
- Integration with other popular business tools like QuickBooks and Shopify
Three ways an IMS helps you compete
Here are three important ways an IMS can help you compete.
1. Improved inventory accuracy and efficiency
Accurate inventory records are crucial to running an efficient business as it allows you to fulfill orders on time without carrying excess stock.
The right software can track inventory in real-time and automate tasks like stock counts. This means you save time and reduces errors by not tracking inventory manually and become more efficient than those who do.
A robust IMS also gives you visibility into stock from anywhere, anytime, regardless of the number of locations you have, so you always know what you have on hand for future planning. You can also quickly identify the location of any stock that needs to be recalled and excluded from orders.
All in all, this enables faster and more prompt delivery, improving overall customer satisfaction and brand loyalty.
2. Reduces costs through automation
Keeping costs down allows you to protect margins and better compete with other businesses.
One way to do this is through automation. A robust IMS lets you automate everything from stock counts, purchase order creation, and stock replenishment to barcode scanning, sales tracking, and report generation.
Not only does this type of automation help avoid costly errors that often arise from manual input, but it can actually help you reduce and control your costs in the first place.
For instance, by using automatic stock replenishment when inventory levels reach a certain point, you can maintain optimal levels to avoid higher inventory carrying costs. You also avoid having to place last-minute orders with suppliers to meet demand which usually comes at a hefty price tag.
3. Better business planning through data insights
Valuable data helps you make better decisions around inventory that can reduce costs, boost your bottom line, and give you a competitive advantage.
An IMS provides this valuable data through real-time reporting on things like sales trends and even asset tracking. For example, a flexible IMS like Fishbowl gives you access to over 150 standard reports. This includes everything from COGS, bill of materials, and gross sales to product margin, inventory availability, and reorder reports.
Invest in inventory management software today
It can be hard for you to compete in today’s competitive online space. But, with the right IMS in your corner, you’ll have a leg up on the competition through improved inventory accuracy and efficiency, reduced costs, and the ability to make better business decisions.
Fishbowl is the industry’s most flexible and popular IMS. Rated as the top IMS for QuickBooks for 20 years and providing the same functionality of an enterprise ERP at less than 20% of the cost, Fishbowl helps growing businesses efficiently manage their inventory from a single platform.
Fishbowl’s CFO, Brian Lanier, shares the importance of driving operational efficiency with data.
4th April 2023
Making data a priority seems fundamental, but when you think about it at a high level, for a finance leader to make their company operate more efficiently, data takes the highest priority.
Throw in the fact that a CFO also must look at other priorities, like cost management, performance, growth, talent, and compliance, and the list of priorities gets stacked a little tall. But can a CFO truly master those other areas if their data isn’t prioritized and understood?
Brian Lanier, CFO at Fishbowl, gives us a peek at his experience with driving operational efficiency at Fishbowl and other SaaS companies he has had the privilege of leading. Brian’s main responsibilities as CFO are reporting financial metrics, gathering the data needed to help different departments identify operational efficiencies and opportunities to eliminate waste, and implementing controls and risk mitigation across the company.
Suppose you are a finance leader or interested in how SMBs can prioritize operational efficiency. In that case, Brian‘s offers a few suggestions from his experience that can help identify the relevant insights and dig deep to make sense of the data.
The importance of metric reporting
“Not only are we talking about tracking metrics for different departments and individuals, but it’s my job to look at the company as a whole and how everything ties together.”
“For SMBs, I begin with high-level metrics to assess the overall health of the company, in order of priority,” such as:
- Cash flow and runway
- Total revenue and growth rates
- Profitability, such as net income
- Balance sheet strength, including debt and liabilities
“After having these things in order, I can now dig deeper. I look at our overall pricing structure to make sure we are aligned with the value we deliver to our customers, as well as how we compare to competitors. This is a starting point that will drive your subsequent analysis and is essential to understand.”
“Next, I look at the gross margin and departmental costs, and continue to dig where the data leads me. The more data and metrics you uncover, the more clearly you can understand your company and where the opportunities for improvement lie. Every company will look different, but the analysis is similar. Do the costs make sense for your company or compared to industry benchmarks? What are the levers you can pull to impact the financial performance of your company?”
Utilizing a CFO dashboard
“Once a finance leader understands the metrics critical to your business, you focus on the levers—, where you have the most leverage in the company.”
“For example, every company’s largest expense will look different. Assuming your largest expenses are labor and materials, a small change in your materials cost could have more impact on your business than a drastic change in marketing spend. Once you identify that lever, based on your cost structure, you can see where to focus your time.”
“Once your dashboard is built and you have access to data for your most critical levers, then you can track the health of those levers,” such as:”
- What is the gross margin for our products?
- At what rate are our customers churning?
- What is our revenue per employee?
“For best results, continue to monitor those levers against benchmark expectations, as well as changes and trends over time.”
“It’s very hard to identify where you can become more operationally efficient without having access to the data. As an example, if you’re in manufacturing and you don’t have the right data to identify what your cost per unit is or what the most important cost levers are, you won’t be able to identify which products might be losing money, or how to best correct the problem.”
“It all starts with data. Once you have a system that can capture the data on a granular level, you can see where waste could exist. Also, having a system that provides access to data gives you the opportunity to drop manual processes to automate them, which can drive a powerful dashboard and workflow. This gives you real-time information about your products, costs, and trends.”
“Data prioritization is what’s going to lead to greater operational efficiency and transformation. With data at your fingertips, you can expect a return on your investment, a more prepared finance leader, and a more efficient business.”
10 Business strategies to control costs and avoid raising prices
21st March 2023
Fishbowl’s Director of Customer Experience, Skyler Johnston, shows us how manufacturing companies can implement specific tactics to become more lean.
6 tips on how to apply lean manufacturing in 2023
9th March 2023
Fishbowl’s Director of Customer Experience, Skyler Johnston, shows us how manufacturing companies can implement specific tactics to become more lean.
With ever-changing new technologies and trends within the manufacturing industry, there has never been a greater emphasis on enhanced productivity and the need to eliminate unnecessary waste. Lean manufacturing is an excellent shift for companies that want to improve efficiency and increase productivity. This method can free up employees and resources for innovation, quality control, and more time working on strategic work.
I got the chance to speak with Fishbowl’s Director of Customer Experience, Skyler Johnston, on how companies can tackle some of the challenges of implementing lean manufacturing within their companies with six tips he has become an expert on.
Skyler’s primary goal as Director of Customer Experience is to improve the journey from start to finish. From implementation to satisfaction and retention, his goal is customer obsession. Before this role, Skyler was a Director of Customer Onboarding, which has made him a bit of a Fishbowl expert on the following six tips.
What Skyler thinks of lean manufacturing today
Lean manufacturing, at its core, means trimming down any unnecessary fat (minimizing waste within a manufacturing operation). Anything that doesn’t add value that the customers are willing to pay for can be considered waste. The mission behind lean manufacturing should be getting down to the most important things in the manufacturing process for each company.
Skyler’s six tips on how to apply lean manufacturing
- Timely purchases
- Instructing and training of employees
- The management of customer relationships
- Location Layout
Cost is a key component within lean manufacturing. Lower costs mean you have a higher margin, giving more flexibility for adaptation. Think about if you are buying from overseas. There is usually quite a lead time. Purchasing from the right vendor at the right time will make all the difference.
Often, you see that buying from a vendor and getting it quickly could be a higher cost than a longer lead time. Managing the timeline is essential to getting the product at the right time, so you can handle the manufacturing process, which allows lean capabilities.
There’s no predicting the future, but companies must be willing to adapt to successfully implement lean manufacturing. You must be willing to adjust the workflow process, because what works today may not work tomorrow. Adaptation is a much-needed skill to stay relevant and ahead of your competition.
On the other hand, you must be cautious with adaptation, because you don’t want to move too quickly into something that hasn’t been proven yet.
The best companies move with balance. Adapting can be costly and time-consuming.
For example, if you’re in a manufacturing environment, and there’s a piece of equipment that helps you bend metal more efficiently, buying that machine can save a lot of time. It adapts and allows you to create more time somewhere else. But, if you try to adapt too quickly and buy too many of those machines, you don’t have the demand, or customers now want something different that doesn’t require that machine. That machine then becomes irrelevant and costly.
Adaptation is meant to align your direction and improves your processes to become more lean, but it’s important to know when something is working and when it’s not. Regardless of what the industry says is right. Being able to adjust as you see fit is key.
Instructing and training of employees
Employees who buy into this new change will set the tone for the entire company. Leaders can aid in this process by creating a good vision of what they deliver to the customer and why.
When employees understand the bigger picture, it can give a better understanding and investment behind the change. They see the vision of what the product will ultimately do for the customer.
Leaders should be willing to teach their employees, listen to their ideas and knowledge as they may be closer to the customer, and be aware of what change could do internally and externally for all parties.
The management of customer relationships
When implementing change, who better to listen to than your customers? No matter the item or product you are selling, more time than not, your customer would like to have a say so, since they will be receiving the final product.
Your customers can provide value, direction, and data on how and when to implement the change. Remember that your customers do not have the final say, so take their opinions and suggestions with a business mindset. Ask yourself “How do I apply their recommendation in a way that would benefit my business and ensure customer satisfaction?”
Implementing change and bringing your customers into the loop at the right time will then only.
incentivize them to be more invested in your product and service and recommend it to other customers.
Part of being lean is making sure that you’re being efficient. Your space is a resource, and the more product sitting around not being used is taking your company away from a lean initiative. Spending money on products that are not regularly rotating through your warehouse can significantly impact your work process.
Every manufacturing process deals with the flow of things moving in and out of a warehouse. Time is of the essence; whether it be humans or AI technology moving products from place to place within a warehouse, you want the time moving the product to be the most efficient.
How much product is stored, where the product is stored, and the time it takes to move out that product all fall into the flow of implementing lean manufacturing successfully.
There isn’t a crystal ball that will help companies forecast the future, but we can plan.
Companies can prepare and plan for what the future will look like by analysing historical data and making strong predictions. But, also understanding that they must adapt because the future is unknown.
Reviewing historical data and analytics can give manufacturing leaders the insight and the ability to analyse purchasing decisions, where to eliminate bottlenecks, and predicting possible geographic and seasonality implications which could impact how quickly and slowly products can be moved through the warehouse.
The future of manufacturing is evolving, and remaining aware of the changes and challenges will only set up leaders in the manufacturing industry for success.
Implementing lean manufacturing with Fishbowl
When done right, the tips listed above can be utilized within Fishbowl’s product. We have analytics that allows companies to make predictions using historical data and how to move forward with the present.
Lean Manufacturing with ERP: A guide to Choosing the Right Software
21st February 2023
Whether you are new to lean manufacturing or looking to invest in a new ERP, this guide will help you become better informed to make the right decision for your business.
With the technology landscape becoming more competitive every year, choosing the right ERP solution for your business can be daunting. For lean manufacturers, running an efficient business is fundamental, and implementing the right ERP for your business can make all the difference to your business’s success and growth.
There are hundreds of products on the market, so manufacturers must be educated on choosing the right solution to fit the exact organizational needs, goals, and scalability potential. Before diving into the main content of this guide, some manufacturing businesses may ask themselves, “Why do I need ERP software?”
Oracle NetSuite conducted market research to review 60 critical ERP statistics. Here are a few stats that stand out the most regarding manufacturing companies:
- Manufacturing companies are the #1 user of ERP software
- Manufacturers represent the largest portion (47%) of companies looking to purchase ERP software
- 40% of manufacturing companies stated they had better functionality when they implemented an ERP system
- An IDC survey found that of small businesses with 50-99 employees, 58% supported the investment in cloud and hosted solutions
In this guide, we will go over the following topics to help you become better informed on lean manufacturing, and how to choose the right ERP solution:
- What is ERP?
- Different types of ERP
- Benefits of implementing an ERP
- What is lean manufacturing
- Manufacturing ERP considerations
- How to choose the best ERP manufacturing
What is ERP software?
For the manufacturing sector, enterprise resource planning (ERP) is used for managing, planning, and essentially carrying out the operations of a business to boost the manufacturing process. With so many new ERP software options available, it is designed to offer flexibility, scalability, and the option to integrate all business operations in one place, to improve workflows and add efficiency.
A few of the many reasons companies choose an ERP system are because it’s cost-effective, reduces errors and wastage, and saves time.
ERP system functionality
An ERP system is created to collaborate and integrate various processes in an efficient manufacturing organization. Teams can save time by controlling processes in one platform. You gain visibility and control into order generation, sourcing, procurement, production, accounting, warehouse management, and all the logistics till the final delivery of the product is complete.
An ERP system allows manufacturing companies to centralize and gain visibility into their production line, enabling them to build a more productive and cost-effective business model, make better decisions, and design better strategies.
For instance, having inventory management functions linked to accounting gives business leaders the ability to see how inventory levels and purchasing trends are impacting their cash flow. Even greater operational transparency and efficiency occurs when all systems, like ecommerce and shipping, are integrated and data is flowing from and to each operation within the business.
Types of ERP Systems
There are three different types of ERP systems that can be implemented with different model options.
- On-premises ERP is implemented locally, or onsite, in the servers on the organization’s premises. It can be hosted on the company’s own computer and servers for full access, control, support, and ownership, once implemented
- Hybrid ERP is when cloud-based, and on-premises ERP system solutions are combined. This model provides ERP users the flexibility to migrate between both models
- Cloud-based ERP is deployed by an organization accessing and storing data on any device with an internet connection, usually through a subscription purchase
Cloud-based ERP is the most modern ERP used in the market today. It’s offered as a Software-as-a-service (SaaS) in the form of purchase modules. A company can purchase models per the organization’s needs, instead of buying a whole package.
Benefits of implementing an ERP
ERPs can provide real–time visibility, integration, and administration access across business operations. Using an ERP software, manufacturing companies can manage all facility operations and processes from procurement to payroll.
Some of the main benefits of an ERP system for manufacturing companies are:
- ERP systems boost the efficiency, flexibility, performance, scalability, and productivity of an organization
- ERP automation capabilities reduce repetitive tasks, manual work, errors, and wastage, which saves companies valuable time and money
- Real-time visibility and transparency enable companies to make better decisions and collaborate more effectively
- Cloud-based ERP specifically offers top-notch security to keep companies’ data safe and secure
- The right-fitting ERP will ensure the smooth running of operations and communication throughout the supply chain process, from suppliers to the end customer
The benefits are endless for implementing the right ERP system for your company. Later in this guide, we will learn how to choose the best ERP system and what questions you should consider before purchasing.
Now that we know about ERP and its benefits, let’s pivot to lean manufacturing and how they work together to provide the best solution and work process for your company.
What is lean manufacturing?
Lean manufacturing is a process that eliminates waste in all forms, by focusing the business’s processes on the finished product and customer experience. A lean method will increase productivity and decrease expenses, making it a smart and efficient approach for manufacturing companies.
The first step is implementing an ERP system to start moving to a lean manufacturing process. Lean manufacturing and ERP do not have to be kept separate. Implementing an ERP can serve as the core of your enterprise, which will manage your workflows and provide real-time insight into demand.
When looking to implement lean techniques into your process, there is a five-step thought process for guiding the implementation.
- Identify value
- Map the value stream
- Create flow
- Establish pull
- Seek perfection
To learn more about the five lean principles, check out this in-depth resource about the process.
If you want to improve your business’s bottom line, lean manufacturing should be something of interest. Adding that it provides a competitive advantage by increasing efficiency, enhancing customer experience, and reducing waste, which leads to increased revenue and profitability.
Manufacturing ERP considerations
When shopping for an ERP system, every solution will offer similar functionality. Still, the goal is to find the solution that fits your current business needs and can scale with your business. Here are some of the top ERP manufacturing features, functionalities, and benefits that should be considered:
- Inventory management features: These will provide real-time visibility on location, inventory availability, and status of required products or materials. Also, before any issues arise, you can identify any shortages and supply requirements
- Automation capabilities: All organizational functions should be in one place. The best manufacturing ERP systems will provide automation of functions, like billing, work orders, production planning, inventory updates, and more
- Improved customer service: Your customer information can be connected to all data, from your manufacturing operations through a CRM system and integrations in your ERP software. This can give you insights into customer activities to keep up with customers throughout the buying journey
How to choose the best ERP manufacturing software
As noted in the above sections, hundreds of ERP software options are available. Your decision should be based on whether the appropriate solution and model will be effective and integrate with your existing business-management software.
While some ERP solutions are very good at general functions, your business may require software specific to your manufacturing needs and processes. Choosing a solution provider specific to the manufacturing industry can develop the right solutions to improve your organization’s efficiency.
ERP software implementation is costly and time-consuming. Consider the most needed functions or processes where you want to reduce long-term costs and increase efficiency, and you should be able to find the best model that fits your business. Choosing the right ERP seems daunting, but it doesn’t have to be when you are prepared, informed, and ready to invest in the best software to fit your business needs for long-term success.
7 Reasons SMBs Should Introduce Cashless Payments Systems.
14th February 2023
While cash payments are still in use, we are moving closer to becoming a cashless society.
Over the years, we have seen significant advances in the fintech industry, leading to new innovative payment methods and allowing businesses and consumers several cashless payment methods to consider. Cash won’t disappear anytime soon, but consumers and SMB owners are experiencing the digital transformation right before their eyes, and implementing various payment methods offers a secure, convenient, and efficient solution for all parties.
Speed, efficiency, and accuracy are essential in the logistics industry. Today, there are still SMBs that use manual systems of tracking payments and orders, which can be cumbersome and slow and possibly have a high potential for human error. In these types of businesses, streamlining supply chain operations and improving logistics efficiency, while also saving money, is key. An effective payment system, integrated into an established workflow, helps teams work more efficiently and allows more time to provide a positive customer experience.
In this article, we will go over everything about cashless payments and the 7 reasons SMBs should introduce cashless payment systems in their workflows.
What are cashless payments?
Cashless payments are any transactions processed in a way that removes the physical interaction between the purchaser and the merchant. There are many types of cashless payments as new technology is created and consumer demands increase. We will go over two types, credit and debit cards, and ACH.
Credit and Debit Cards
The acceptance of debit and credit cards is usually a standard for any size business. This form of payment is the most frequently used and accepted cashless payment option available.
An emerging trend related to card payments is contactless credit and debit cards. Tap-to-pay is now widely available and a convenient option to have for your customers. This is one of the most convenient in-person or on-premises payment options.
Introducing an integrated payment system for your business can also benefit your internal workflows and customers. A flexible and convenient payment experience for your customers will help you retain them and improve how your team works and how fast they can get cash flow into the business. If you are interested in more integrated payment solutions, read our most recent article about how Fishbowl is evolving with the future of digital payments and offering a new payment solution for SMBs.
One of the main benefits of Automated Clearing House (ACH) payments for SMB owners is cost. These payments can result in lower processing fees than credit cards and are a great option for recurring payments. ACH payments are processed by transmitting bank routing and account information between the payor and the business.
Now that we know about cashless payments and a few options, let’s understand why SMBs should use cashless payment systems.
1. Increased revenue
Businesses that limit their payment options also limit their ability to bring in more cash. Since cashless and digital payments dominate the payments industry and are preferred by many customers, giving multiple payment options will lead to a better customer experience, and presumably, increased customer retention.
2. Speed and convenience
Cashless payment options can streamline the payment experience for your customers. When there’s no cash involved, customer service times are cut down significantly. Speed and convenience are two determining factors for why a customer will choose your business over your competitors. Cashless payment options can deliver on both.
3. Data and insights
Cashless transactions provide helpful data and insights, allowing your business to make better informed decisions. You can link these transactions to specific customers to analyze payment volume by time period or payment type. Cashless payments boost your market research and give you a greater chance to know your customers to provide the best service.
4. Payment security
Due to the advances in technology and cybersecurity, accepting cashless payments will keep your money safer. With built-in fraud protection and easy payment tracking, credit cards are a safer payment option than ever before.
5. Lower operating expenses
Handling cash is costly, and it takes time and money to train employees on how to properly manage cash payments and transport cash from your business to your bank. Depending on how much money your business collects, you may even have to hire an armored car service to transport and deposit cash, which could be expensive. SMBs can cut out these types of expenses by managing payments electronically.
6. Accounting accuracy and efficiency
When your payment system can track money received automatically, it makes your accounting more accurate and removes the chance for human error. Also, not only is automated accounting more precise and faster, an integrated payment solution can improve your current workflow and save you time, unlike manual accounting.
7. Improved quality of customer experience
A cashless payment system has a direct impact on the customer experience. Giving time back to your customers is a tremendous value add and makes them think twice about leaving your business for the competition.
The relationship between the business and the customer is crucial. It can lead to loyalty, improved retention, and profitability. The payment experience plays a vital role in business workflows and customers. Going with a cashless payment system will prove an investment and a smart business decision in the long term. Staying with the trend of technology and ahead of the competition while still may be using cash payments puts your business in a greater position to operate more efficiently, earn more business, and gain more customers.
Check out our recent digital payments blog to learn the benefits of integrated payment solutions.
How Fishbowl is Evolving with the Future of Digital Payments
9th February 2023
Fishbowl is helping small and midsize businesses stay ahead of digital payments by utilizing an integrated payment solution.
One of the most critical questions small and midsize businesses (SMBs) should ask themselves is – are their payments keeping up with digital transformation? With technology becoming more innovative, the best businesses are doing all they can to protect their customers from threats, and giving them the most convenient, secure, and streamlined payment options.
Today, nearly 80% of customers prefer online payments over traditional payment methods. This is where an integrated payment solution shines. An integrated payment processing system, or payment gateway, allows you to accept payments over the phone and online. You can also set reminders for customers through text and email invoices, and set up recurring payments within the payment system.
To stay relevant and to evolve consistently with the future, Fishbowl has created its own integrated payment solution, called Fishbowl Payments. As we pride ourselves on being the industry’s most flexible ERP software solution for warehouse and manufacturing businesses, we want to help businesses give their customers the best payment experience and create long-term retention.
Before diving into what Fishbowl Payments is and how it is helping teams give a flexible and convenient payment experience, let’s talk about the benefits of integrated payments and how SMBs can operate more efficiently by investing in this solution.
The better solution – Integrated Payments
In the warehouse and manufacturing industry, time is essential. And the time that can be put back into teams’ hands to work on more strategic projects and maintain customers can make all the difference. Teams that use manual accounting tasks, such as tracking paper ledgers and invoices to record financial transactions, are not ideal, and it leaves room for human error, which can lead to breaching security vulnerabilities that could cost businesses as much as $500,000 in fines each month, according to American Bar Association.
The more efficient option is choosing an integrated payment solution that will automate the entire payment process and allow businesses to accept payments directly within their existing ERP system. This solution saves your team time and can improve internal workflows because everything is on one platform—no need to waste time switching platforms and creating different silos of your customer’s information.
Provide the best customer experience
As far as customer service goes, an integrated payment solution comes with personalized communication from an assigned account manager that is ready to assist with any questions or issues you may have.
With payment processing integrated into your ERP platform, you can immediately leverage automation to reconcile your inventory, accounts receivable, general ledger, and more. Most bank-provided platforms are hosted outside your typical business management software, meaning you must reconcile between apps to complete your billing process and become another customer ticket in someone else’s system. Customers want speed and simplicity. With the right integrated payment solution, you can give them both.
How payments integration impacts your business
When picking the systems that forms the backbone of your operations, it comes down to the best fit. No business is the same, so choosing an ERP system that fits your operations now and has the tools and functionality you will need as your business evolves is essential.
Fishbowl Payments aims to make the payment process as simple and seamless as possible, by providing an integrated solution that can sit in your ERP solution and immediately impact your customers, internal workflows, and time.
Let’s get into some of the benefits of having a solution, like Fishbowl Payments:
Get your time back
Managing finances is an overwhelming task – add manual labor to it, and it can be downright draining. With Fishbowl Payments, your payment process is integrated into your central workflows in one platform. This ensures that you get paid on time while your inventory and finances are reconciled automatically.
Choosing a solution like Fishbowl with built-in payments can help your business save up to 40 hours a week – otherwise spent reconciling invoices, following up with customers on late payments, and working from multiple systems.
Imagine what you could do with the time you get back in your days with a solution like this. Instead of chasing payments, you could be focused on expanding and retaining more business.
Avoid bank fees
Bank processors may or may not work with your current workflow, requiring your team to facilitate the flow of data in some other way that takes time and resources that a growing company may need help to spare. In addition to time and labor costs, bank processors tend to markup their payment processing with fees and non-transparent pricing.
- Gateway setup fee
- Monthly gateway fee
- Merchant account setup
- And more
Integrated solutions, like Fishbowl Payments, are set in the tool’s core functionality at no additional cost. Between that and the standard processing fees, you’ll never have to guess how much you spend on collecting payments.
Increase cash flow
82% of businesses that failed cited cash flow problems as a factor in their failure. Cash flow is how quickly money is moved in and out of your business. Getting paid on time can be difficult; add chasing down late-paying customers, and your business can be delayed from receiving payments for days, maybe weeks.
A solution like Fishbowl Payments is meant to get you paid faster and speed up your cash flow. Up to 30% of SMBs expect to face the negative impact of late payments that may affect the company’s suppliers, staff, and investments.
Considering an integrated payment solution is staying proactive and can limit that percentage compared to businesses that still need to take advantage of this type of payment process.
Keep up with the times and stay ahead of the competition
Digital payments are only expected to scale and become the new normal. Our goal at Fishbowl is to transform business operations and to provide tools and services designed to help businesses thrive and grow. The payment process is essential to helping businesses grow and providing the best customer experience.
4 Signs Your Business Needs a New Inventory Management System
Inventory management systems are essential for your business.
They help track the ins and outs of your stock with precision.
However, not all inventory systems are built the same. Some inventory systems might work well for your business, while others won’t. So it’s up to you to evaluate your current inventory management solution and see if it suits your business well.
But first, here’s a list of some essential functions a good inventory management solution should do:
- Accurately forecast stock demand and sales
- Highlight high-selling and profitable products
- Manage stock levels, orders, purchases, etc.
- Prevent overstock and stockout situations
So when will you know that your current inventory management solution isn’t working for you? The following four critical signs will tell you when you’ll need to look for a new inventory management solution.
Time Consumption and Expenses
An inventory system should manage your stock optimally without wasting any time or expense. If yours isn’t doing it, chances are you need a new one. But why is this necessary?
Having real-time information about your stock is crucial in inventory management. In other words, if your inventory system isn’t tracking your inventory levels right, you’ll end up wasting resources. So, your expenses will go up, and profits will come down as your sales take a hit.
No Support for Multiple Warehouses
Once your business grows, you’ll have to store your inventory across multiple warehouses. It’s going to happen eventually once your business operations expand.
But what happens when you find out that your inventory management system does not have multi-warehouse support? It’ll become extremely hard to move all your data to another management system.
Therefore, you need an inventory solution that supports multi-warehouse management capabilities and lets you have a bird’s-eye view of all your inventory in one system. It will eventually save you a lot of time and hassle. So make sure that your inventory management solution supports this feature.
Overstocking and Stockouts
Two of the biggest inventory issues are stockout and overstocking. Stockout happens when your inventory system fails to notify you to reorder products. Overstocking happens when your inventory system doesn’t accurately report your inventory stock levels.
Both scenarios can lead to serious issues and revenue loss if they aren’t detected on time. Here’s how a good inventory management system forecasts the requirements of your stock:
- Analyzing past data
- Assessing current trends
- Predicting future outcomes
- Tracking the number of items available
Forecasting allows you to plan your product sourcing and manage inventory accordingly. It prevents you from experiencing stockout or overstocking.
If you run out of stock and cannot fulfill orders, you’ll lose customers, revenue, and reputation. And if you have more products, you’ll have to bear the expenses of keeping and maintaining the extra inventory. This inventory can turn into dead stock if kept for longer.
If an inventory system does not report and forecast correctly, you may face these problems frequently. A proper inventory system can prevent these issues and help you:
- Build brand loyalty
- Increase revenue
- Reduce costs
- Retain customers
Unable to Monitor Supply Chains
Supply chain refers to the entire flow of a product, from the manufacturer to the consumer. If you’re unable to monitor the supply chain through your inventory system, you won’t be able to track your product.
The following happens when your inventory system does not monitor your supply chain properly:
- Productivity loss
- Customer loss
- Revenue loss
A good inventory management solution should streamline your supply chain management by:
- Tracking your stock from the manufacturer to your warehouse
- Providing an estimate about how quickly or long it can take for your stock to be available
A business’s inventory management solution should be tailored to its needs. If it does not work for you, check out another one. Keep exploring until you find the one that fulfils all of your inventory management needs.