ERP Pain Point #5: It takes too much effort to generate a complete list of active materials and their descriptions
Leslie (New Product Portfolio Manager): Hi Casey. Can you help me please? I’m trying to get my arms around how many active Finished Goods we have, but I’m not quite sure the best way to go about it.
Casey (Reporting Specialist): Sure, no problem. Here’s a complete list of all Finished Goods that have had some sort of material movements in the past year. I think that should do it.
Leslie: Awesome! Thanks!
One week later
Leslie: Well, I’ve been checking out the list you gave me, and it seems that some of those materials have just been shuffled around the warehouse and not really used to fulfill any sort of demand requirement. Can we take out those kind of movements?
Casey: Hmmm… What if I just give you a list of everything that was either produced or put on a delivery?
Leslie: Let me think. It wouldn’t get produced unless there was some sort of demand signal, so that works. And it wouldn’t go on a delivery unless it was to fulfill a sales order or some sort of replenishment order, so that should work too. So, I’m talking myself in to saying yes, that should do it!
Two weeks later
Leslie: Hi Casey. I’m really starting to doubt our analysis because I’m finding too many holes in our logic. For instance, I’ve seen several replenishment orders that were triggered by forecasted demand even though we haven’t had any actual sales for those materials in over two years. I’ve also seen several replenishment orders triggered by stock dipping below the reorder point…
Casey: Wait, that should be legit, right?
Leslie: You’d think so, but here’s the kicker: on at least 3 occasions, the reason why the stock dipped below the reorder point is because it expired, and we had to write it off! I hardly think that describes an “active” material!
Casey: Hmmm… this is going to take a lot more analysis than I thought…
“What are your active materials?” It seems like such a simple question, but as you start to peel the onion, you may find there are a lot more layers than you originally thought. If you are preparing for an ERP implementation, this is definitely a question you will want to answer accurately before you even start your project. Otherwise you run the risk of bringing over a bunch of obsolete materials – and perhaps a flawed demand planning process - into an otherwise pristine system.
You can’t build a world class ERP system on a broken business process foundation.