Tuesday, September 16, 2014
Small Business Solid Technology
Inventory strategies are a key driver of a company or organization’s success. The reason being inventory serves as a barometer for a company’s overall (financial and operational) health. U.S. Census Department highlights that inventory is a substantial asset in supply chains, with total business inventories reaching ~$1.62 trillion, in January 2013— about 29% larger estimate compared to ~$1.27 trillion in sales that month. [i] Inventory strategies, often, have a direct affect on customer service, operational performance, and the direct cost of the firm’s inventory policy.
Inventory strategies drive customer service levels, which ensure that the right products are available at the right place at the right time. Inventory strategies help to optimize operational performance by enhancing operational activities. Fundamentally, these strategies help to balance customer service performance against the costs of ordering and inventory-carrying costs.
Businesses, often, assume improving the accuracy of sales forecasts is the best way to reduce inventory, and that more inventory on hand beefs up customer service.[ii] However, the key to business improvements is an optimal inventory level, an approach easily implement by large companies oppose to small businesses. Small businesses are more vulnerable to the negative impacts poor inventory management can have on operations— especially in times of financial instability.
Many small businesses across America now have machinery that can complete various functions automatically, but are manually keeping inventory records by hand. Optimal Inventory management to maintain substantial inventory levels, for operations, has been a challenge for over the years for many small businesses—until recent implementation of business intelligence software (BIS).
An example of a BIS implementation is Auto Wash Express, owned Brian Janezic. Mr. Janezic was first introduced to FileMaker Pro, a BIS product well suited for small businesses and tailored to iPads. With FileMaker Pro, he can now pull up his two (operations) sites, see what inventory is on hand, and create a PDF of a purchase order to send to local supplier or online suppliers.[iii] When Mr. Janezic needed to check the eight drums of carwash chemicals (windshield bug removal solutions, pre-wash chemicals for tires, waxes, and glass cleaners) levels he would have to use a yard stick to each drum, noting liquid levels and measuring again a week later. Only capturing two data points per week. Since being introduced to FileMaker Pro, he has installed sensors that are linked to the software system for each drum. This now allows for there to be a continuous monitoring of chemical levels, and instead of having two data points in the span of a week, he now has as much as 500 data points,[iv] per week across the company. The system also has text message and email alert capabilities, to report a malfunction or update of any sort. An example of this would be an email alters sent if a valve stick is open, which would potentially drain a “$250 drum of soap.”[v]
Last year 9.2 percent of small businesses adopted BIS, compared to ~1.7 in 2010. [vi] It is cited that this increase is use is due to easier-to-use products and lower prices. BIS now makes it easy to drag and drop spreadsheets, and upload files from mobile devices. Through BIS many small businesses are able to run fleets of vehicles and staff better because they know the exact location of their employees. Importantly, these tools also provide customer insights; small businesses have a better understanding of the items to sell to their customers as well as which products have the best profit margin. BIS software now allows companies to better respond and interpret emails field by customer service representatives,[vii] and spot information trends, which has sped up response times. What once took 24 hours now can be solved within two hours.[viii]
Management of small businesses can now efficiently, and without reliance on gut checks, accomplish aspects of the inventory management process. As this shift towards BIS implementation continues, it leads to the question of how long can big businesses maintain there market positions as small businesses are becoming leaner and more efficient?
[i] Core Curriculum: Operations Management- Managing Inventory. Roy D. Shapiro. Harvard Business Publishing. September 12, 2013.
[ii] Ten ways to improve inventory management. Pratap Mukharji, Sam Israelit, Francois Faelli, Thierry Catfolis, and Raymond Tsang. Wall Street Journal. July 06, 2011.
[iii] Finding Ways to Use Big Data to Help Small Shops. John Grossmann. The New York Times. July 9, 2014.
[iv] Finding Ways to Use Big Data to Help Small Shops. John Grossmann. The New York Times. July 9, 2014.
[v] Finding Ways to Use Big Data to Help Small Shops. John Grossmann. The New York Times. July 9, 2014.
[vi] Finding Ways to Use Big Data to Help Small Shops. John Grossmann. The New York Times. July 9, 2014.
[vii] Finding Ways to Use Big Data to Help Small Shops. John Grossmann. The New York Times. July 9, 2014.
[viii] Finding Ways to Use Big Data to Help Small Shops. John Grossmann. The New York Times. July 9, 2014.