Where did these lamps come from and other ERP questions

Posted by Jason on September 30, 2010

It’s fun when I can find a real-life example to illustrate how important an effective enterprise resource planning (ERP) system is to a company’s bottom line. Here’s a great real-world example of a company in need of a new ERP solution.

Six months ago a colleague Tom and his wife Emily ordered three lamps from a local retailer. Because the items were out of stock the retailer placed them on back order from their drop shipper. Not willing to wait, Emily promptly canceled the order, was refunded, and bought the lamps elsewhere. Yesterday, six months later, an unmarked box arrived with three lamps. It’s the canceled order.

Here are the questions this order and shipment mix-up raised. Mind you, they are also some of the issues a good ERP system will help you solve.

• Where did these lamps come from?
• Why didn’t the retailer know the drop shipper was out of stock when they placed the order?
• Did the drop shipper get notified when the order was canceled?
• Does the retailer know the drop shipper fulfilled a canceled order?
• Will the retailer ever learn what happened to these lamps, or has this order disappeared into a black hole?
• Who will bear the costs created by this error, the retailer or the drop shipper?
• How much profit and inventory is lost to mistakes like this each month and year?
• How much money is wasted on unnecessary shipping and handling costs each month and year?
• Why wasn’t the retailer identified somewhere on the package or packing slip instead of only the name and address of the drop shipper?
• Why is there no contact information for the drop shipper or retailer on either the package or packing slip?
• How and to whom does my friend return the lamps?

This example illustrates the issues caused when the systems we order and fulfill from are not connected. Sometimes we call this ‘silos of information’, other times we just call it frustrating and costly.

Here are a few questions to help you determine if you need a new ERP system.

• Do your sales and customer service teams struggle to find up-to-date information on which products you have in stock?
• Do your sales and customer service teams lack visibility to the back order and fulfillment systems?
• How many times does an order (or canceled order) need to be entered for the order to be fulfilled?
  Hint: if the answer is more than one, you may need a new ERP system.
• Your business is growing and your system can’t keep up
• A lot of time is wasted hunting for information
• You’re losing clients and losing money

If you answered yes to the questions above it may be time to find a qualified ERP Consultant to help. Find out more about what to expect during an ERP Implementation.

An effective ERP Systems can help improve your bottom line by

• Eliminating the need for duplicate entries into multiple systems
• Reducing the opportunity for operator error
• Providing instant access to orders and inventory
• Improving supply chain management
• Improving efficiency
• Improving inventory management

Do you have a story to share? We’d love to hear your company or personal experience illustrating the ramifications of inadequate supply chain management or enterprise resource planning systems either from the customer or company perspective.