The question must be considered: Is it worth it? What is the ROI if we automate this process? What if software could save your company tens of thousands a year, over a lifetime? Let me share the story of a client, an aluminum foil stamping company that manufactures disposable cookware (think bake and roast pans).
When the manufacturer first approached us, their systems were a bit… cumbersome:
- Small inventory variances processed on old software through manual entries had been manageable when the company was small, but volume had increased dramatically.
- No scan guns were in use to process inventory; inventory transfers were handwritten, then entered into the system later, leading to frequent errors. Each manual entry required every component’s lot and bin number.
- There was no way to find variances until annual inventory, when it was too late to fix problems. Performing the annual inventory count took 2 to 3 shifts a day for 3 full days.
Variances were caused by theoretical conversion from weight to length. Rolls of aluminum were inventoried and purchased by weight, but consumed by the foot, a common problem with raw materials. A certain weight per length is standardized, but variations in thickness causes actual weight to vary from the standard—making production estimates inaccurate. Then, when production would make more units than the program estimated based on weight, an inventory adjustment entry had to be made.
The combination of these factors caused material variances to balloon to approximately $5 million in write-offs per year, much to the dismay of auditors and bankers. The volume of entries required to adjust inventory in the system was so great, it took a full-time employee (at $60K annual salary) to work around the discrepancies.
We got to work on a solution:
- Creating software able to handle the natural variances that occur when you’re working with raw materials—in this case, rolls of aluminum and coils of steel.
- Writing a custom barcode app that eased parts transfers, from receiving to inventoy to production.
- Simplifying their process, so actual inventory was accurate and any discrepancy was tracked by production order number.
- Moving to a browser-based solution and installing Wi-Fi so employees could interact in real-time with the inventory database.
- Including user validation so errors were caught and corrected in the moment.
- Designing time-saving reports that allowed users to manage by exception.
- Automating production entry and accounting entries.
What were the tangible results?
- Real-time, accurate inventory management, with more and better data.
- Reduced human error and saved time by automating the entire process.
- Improved company’s ability to deliver great customer service and financial compliance.
- Slashed annual material variance write-off from $5M to $1M within 1 year.
- Saved the company $60K in annual costs by eliminating a staff accountant role.
- Reduced annual inventory from 3 days to 2 shifts over a single day—and they’re no longer looking for $3M of “missing” inventory.
When a programmer creates a general software application to sell to the masses, the boxed solution might meet some customer needs, but not all. A custom solution, with built-in intelligence that answers a multitude of questions specific to the client, fully meets their unique problem.
Curious to know how custom software could solve your company’s toughest challenges? Schedule a free consultation with one of our software experts to learn more.