Traceability with production management or sales management?
The search for inventory management (inventory management software) is the main need expressed; but in fact it’s the result of purchasing and sales management. The choice is difficult, as the vocabulary used is so specialized and nuanced, like the difference between manufacturing management and production management…and what’s more, if we add the desire to reduce errors by automating through the use of barcodes!
We’ll deal here with the accounting side of stock management, not the organizational side, in order to derive the simplest and most cost-effective solution.
We receive a large number of calls from small and medium-sized manufacturers and processors who are looking for “inventory management software” and can’t simply find it. They then chose “sales management” alone (without the production module) on the pretext that the sales management specifications state “stock management”. They then want to add the use of barcodes to reduce data entry errors.
They’re stuck and crying out for help.
The aim of this section is to explain to those who have already made their choice, how to fill this gap with our software.
We deal here with requests from companies that have workshops, that produce from raw materials for which they wish to ensure stock management, whether or not they trade in these materials.
The basics of inventory management :
It’s important to understand that inventory management is not a function in itself, independent of the rest of the company’s management.
Inventory management is a result of the management of purchases and consumption of materials on production orders for these manufacturing companies by the simple formula below:
STOCK = INPUTS - OUTPUTS.
A common solution for error-free data entry is to ask your software publisher and suppliers to apply barcodes to BL, order and invoice numbers.
Another solution we also use may be character recognition (OCR) to record accounting document numbers (BL, orders or invoices): see the modules in our range of supply-chain applications
Let’s look at trading and manufacturing separately.
Barcode inventory management software for trading companies:
Inventory management is the result of buying and reselling the same item, without modifying it. Sometimes, this item is included in a “nomenclature” (a list of items making up the finished “composite” product) which is used for picking. This is done to sell an article composed of several items, without transforming or removing the component items. To carry out this type of operation, it is common to use a sales management system: this is largely sufficient in the retail sector.
NEGOTIATING STOCK = PURCHASES (receipts) - SALES (picking delivered).
All you need to do is enter the stock entries and withdrawals, and link them to an accounting document: the supplier’s order or BL for entries, and the customer’s order or BL for withdrawals.
Indeed, at this stage of the number of entries, to request barcode management. Clearly, barcode management is closely linked to, and integrated with, IT management.
Now the question of the distance between the object to be entered on the PC and the CAPM arises, and that’s where the trap lies.
A simple USB handheld scanner is no longer enough, and what’s needed is a mobile terminal with a scanner and intelligence in the hand that will synchronize with the IT management system.
Read §“Why choose a terminal with a scanner integrated into a handheld shower?
And as the management of these terminals is not provided for: it must be added and this is not necessarily possible nor authorized by the editor
Let’s take a look at the case of barcode-based inventory management software in a manufacturing company.
Component items are said to be “consumed”, i.e. they are transformed or disappear in an operation that is part of the routing. Only a production management system or “GPAO” allows these operations to be carried out correctly and tracked.
Two basic stock management equations must therefore be respected:
STOCK RM [Raw Material]= PURCHASES(receipt) - CONSUMPTION on OF / on Order
STOCK FP [Finished Product]= Finished OF - SALE (order picking) delivered
Example for a company manufacturing molded resin sheets
For example: a plate reference ZZ is composed of 2kg of resin reference YY and 300g of fiberglass (mat) reference XX.
XX and YY are the BOM items for ZZ.
The molding operation consumes these 2 items in the proportions indicated, without it being possible to reverse the operation.
We can say that the gross cost of product consumption is equal to the cost of the product bill of materials, which would ultimately be the same if we were using simple sales management. So what’s different about simple sales management?
A quick aside on using sales management to manage production:
There are two major differences (not to mention the absence of batch traceability, tracking of tooling used, and tracking of actual time spent):
- the transformation operation is carried out well before the sale of the finished article. Consumption, and therefore stock reduction, takes place on the date of the operation, whereas in commercial management, consumption of items ZZ and XX takes place when the BL or preparation slip is issued. What’s more, this OF in CAPM or preparation order, with no raw materials in stock, will not necessarily generate a need to purchase materials for the future date of the operation, taking into account the supplier’s delivery lead time: you’ll have to think about this manually in sales management.
- the cost price of the final product is made up of a significant proportion of operator and machine time, with an hourly rate: we could imagine using commercial management and putting “operator hours in stock”: consuming these hours is not a problem, whereas purchasing them is impossible in commercial management. Controlling and monitoring production times is also impossible in sales management.
Some commercial management systems integrate what they call “manufacturing management”, which allows you to create production ranges, but cannot launch date-based or cascade supplies, nor manage planning, as is the case with real production management systems, known as “CAPM”.
Because of the first difference, you need the “date-based inventory management” function (also called “MRP” = Manufacturing Resource Planning), which is not always implemented in simple sales management systems: only this function enables the system to consider forecast stock shortages and purchase proposals (with a “minimum stock” alert, for example).
Conclusion: sales management can therefore NOT be used to manage production on a long-term basis, but it can be supplemented by appropriately linked modules.
by our mobile external modules, such as :
Create an interface between a sales management order and production using mobile modules from our range of supply-chain applications
Ask us for advice!