There are three kinds of people: those who watch things happen, those who make things happen, and those who wonder what happened.
The world is in crisis. Some countries are hit harder than the others, some markets have sunk deeper than the others, but the effects of global economic recession are obvious, and if the crisis didn’t hit you yet, fasten your seatbelt—it surely will.
With the whole world wondering what’s going on, the winners will be those who learn to navigate the troubled waters and make things happen. This is much easier with a piece of good business management software, such as Microsoft Dynamics NAV.
Recession is more than skin deep, and no small or medium-sized business can possibly mitigate the macroeconomic cause-and-effect avalanche that led to current situation. Instead of prescribing a cure that’ll save the world (maybe another time), I’ll focus on three elephant-obvious symptoms that affect everybody:
- Declining sales: lack of money clogs the wheels of perceived obsolescence, and people stop buying unless it’s necessary. From consumers, this symptom quickly cascades all the way up the supply chain, and suddenly everyone is affected.
- Decreasing profitability: less sales means less revenue, which means lower margins. Unless you find a way to decrease operating costs, you face a serious profitability issue. Corporations can lay off thousands to save billions; small to mid-sized businesses cannot.
- Illiquidity: less profit means less cash to operate. As if this is not bad enough, less sales can easily mean more cash trapped inside excess inventory of both raw materials and finished products. Unless you harness your demand/supply balance forces.
These three are are linked together tightly, and tend to spiral around in endless cycles. But there is good news for you: Microsoft Dynamics NAV can actually help you tame the recession beast.
I’ve brain-dumped a few random thoughts about Microsoft Dynamics NAV features you can put to work today, not to help you survive, but to drive your success throughout the crisis. Here you go:
- Item planning and replenishment: set up planning and replenishment options, such as lead time calculation, safety lead time and reordering policy. Although the four available reordering policies don’t cover the leanest and meanest scenarios (such as Kanban), they help you keep the inventory down at all times.
- Stockkeeping units: these help you establish a more granular planning system. If you run consignment stock or vendor managed inventory (VMI), you can control inventory levels downstream your supply chain, allowing you to even further decrease overall inventory.
- Planning worksheets: combining actual and forecast demand with planning options of your items and stockkeeping units (and manufacturing, if you use it), this functionality calculates the optimal replenishment plan to meet all of your demand while not exceeding or creating excess supply. It can create new replenishment orders (purchase, production, transfer), reschedule existing ones, change their quantities or cancel them altogether, making sure that only necessary transactions are carried. This reduces administrative work, eliminates error and boosts productivity, all of which of which contribute to your gross margin.
- Order promising: with properly configured planning options of your items and stockkeeping units, as well as receiving and shipping options of your vendors and customers, you can take advantage of available-to-promise (ATP) and capable-to-promise features (CTP). These two tell you how soon you can have the goods delivered to your customer’s door, all based on planning setup, inventory at hand and existing demand. This feature makes you reliable, which can increase your sales (or at least keep them where you need them). When economy is down, vendor reliability is crucial because it allows you for a leaner inventory, and if you are a reliable vendor, customers will want to do business with you.
- Customer credit limits: by establishing credit limits for your customers, the system warns you any time a customer transaction would exceed the limit you imposed. This simple feature helps you control your cash flow, and prevents doing unnecessary business with customers that can’t pay.
- Customer statistics: mother of profitability analysis. It gives you detailed overview of your business with a customer, including revenue, costs, profits, discounts, refunds, adjusted costs and profits, and dozens of other financially relevant metrics. Too many companies treat their customers based on revenue—in rough times profitability is a far more relevant metric. Understanding of profitability of your customers can help you focus your business on those segments that generate higher margins, and eliminate those where you lose money.
- Item statistics: even more powerful than customer statistics, this feature helps you understand both the cost structure of your items, and their profitability. Situation is much more clear with items—while it is more difficult to fire a customer, discontinuing an item based on lack of profitability or loss is more than a sound decision.
- Approval workflows: both for sales and purchases, establishing approval schemes helps you control the cash flow by making sure no excess liabilities or credit is created.
- Intercompany postings: this feature reduces data entry and manual work exactly by half, because it allows automatic exchange of purchase/sales documents and transactions in customer/vendor relationships. Although not too frequently used, there are several scenarios where intercompany postings functionality saves tremendous amounts of work, such as running multiple companies in the same database, or doing business with partners running Microsoft Dynamics NAV.
- Picking by FEFO: companies handing expirable goods must take good care of their inventory aging. Picking by FEFO ensures that those goods with earlier expiry dates are picked first, preventing any unnecessary costs of expired goods.
- Business Notifications: streamlines your processes by establishing loose workflows and notifying relevant stakeholders of important business events. It can eliminate all waiting and unproductive time by allowing users to take over the tasks immediately when responsibility shifts to them. Your employees are more productive, and business runs smoother as there is very little slack in execution. Ultimately, this can also positively impact your customers’ satisfaction, as their orders get executed quickly.
- Business Analytics: a built-in OLAP based business intelligence (BI) subsystem, allows for easy establishing and maintenance of a basic data warehouse and OLAP database, and comes with an OLAP client (both Windows and Web-based) for ad-hoc analyses and reporting. While this is far from cutting edge market-leading BI tools, it provides a fantastic price/performance ratio, and can give you immediate insight into information, helps you understand what’s going on at all levels of your company, and assists you in timely decision-making processes.
(I almost put Commerce Gateway in the list of cost-saving features, but I gave up on it. Yes, it can boost your supply chain up- and downstream, saving you significant costs, but it has a very costly external dependency on BizTalk Server. If you have it already, you should leverage its potential and couple it with Microsoft Dynamics NAV.)
Make sure to use the features above. They can turn a bad economic situation into your advantage, help you make things happen, and navigate safely through the times of recession.
This Post Has 6 Comments
one of the largest benefits of owning an ERP system is real time reporting; in non-erp environment you have to rely on your bookkeeping and their timely work
in my case, one of the greatest benefits was ability to see your sales funnel from the begining not from the back end where you only get report and realise you are in trouble
with ERP you can see and monitor number of quotes, you can track orders, relate that to your stock and you can make prediction of your future cash flow, which in the end can help you spot troubles ahead before anybody else
without ERP you typicaly get reports on something that already happened and after the fact; in the first case you have significant head start which you can use to fix, remedy or at least soften the problem
What a well-thought-out article, Vjekoslav. There’s also more information about Dynamics NAV features, for those companies that aren’t aware that they exist, on Enterprise Resource Planning.
Fred, thanks! Both for the comment, and for the link. I’ll make sure I consume most of material there, and make it into a blog post here a bit later. This seems to be great stuff!
Just wanted to say hello to everyone and that I look forward to posting plenty of useful information for all ……. Thanks,
Vellduemn, hello to you to! See you around!