Inventory Management!
May 8, 2011 8:21 AM   Subscribe

Help designing a small business inventory system. Super extra difficulty inside, treat it like a logic puzzle!

Okay. So I am trying to figure out an inventory management solution for the small business I manage. Cost is an issue, no software that is thousands of dollars please!

Difficulty components:

1. The things we need to inventory are disparate. We have the Front of House of the bricks and mortar business, which needs to be able to track foodstuffs, dry goods, and equipment.

2. Also have the back-of-house production kitchen, which needs to track foodstuffs, dry goods, and equipment.

3. Also have an online sales component, which needs to track foodstuffs and merchandise.

4. Our foodstuffs by in large DO NOT have barcodes. We have over 80 different local vendors for foodstuffs and they don't come boxed up and barcoded, they come in a bag handed to us by a farmer. Dry stock could potentially be barcoded, provided blackberries support it.

5. Needs to be a system that lower level management / employees can interface with easily.

6. I would like to be able to input cost information that would allow us to value inventory at any given moment as well as allow us to do analysis to project cost savings with different inventory strategies.

Something that might make it easier is that the system would NOT need to interface with sales and auto-update. Right now we use a perpetual inventory system done only by me in excel / word. We would need to continue in the perpetual inventory system, as our product sample / loss is such that POS updating would be inaccurate, and would not apply to 2/3rds of the inventory control needed sectors.

Any ideas?
posted by lazaruslong to Work & Money (10 answers total) 6 users marked this as a favorite
I have seen Quickbooks used successfully in situations such as this before, and even used the Quickbooks ODBC module to generate spreadsheets to keep the "legacy reporting" in place.
posted by SirStan at 9:08 AM on May 8, 2011 [1 favorite]

What you are describing is not a mere accounting system, but an enterprise resource planning system. Relative to standard accounting system, they are comprehensive, and difficult to deploy (but rewarding, over the long term, if done correctly).

An ERP system instruments not only inventory, but processes: including scheduling, production, planning, and distribution / logistics. As such, it can calculate the optimal ordering amounts for various items for different product mixes, projections, and deals.

If you are a huge company with lots of resources (and cash), the standard-bearers of the ERP field are SAP and Oracle. For smaller companies, there's Microsoft Dynamics, and a few others (including open source solutions).
posted by curtm at 9:12 AM on May 8, 2011 [1 favorite]

Response by poster: SirStan: That sounds somewhat attractive, because we currently utilize QuickBooks for our accounting needs. Thank you for using the polite term "legacy reporting" for what really is a clusterf---- of spreadsheets and hard copy reporting. I do NOT want to continue with the...legacy reporting format. Could you expand a little bit on QuickBooks' functionality in this regard?

curtm: Yeah, I came across descriptions of ERP system implementation. My concern is that it is using a sledgehammer to kill ants, in the sense that the business is small. We grossed a little over a million dollars last year, but we are small in the sense of having very limited management labor to assign to the management of the system as well as limited cash to spend on implementing any system. Currently our production is very day-to-day, in the sense that our pastry chefs make product each day for the Front of House, and our chocolatiers produce raw material every other day that is converted to final product on the intervening days. Does this sound like a system that would benefit from ERP implementation?

Another thing I should mention is that we are expanding into a chocolate factory soon, so ERP implementation would make a lot more sense for production scheduling in that sense. Therefore it might make sense to being the ERP implementation even if it is a little bit overkill now in the anticipation of having the system up and running and managers trained on it for when the expansion is complete.
posted by lazaruslong at 9:20 AM on May 8, 2011

Response by poster: I have to scoot out for a little bit, but I will be back later to respond and clarify as needed. Really appreciate the time and effort everyone.
posted by lazaruslong at 9:32 AM on May 8, 2011

Best answer: The first thing that comes to mind is that I wouldn't worry about barcoding your dry goods. Set in place a process to weigh them, and put that into the system. This will allow you to track depletion over time, and a weekly or few-days resolution should be fine, depending on how often you usually have to resupply. "We use 573lbs of cane juice per week," stuff like that.

However, while inventory management/ERP is fine, you don't really say what problems you're trying to solve. In the parlance of today, "pain points" are where the current system breaks down or is frustrating, so look to solve those first. Is the kitchen running out of stuff because there's too much to keep track of, or do you find that you have too much and it goes bad? If the chefs are still going to keep the same schedule it may be enough to put their mind at ease that they no longer have to worry about whether they'll reach into an empty box of chocolate nibs the next day.

The online and retail aspects should be fairly straightforward, per Quickbooks or whatever above; it's kind of a solved problem.
posted by rhizome at 9:47 AM on May 8, 2011 [1 favorite]

Response by poster: Good call on the pain points, I hadn't heard that term before. I'd really love it if I could engage with you further later on this evening, gotta run out now for brunch! I'll think of the pain points, and there are many, and be back with more information later.
posted by lazaruslong at 10:09 AM on May 8, 2011

Response by poster: Pain Points I can think of:

1. Multiple individuals currently take inventory and re-order. Many times these are actually just looking for low stock and ordering, and not actually recording an inventory. These individuals do not communicate or centralize their data in any way.

2. Multiple overstocks and outages occur on a regular basis as a result of any one of the individuals tasked with inventory maintenance either being sick, out of town, or having a workload increase in any of their other functions. None of the managers taking inventory have that as their sole responsibility.

3. As a result of number 1, there is no meta-level oversight on expenses, loss, theft, or waste.

I'm sure I could think of more. The whole system (or lack thereof) is more or less a pain point.
posted by lazaruslong at 2:33 PM on May 8, 2011

Best answer: Wow. That's a pretty messed up environment. I've really got to caution you, though -- implementing "software" isn't a solution. In fact, it'll just make you more confused unless you put systems in place first... you won't have a basis for creating reports that make sense, nor will you have any sense of what the stock report output means.

a) As a general rule with systems, you cannot digitize a system unless you have a system. Therefore, step 1 is to establish a system.

b) How much do you know about statistics? Can you tie orders to sales within a specific confidence interval? If not, that should be one of your first goals.

c) Have you defined the purpose of the reports that currently exist, and interviewed different stakeholders for their take on the meaning of different numbers?

I realize that the following books apply to a manufacturing environment, but have you read "The Goal" series by Eli Goldratt? There's a couple of books in the series and they're really good for getting you excited, introducing you to some basic terminology, and giving you *just* enough of a feel of a handgun to blow your own foot off. They read like novels, and I can easily polish them off in an evening or two.

I have a degree in supply chain and logistics and have managed restaurant operations from a supply chain point of view; if you have any questions please feel free to MeFi Mail or Email me.
posted by SpecialK at 5:54 PM on May 8, 2011 [3 favorites]

d) How receptive is ownership/senior management to appointing a person who is specifically responsible for developing this intelligence or basically creating a person who manages inventory?
posted by SpecialK at 5:54 PM on May 8, 2011

SpecialK nails it at a). Trying to fit software to broken business procedures is the most common cause of death march projects.

First the fixing. Then the automation.
posted by flabdablet at 11:46 PM on May 8, 2011

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