ERPAG 5.1

Inventory costing methods

inventory costing methods

Which are the most used inventory costing methods? Which inventory costing method is supported in ERP/MRP software solution? Should you use FIFO, LIFO, Average or Specific costing method in your ERP?

In practice, after you sell anything from your inventory, the cost of goods sold must be included in the period the sale has been made.

There are four main types of inventory costing methods:
1. Weighted average method
2. FIFO (First In First Out)
3. LIFO (Last In First Out)
4. Specific identification

In one of our previous blogs, we explained the differences between Weighted average and FIFO costing methods: https://blog.erpag.com/2019/01/fifo-vs-weighted-average-inventory.html
In this blog, we will go over each method.

Weighted average method

This is the most commonly used costing method. With this method, the average cost is assigned to each inventory piece when it’s sold throughout the year.

The average cost is calculated after each purchase with the next formula:
Average cost (purchase price) = Old inventory value + landing cost / Old inventory quantity + landing cost
Where the inventory value = purchase price + landing cost

The average cost contains your purchase price plus the shipping, handling, etc. (landing cost)

Susan has a bike store. She uses the weighted average method to run her inventory costs. If she purchases a bike on the 1st of March for $70, with $10 shipping, her average purchase price for the bike will be $80. On 9th of March, she purchases a bike from a different supplier for $50 and $10 shipping, her stock price will now be $70.
Purchase cost balance = $80 + $60 = $140, divided by 2 pcs = $70

weighted average inventory cost method

Upon making the sale, the $70 cost will be assigned to the bike:

weighted average costing method

As the inventory purchase price changes over time, so will the stock price (average purchase price). 
ERPAG uses a perpetual inventory costing method in inventory transactions, which means that it updates the stock price (weighted average price) after each purchase.

FIFO (First In First Out)

The FIFO method means that the inventory that is first physically acquired will be charged to expenses account. Therefore, for this reason, the inventory items that were first bought they are sold first as well, and the remaining stock items at the end of the period are those that were last purchased or manufactured.

The FIFO inventory method is actually based on the physical flow of inputs or inventories without taking into account the price of these inventories and whether these inventories will be consumed in that order.

Karen also has a bike store, and she purchased 4 bikes on Monday at $70 each, and she purchased 2 bikes on Tuesday at $75 each (Jesus Karen, always buy in bulk when you find a great deal!). Mike comes in and purchases a bike. Even though he bought a bike that Karen paid $75, she will assign the cost of $70, because she is calculating her inventory costing by FIFO method. Her inventory stock amount will be $360.

FIFO costing method

The result that will arise by applying this method, expressed through the amount of expense and inventory at the end of the period, depends on whether or not the cost of inventories increases.

If it is assumed that it’s a sale of finished products, the effects of applying the FIFO method will affect the amount of cost sold and the value of the inventory that will be in stock at the end of the period.

LIFO (Last In First Out)

The LIFO inventory method means that the last purchased inventory item is sold first, and the remaining stock items at the end of the period are those items that were first purchased or manufactured.

Same as with the FIFO method, the LIFO inventory method is based on the physical flow, the input, ie the inventory, regardless of the price level of these inventories and regardless of whether the inventories are actually consumed in that order.

In this case, Karen will sell to Mike the bike that she purchased for $75.

The result that will occur by applying the LIFO method expressed through the level of costs or expense and inventory at the end of the period, will depend on whether the cost of inventories increases or decreases.

Specific identification

This method is used when you can track individual items of your inventory. Whether it’s through the serial number, or a barcode, or a QR tag. If you can distinguish each item in your inventory, you can track the cost of each and one of them through an accounting system, or even a simple XLS table. The point of the specific identification method is to track the cost of each item sold.

If Susan shifts to this costing method and purchases bikes in June for $65, and for $70 in July and puts QR codes on each one of them. Upon each sale, she will be able to identify the cost of the sold bike.

This sounds like the best option to track the cost of your inventory, but it’s also very time-consuming method, and it’s more suitable for items of high-value. And since Susan & Karen are super busy bike-shop owners, they need to rely on FIFO or weighted average, or, at the last spot – LIFO costing 
method, if they want the procurement, inventory stocking, sales, and cost assignment to be done asap.

ERPAG as one of the ERP and MRP business software solutions offers Weighted average and FIFO as inventory costing methods. Due to opinion collision, we incorporated the 2 most used costing methods, and we give you a full ability to choose by which method you will run the warehouse. Once you assign it to your warehouse and start creating documents, we are stripping down that ability from you and tying your hands and you won’t be able to change the costing method anymore. So make a wise choice. At least, with ERPAG, you have such a possibility.

Regards,
ERPAG Inc.

ERPAG 5.1

Raw material management system


Do you know what are raw materials and how to manage them properly? Do you know why this is important? Could you define what is the real cost and the estimated cost of manufacturing? 


The first step for using good raw material management is to have clear concepts related to it.

These are the most important concepts of raw material management:

Raw material: it is the product (unprocessed or partially or totally transformed, and in the case of sub-assemblies, processed products that are used in the manufacturing process of another product) that we acquire to sell it to the customer, in the form of raw materials in some cases and as a final product in other cases. The raw material is one of the most important expenses, hence the good management of it is essential for the real viability of the business.

Stock: is the amount of raw material we have stored in warehouses and other various locations enabled for that purpose. But not only that. The stock is money, money that we have invested in the purchase of raw materials and that we must manage in detail to turn it into sales and, therefore, into profits. Erpag gives you the opportunity to maintain your stock levels both of the raw materials and finished items by using the qty below minimum option: https://learn.erpag.com/project/create-new-product-1/untitled-4/basic-definition/quantity-below-minimum


Bill Of Materials: it is a blueprint that lists all items that need to be used in the manufacturing process, collects important information about each item (such as cost) and it lists the quantities that need to be used. On the list, you will also see the work operations and the labor cost.

multilevel bom

Consumption: the consumption of raw material refers to the total input of raw material from the warehouse into the production process, to manufacture the products that you are selling to your customers. When we talk about consumption, we include all types of consumption: both the one that ends up in manufacturing and that is eventually sold, like the one that goes to waste, returns and mysterious disappearances... It is very important not to confuse the purchase of raw material with consumption. Raw material consumption evolves according to sales (the logic is that purchases also do so) and serves to measure the result of the decisions you make in your company. Consumption management reports in terms of the consumption value of a period and is analyzed from two perspectives: Real and Estimated.

Inventory: the inventory is the reflection of the current stock levels in your company, which corresponds to the specific moment in which you do the raw material count. Knowing the valued stock of the product in your company is essential to know the consumption and, at the same time, adjust the orders and manufacturing. The task of stocktakings must be periodic, in order to compare the data. You don’t always have to do stocktakings of your entire inventory, you can do it by a certain category of products, certain warehouse (if you have multiple locations), you might want to focus on the control of only a certain number of items and to the stocktakings only for them… and you can also choose a certain time period for this, for example monthly, with more frequent inventories, yearly for the total inventory, etc. To read more on how stocktakings work in Erpag, please go to the following link: https://learn.erpag.com/project/create-new-product-1/count-inventory/inventory-checking

Cost: cost is the relationship between two variables. The real cost of manufacturing and the estimated cost of manufacturing.

The real cost is the amount of raw material that has been consumed in a given period and is calculated - as we have seen on more than one occasion - by means of the formula (Initial Inventory + Purchases - Final Inventory) / Sales. The Real Cost is what it has been while the Theoretical Cost is what it should have been. Therefore, the more the Real Cost of Theoretical Cost moves away, the less benefit you will get and the more you will have to work for the profitability to be established.

The estimated cost is the product cost that would be achieved if the bills of materials were followed strictly. It is calculated using the formula raw materials cost + (work operation cost per hour * hours of labor) = estimated cost. The difference between estimated Cost and Real Cost is money you stop earning. The estimated cost will change depending on how three variables change in the bill of materials change: what the product costs you, the work operations cost and the labor included. The real cost will aim to follow that, but the specific work orders will vary from case to case.

Erpag will give you both of these calculations automatically, and you will be able to compare them. This will enable you to identify when and why your manufacturing processes are costing more than it is foreseen so you will be able to address the problem and avoid similar loses in the future.

Raw material purchase management: every time that a customer orders a certain item, Erpag will automatically compare the demand to the stock levels and trigger the back-ordering option to let you know whether you need to go into production in order to fulfill the sales order, or you are lacking in raw materials, so you need to order them from your supplier. This will all be listed in separate fulfillment lists, and you will be able to create work orders/purchase orders in one click.  To read detailly about this option, refer to the following link: https://blog.erpag.com/2018/10/fulfillment-backorders.html

ERPAG 5.1

QuickBooks Online & ERPAG Sync Errors 


quick books error


Which are the common error messages you get when you sync the documents from your ERP software with QBO? How to solve errors between MRP and QBO sync?

1. Introduction

The emergence of cloud computing and, in particular, the Application Programming Interface (API), has made great strides in linking diverse applications. Application users imagine that the process is simple and that only one "click" is enough and the data will be synchronized, something like receiving and sending an e-mail. But in practice, there are problems from the technical side that are completely incomprehensible and frustrating to the users.

Apart from the inaccessibility of the service, the most common problems are related to so-called "Dirty data". By "dirty data" we do not consider anything bad, the data from one system being sent to another system does not satisfy the logical control of the database entry.

Example:

In ERPAG, the "SKU" must be unique, while the item name can be repeated. When entering data in ERPAG, it will be allowed to enter it with the same name (eg SKU: 00155 Name: Small Bolt and SKU: 00156 Name: Small Bolt). From our point of system identification and functioning, the name of the product is not relevant.

With QuickBooks Online (QBO), the situation is different, as it will not allow the manual entry of a new item if the identical name is previously entered, so it will not allow even an API entry. From the point of view of QuickBooks Online, this is "dirty information".

In this text, we will describe the most common mistakes, problems with synchronization, and how to solve them.


In ERPAG by "clicking" on the info icon you can see the error message on each document.

QBO sync statuses

The solution depends solely on the error message description.

In this text we will focus on API errors, while the other QBO integration information can be viewed on the following links to our blog:

https://blog.erpag.com/2018/09/quickbooks-online-erpag-manufacturing.html

https://blog.erpag.com/2018/11/erpag-qbo-canada.html
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2. Online Status

Cause:

Every online service has its own "downtime", a time when it is unavailable. The reasons for the unavailability of the service may vary, from some error through security to regular maintenance and system updates. In most cases, ERPAG initiates synchronization so that the operator does not know if the QuickBooks Online services are available, and only when synchronization is activated an error occurs.

Error Descriptions:

The service is temporarily unavailable.

An error occurred on the server while processing the request. Resubmit request once; if it persists, contact developer support.

Solution:

Whether the QuickBooks services are available you can check on these two official Intuit links:

http://status.quickbooks.intuit.com/

http://status.quickbooks.intuit.com/

QBO website error


When the service is normalized and working, start the synchronization again.
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3. The item name (description) already exists

Cause:

In the introduction of this text, we provided an example of "dirty data". In ERPAG, the identification is SKU, while QuickBooks Online uses the item description (the reason is the most likely that QBO can function without SKU numbers). So there is no verification of duplicate names in ERPAG, while this verification is embedded in QBO.

Error Description:

The name supplied already exists. : Another product or service is already using this name. Please use a different name.

Solution:

The primary solution would be to import the whole QBO codebook through an Excel file before the first synchronization, after exporting the product and service list from ERPAG.

QBO Product list

The system will then execute the logical control of the entered items.

If this is not possible, one of the solutions is to change the name in QBO (for example, add a suffix).

QBO product information

ERPAG connects an item according to the SKU data, during the next synchronization, it will be newly created with the "unique" name.
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4. The customer and supplier (vendor) have the same name

Cause:

QuickBooks Online does not allow the supplier, customer or employee to have the same name.
In practice, it happens that at some point the buyer is also our supplier. This is a fairly common case in some European countries, as national accounting standards require that when a customer returns goods, this transaction must be entered as a new input of goods, Instead of voiding sales orders, we need to make a purchase order.

Error Description:

Another customer, vendor or employee is already using this name. Please use a different name.

Solution:

Since there is no code/key (as there is an SKU in the item) in the QBO list of the customers and suppliers, the search is done first via "Display name" and then through the "Company name", and if the data is not found, then a new customer or supplier is automatically created.

QBO partner information

In order to solve this problem, we need to manually open the Customer or Supplier (Vendor) in QBO, where "Display name as" will be unique (eg we can add a suffix) and such a name cannot exist in ERPAG. "Company" information must be identical to the one in ERPAG.

Example (top picture):

When we activate synchronization from ERPAG, the application will search first for the "Acme Ltd" in "Display name", and after it has not been found it will search through "Company", since this information is identical, the invoice will be created for this customer.

Note:

When ERPAG automatically opens a customer or supplier, the "Company" and "Display name as" data are identical.
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5. The administrator locked the books

Cause:

When the accounting period ends, administrators have a good practice to "close the books" with the appropriate date. This way, they prevent the documents from being accidentally inserted into the finished period.

Error Descriptions:

The account period has been closed.

The account period has been closed and account books can not be updated through the QBO Services API. Please use the QBO website to make these changes

Solution:

The first question is whether this document should really be booked under that date?

If it doesn't need (and it will be posted under another given) in ERPAG, through the "bulk" action, we can change the status to "ignore"

ERPAG QBO sync statuses

While we create it manually in the QuickBooks Online with the wanted date.

If it is necessary to enter the documents into business books with that date (the administrator or accountant must decide), then it is necessary to "unlock" the books in QBO.

unlocking the books in QBO

Note:

"Closing the books" is probably done for a particular reason, so please always consult with your administrator or bookkeeper.
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6. The transaction is made the date of inventory tracking

Cause:

When manually opening a new item (or XLS import), a date is added which is later than the transaction date.

This can happen when the dates between the sales and purchase order are different (for example, we synchronized the purchase order one month after Sales order).

Example: An item is opened (as in the picture) where "As of date" is 13th of June 2019.

QBO Set product date

While we are trying to synchronize the document from 11th of June 2019.

QBO and ERPAG document sync

Error Description:

Transactions with inventory (QOH) products can’t be dated earlier than the Inventory Start Date for the product.

Solution:

In QuickBooks Online, for that item, you need to set the proper date, like it's pictured below.

QBO Adjust starting value
QBO inventory starting value
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7. Duplicate Document Number

Cause:

When opening the QuickBooks Online database, there are already predefined values. One of the default values is a warning (ie a ban on the API call) if we try to enter a new document (for example, invoice) and there is already a document with an identical number in the database.

We will not go into the reasons why it was done in QBO, although ERPAGs document numbers are mostly unique as well. In case of Splitting, Voiding or Return of Goods, the newly created document retains a unique number. Then there is a problem with synchronization.

Error Description:

Duplicate Document Number Error: You must specify a different number. This number has already been used.

Solution:

In QuickBooks Online, in the Company settings, turn off the parameters as shown in the pictures below.

duplicate number options in quick books
duplicate document number in quick books online

There is another solution considering the voided documents - to change the status to 'ignored' through the bulk action.

QBO and ERPAG sync voided documents

And then void the document in the QBO.

voiding documents in QBO

Note: Void options are a little bit advanced, so we advise to contact your Administrator or Accountant before proceeding with such action.
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8. Business Validation Error

Cause:

In order to work faster, data is often sent asynchronous, i.e. the order of sending data does not have to correspond to the order of receipt.

Example:

We sent a request to open a new supplier and then a Bill document related to that partner. Bill came first to the server (ie to the database). Since the data has not yet arrived (or it's not already entered in the database), the document is not valid because there is no supplier in the database.

Error Description:

BadRequest inner Validation Exception was thrown. Details: Business Validation Error: Error occurred when setting up Styles due to parallel requests.

Solution:

Simply run the synchronization again in a few moments.

Regards
ERPAG Inc.
ERPAG 5.1


History of inventory management



First signs of inventory management


Probably the first "inventory counting" that comes to our mind is Adam naming all animals, and, latter Noah counting beasts entering the Ark.

Related imageImage result for adam naming animalsThe first signs of inventory management go way back in history. When you look achievements of ancient architecture and read about great battles of past, you need to ask yourself how did they manage it, how did they manage logistics of such monstrous projects?
Supplies, tools, manpower
We think of first inventory management systems as primitive and ineffective, but the latest archeological and science breakthroughs give us a totally new insight in old inventory times

Dr. Gunter Dreyer of the German Institute of Archaeology is perhaps the most prominent of a number of archeologists who believe that writing actually developed out of early marks that were used to tally the kinds and amounts of goods in stock at ancient warehouses.

Dr. Dreyer recently discovered numerous inscribed bone labels attached to bags of oil and linen in the tomb of King Scorpion I at Abydos, Egypt. The labels date back 5300 years, are the world's earliest known writing, and describe inventory owners, amounts, and suppliers.

One could even conclude that Inventory control goes back further than writing. Even before systems of representing specific sounds by specific pictures arose - the systems that let you look at a letter "s" and associate it with the hissing sound one makes by pressing the tongue lightly behind the upper teeth and squeezing air out of the lungs, for example - there were simpler inscriptions in Egyptian and Babylonian warehouses and granaries, with pictures that represented the inventory owner and numbers representing amounts in stock and taxes due.


Middle Ages


Merchants couldn’t really account for stolen goods unless they did time-consuming physical counts on a regular basis. They also had trouble making sure they got the right number of products when orders came in because of sparse record keeping.
Great battles in the past with more than 100 000 knight included-needed to be prepared. There was an inventory system that enabled armies to be equipped and prepared in time. With the invention of accounting and new world explorations, inventory management climb its leaders. There are tons of documents regarding inventory preparations and counting. But still, inventory counting was done manually and it was a much tedious process.

Industrial revolution or : 

"Do not fold, spindle or mutilate"

was a generalized version of the warning that appeared on some punched cards.
Yes, during the Industrial revolution PUNCH CARDs were a real revolution. They were commonly used in business and even used as financial records for storing bound and check info. Of course, they also found their place in inventory management.

Here is the short timeline history overview of punch card evolution:

1740
Basile Bouchon developed the control of a loom by punched holes in paper tape in 1725. The design was improved by his assistant Jean-Baptiste Falcon and Jacques Vaucanson
1832
Semyon Korsakov was reputedly the first to propose punched cards in informatics for information store and search. Korsakov announced his new method and machines in September
1881 
Jules Carpentier developed a method of recording and playing back performances on a harmonium using punched cards.
1896 - IBM era started
Hollerith founded the Tabulating Machine Company (1896) which was one of four companies that were amalgamated (via stock acquisition) to form a fifth company, Computing-Tabulating-Recording Company (CTR) (1911), later renamed International Business Machines Corporation (IBM) (1924).
1950
The UNITYPER introduced magnetic tape for data entry in the 1950s. During the 1960s, the punched card was gradually replaced as the primary means for data storage by magnetic tape, as better, more capable computers became available.

Modern times

Barcode Scanning
Tracking of inventory is another major area of overall inventory control and management. Traditionally there was no foolproof method to keep an exact track of inventory items. Nowadays, barcodes are extensively used on products in supply chain or production processes which can be scanned by bar code readers which then sends the data to the central control unit regarding the product details and updating various details about the product.

Use of RFID
Radio Frequency Identification Technology is the advanced technology to increase equipment, inventory and business process visibility. It helps to accurately track the location and exact count of materials and store them in a central database which provides a bird’s eye view on the inventory levels in the organization hence empowering the users to make informed decisions based on facts.

The Future ..will I be pretty ..will I be rich...

With industry 4.0 there will be synergy between logistics, production and inventory management/
Finally, we are reaching to the golden milestone of  "ultimate supply and demand"  that drives goods allocation. How, when and changes You can read about it in our next blog.

ERPAG Inc.



ERPAG 5.1

Top 5 Mistakes When Choosing ERP-MRP for SMBs


banana peel

What are the top 5 mistakes when choosing an ERP/MRP solution for SMB company? Which ones can you easily avoid? Which are the key elements you need to consider when choosing an ERP/MRP for your company?


The introduction of a new, or replacement of an existing ERP / MRP system is one of the most important decisions SMBs make during the year. This process is very stressful, strenuous and often ends in failure. One joke could explain the challenges of choosing business software:

"Nothing is easier than quitting smoking, I quit it 50 times."


Based on our experience, in this text, we will explain the most common mistakes that cause SMBs to make the wrong choice.
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1. The choice is not made by the owner or top manager

According to their own "job descriptions", the owner, CEO, GM, or top manager are very busy. It can be said that their time is the most expensive in the company. Leaving or delegating the decision to choose an ERP / MRP software solution to its subordinate employees will result in a high cost at best case.

Is the time saved by the owner (or top manager) more valuable than the wrong choice?

Parameters based on which the owner (or top manager) decides and the employees are diametrically different.

Parameters important to the owner (or top manager):

• New value
• Productivity increment
• Economics
• Price/quality ratio
• Saving labor
• Long-term investment, long-term benefits
• Pragmatic feature "checklist"

Parameters when an employee decides:

• Implied additional liability, in addition to existing obligations
• Test only the top 5 solutions
• Always decides for the most expensive, due to lower risk
• It's not directly his money in question
• Search for a replica of an existing system because it already has a built-in position
• Focuses on their own personal benefits
• Discredit any system that could potentially jeopardize his position
• Unrealistic feature "checklist"

Conclusion: In each part of the selection, the owner or top manager must be included.
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2. Deadlines


deadlines hourglass

ERP / MPR solutions are one of the most complex software solutions, and their complexity itself requires a deep and thorough analysis of each process. It's impossible to do it in the short term.

The biggest trap is if you have short deadlines for choosing and implementing a new solution.

In practice, it happened that we were contacted on December 20th, with the wish to start applying the software from January 1st!

From our experience, for this kind of software and in the most ideal case, it's impossible to make the choice under just 3 months.

Our recommendation is to make your selection in the period of reduced business activity (for example, off-season), because then you will not be pressed by deadlines.
When choosing a solution, you need to compare in detail your needs with the functionality of the solution.

On this link, you can see the ERPAG features list: https://www.erpag.com/features, and you can open a trial for free to fully explore our solution.
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3. Unwillingness to compromise

There is no "magic" software that will cover all the processes in the way you have imagined.

"Typical" software such as ERPAG are designed so that they can be used by multiple users, each procedure is analyzed, there are as many common points as possible. When creating a procedure (or features), it is taken into consideration that their fusion and usage is compatible with as many users as possible.

It happened to us that the entire implementation reached its downfall due to the unwillingness of the user to change his habits even for the one "millimeter."

In one implementation of the calculation of earnings, in our form, the coefficient was entered per hour, while the user insisted that it should be entered in full amount for a month. Even with our explanation that this information is entered only 12 times a year, the user's response was that the management provides them a report with monthly amounts and that they do not want to calculate the coefficient by the calculator each month! We know that the user is always right, but the price of such change would only be paid off after 1000 years.

"Tailor-made" solutions are the most expensive and virtually inaccessible to SMBs. Through the joke, they say that the development of such a solution is more expensive than the worth of the SMB company that seeks such solution.

SMBs companies must be prepared for compromises. If a solution covers 80% of your processes, then you are on the right track.
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4. The most expensive solution is the best one


rolls royce


If that was the case, everyone would drive "Rolls Royce".

By choosing an expensive solution you did not get a guarantee that the system will suit you.

With such a choice you will get a system that is more complex than your needs.

Such a solution is designed for "enterprise" companies, whose organization is complex, having specialists whose only job is working in the information system. In SMBs, working in the information system is one of the operations (often additional) that the operator is working on during his regular working hours.

These are two completely different concepts, it is impossible to "downgrade" the solution provided for the "enterprise" company and apply it to SMBs. Nor it is possible to "upgrade" SMBs software solution for the enterprise.

It's like buying a truck and a pick-up vehicle. If we need delivery around the city, we'll buy a pick-up, we certainly will not buy a big truck or "Rolls Royce".

Until the emergence of "cloud computing," ERP / MPR solutions were inaccessible to SMBs, primarily due to price.

In our blog, we explained how it is possible for us to get on the market with a good price: https://blog.erpag.com/2019/04/mrperp-app-from-49.html
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5. Choosing an "open source" solution or a start-up company


startup financing cycle

With every emergence of new technology and the occurrence of "cloud computing," "start-up" companies start to pop up.

If you are planning a long-term use of an ERP / MRP solution, the choice of a start-up company is quite risky because 90% of the start-up companies get shut down.

The first goal of a start-up or open source solution is to reach as many users as possible. Their funding is not from profits, but from donations or investors. The ultimate goal is the sale of users or acquisitions from already established businesses.

Creating an ERP / MPR solution on the cloud platform itself is not revolutionary. Almost all major companies have launched new "cloud" versions (for example, Intuit QuickBooks: https://quickbooks.intuit.com/). We do not expect major players to overtake start-up or open source companies. According to our estimation, in the upcoming period, we expect "quenching"  of a lot of ERP / MPR solutions.


ERPAG has evolved from MS-DOS, through Windows, and the current Cloud-Based version. In all these phases, it was financed and developed from its own profits. We were established in 1996 and our plans have always been and will be long-termed.
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2019. ERPAG Inc

What is warehouse management? How can your company benefit from warehouse management? What is the difference between inventory management and warehouse management? 

Warehouse management is increasingly important for companies to fulfill the promises they make to their customers and to be able to save more time and allocate money to other areas of the company. Let's start from the essentials:

What is warehouse management?
It is the logistics process that is responsible for receiving, accumulating, moving and maintaining any type of material, such as:

  • Raw material
  • Semi-finished products
  • Processed products
  • Safeguard machines and equipment  


In addition, warehouse management is also responsible for planning the storage of these products in a location, planning the movement, the supply and keeping the exact control of the stocks that are so important to produce more and sell more.

Is there a difference between warehouse management and inventory management?
Actually, both are based on the same idea with the difference of complexity, that is, the size of your company:

If you have a small business, inventory management tells you how many units of the product you have a place. If, on the other hand, you have a slightly larger company or you are a manufacturer, you will have to deal with more complex tasks such as knowing how many products are finished and how many are in half, knowing how many are defective, doing maintenance work on the site where it is stored and all the tasks related to it. Inventory management is also known as stock management or stock management.

As the company grows, the need for multiple locations grows as well and the inventory management tasks for each of the locations becomes more and more complex. That’s where warehouse management comes into place.

The general tasks of warehouse management are:

  • Input and materials, supplies and products 
  • Supply to production 
  • The exact location of the product in the warehouse 
  • State of the product or material (finished, almost finished, etc.) 
  • Product characteristics (Size M, green color, version 40 GB, for example) 
  • Identification and labeling of the product 
  • Product photos 
  • Movement of operators 
  • Machines commissioned (forklifts, cranes, etc.) 
  • Connected with the sales department to update availability 
  • Distribution of products inside and outside the warehouse 
  • Quality management 
  • Warehouse maintenance plan 
  • Security plan 
  • Control of expiration dates


The task of warehouse management ends when the item leaves the warehouse (even if they take data like who, when and where they took it).

What does the management of a warehouse do for your company?

In a simple way:

  • Prevent you from spending a lot of time looking for a product and making faster deliveries 
  • You control all the movements of the product in your warehouse to avoid damage, theft or expiration of your stocks 
  • Control of production so as not to saturate the warehouse 
  • Send updated information to sellers, e-commerce store, ordering system to suppliers, production, etc. 
  • Avoid mistakes when identifying products 
  • Avoid hiring staff for these types of tasks 
  • You reduce time and money that you can use for other value-added activities.


The problem with warehouse management is that it represents a cost that does not add final value to the product. So optimized management is vital so you can have more competitive prices in the market. To achieve this task, I recommend you use ERPAG, an inventory, manufacturing and warehouse management software, that enables you to have multiple locations and manage your stock in each one of those locations!



To read more about what falls under the warehouse management side of Erpag, refer to the following links:
https://learn.erpag.com/project/products-and-services/untitled-3/warehouses
https://learn.erpag.com/project/create-new-product-1/move-inventory
https://learn.erpag.com/project/create-new-product-1/untitled-4/basic-definition/minimum-purchase-quantity/transfer-fulfillment




ERPAG 5.1

Make-to-order vs make-to-stock

What is the difference between make to order and make to stock?
Which business model fits better?
When should we use one or another?
What are the pros and cons of using make-to-order and make-to-stock?


Few introduction words...

These are just some of the questions that we ask when planning our manufacturing process.
In the startup phase more or less everything goes based on intuition and experience, but later we need to wisely choose between two models. At first sight, there is no obvious difference but when we analyze more deeply, we can see very important differences that can save or lose a lot of money during the curse of time. First, let us explore the features of each approach.



MAKE TO ORDER

We are sales beasts. We optimized all our sales channels and marketing is driving our sales. Numbers are skyrocketing and orders are just pouring into our sales module. Everything is bright and shiny.

Except in manufacturing.

Our shop floor guys are stuck in production. Raw materials slots in the warehouse are empty, and work order queue on our CNC center is longer than a black-Friday rush in front of our favorite high-tech fruit logo store.

As you can see from this disaster scenario, there are some pre-requirements that need to be meet up in order to run our manufacturing smoothly. Don't get me wrong - fortunes are made when built to order process is fine-tuned.

And what do we need to ensure in order to keep things under control? Okay, it is not a top secret and we like to share knowledge - isn't that the reason why we are writing this in the first place? :)

So, here they are - the top 5 must implement features if you wish to run your "build-to-order" manufacturing smoothly.

First, (Orwell would like this one) - Monitoring, monitoring, and monitoring.
You need to have eyes and ears in each corner of your shop floor. You need to know exactly where are you standing with your inventory levels, are machines operational, and to manage your supply chain on the top level. Why? Because you don't want to disturb your manufacturing process, especially if you are a small business and your resources are on a high demand level.

Second, Flexibility.
You need to have flexibility built into the DNA of your manufacturing process.
You need to be able to shift gears, speed up one order and put on hold another.

Third, the Fulfillment process.
Your procurement team backed with the help of an MRP/ERP Software should be able to react quickly on new demands and deliver goods on time and in right places, of course, with demanded goods, so your RMA is not overheated.

Forth - you still need Safety stock to ensure JIT (just in time) delivery of goods. And that's a touch of art. Too much can put you in the trouble by tying up financials and producing an unnecessary cost, on another side - not enough can produce additional cost in transport and brake the deadline.

And at last - the last one - fifth, Synergy between the dynamic components of your manufacturing system.
This one is about building a team that likes to work in dynamic conditions, that is fast to respond and whose team members are ready to jump in for one another.

Benefits:

  • Customer satisfaction
  • Optimized costings for transport and warehousing
  • Fast reaction to market terms

Risks

  • Inefficiency
  • Wastage
  • Deadlines 



MAKE TO STOCK


Okay. If "make to order" is for acrobats, then make to stock is for the fortune tellers.
This is the perfect manufacturing process if you have a crystal ball and you know how to use it.

Joke aside, yes, that is just what you need in order to successfully run your make-to-stock manufacturing. If you are wondering why - I'll tell you why:

This type of manufacturing is driven by FORECASTING. Which means that you need to have strong capabilities to predict the demand based on previous sales. Usually, from the small business perspective, these are monthly, quarterly, half-term, and yearly cycles.
It is achievable, but you need to take into account a lot of variables and you need to work in a stable economy.

If the economic terms are fluctuating then you need to guess when and what to expect (and if you are good at guessing, then you better move to Wall Street ;) ).
In order to have good forecasting, the software system must have great reporting.
"Statistical data", "business intelligence" and "AI-driven" are just some of the terms that you will get used to.

You need to possess the right assets, in terms of knowledge, to really understand trends and set your goals.

And, the last but not least, is your art of seduction - for the great relationship with your vendors.
You depend on them, usually, these are long term contracts and you need to choose the right suppliers to keep your shop floor running



Benefits

  • cost decreasing using blanket PO and other long-term suppliers contracts
  • cost consistency
  • more stable environment
  • predictive machines maintenance cycles
  • overall less stressful environment
  • better efficiency

Risks


  • stockpiling caused by bad planning
  • manufacturing interruptions
  • slow "market" response time

Now, once you have all the facts, it's up to you to decide: which member of the Circus are you?














Magento & ERPAG integration


The era of the overall digitization and crossing of business from paper to digital media has brought many benefits and accelerated the development of companies. The phenomenon of the CLOUD Internet service and the enabling of business without the physically present borders additionally contributed to that development. Sales on the Internet have been growing for years, and the number of services that enable this kind of sales every day is growing. Magento is one of these services.

In order to enable ERPAG users to sell through Magento services, ERPAG has made it possible to connect between these two services using the Magento API (Application Programming Interface) version 2.3. Therefore, to securely connect ERPAG and Magento, you need to have Magento version 2.3 or higher installed.

By connecting ERPAG and Magento, the user receives the following benefits:


  1. Complete Inventory Management (Sales, Procurement, Stock Status, Production, Ordering, Packaging and Shipping) on the ERPAG page
  2. ONLINE sales from Magento
  3. Updating items in Magento (sending from ERPAG)
  4. Updating quantities (stock) in Magento (sending from ERPAG)
  5. Update items in ERPAG (download from Magento)
  6. Download Sales Order from Magento to ERPAG

In the synchronization process, ERPAG relies solely on the SKU. So, if you already have items defined in Magento, check that each product and its variation have a unique SKU.

Preparing and setting up Magento

The first step for successfully connecting ERPAG and Magento is to create a new Integration (an account that will have access to the Magento API). Open the browser and log into your Magento. Then click on the "System" link as shown in the picture and select the "Integrations" option.


The next step is to create a new integration by clicking the "Add New Integration" button.


Enter a name (the name may be arbitrary, but it is a recommendation to enter a name that will refer to the application for which you are creating the new integration). You must also confirm the new integration by entering your password.


In the same form in the API - Available APIs option in the dropdown list, select the "All" option, then save the changes and activate the new integration.


Then activate the Allow button.


After creating a new integration, Magento will generate tokens from which ERPAG needs only the Access Token data.


Record the text file with Access Token somewhere because you will need it to enter ERPAG.


Preparing and setting up ERPAG


In order for ERPAG to communicate with your Magento store, you must enter the previously obtained Access Token in ERPAG. Log into ERPAG using your ERPAG account and activate the "Web Shops" option from the "Sales" menu.


The next step is to open a new Web Shop.


In the following form, besides entering Magento Access Token, you need to set up the synchronization mode. How data synchronization will take place depends on your business process and varies from case to case. That's why we will explain each option in detail and you will decide for yourself which model suits you best.


Panel – DOCUMENT HEADER

In the Description field, enter the name of your Shop. This name will later be displayed through the synchronization process, and in this way, you will know which Magento account you are synchronizing with.

In the Synchronized field, enter the starting date and time from which ERPAG will begin to download Sales Order. Later, upon each synchronization, ERPAG will correct this information on the date of the last Sales Order taken over.

In the Status field, you can turn on or temporarily turn off the sync with Magento.

In the Update qty to webshop field, select whether you want ERPAG to update the stock status in your shop.

In the On Stock Status select whether you want ERPAG to correct the On Stock data in your webshop during synchronization (Auto option), or for ERPAG to ignore the status because you are updating it manually in your webshop.

In case your Magento is set with multiple web sites and each website has its stores, it's mandatory that you set the website from which you will synchronize the data.

set websites in magento


Panel – API-SETTINGS

Enter the Access Token, and the URL, and then press the VERIFY button to verify that the API data is entered correctly. It is recommended that you use a secure URL, or that the URL starts with https: // instead of http: // in order for the communication between ERPAG to your Shop to be encrypted. At the same time, if your Shop works through an unsecure http: // protocol, there is a possibility that certain options will not work.

Panel – CONFLICT RESOLVER

At the beginning of this instruction, we said that ERPAG is synchronizing with Magento by searching products based on their SKU. When the SKUs are different, the following processes will be performed:

  •           In case the SKU exists in Magento and does not exist in ERPAG, ERPAG will download and create a new Product in the Product and Services list
  •           In case the SKU exists in ERPAG and does not exist in Magento, ERPAG will create a new product in your Magento

Conflict resolver is essential in the situation where identical SKUs are found on both sides.

In the Product field, you can choose which side to win, or which data will be valid:
  • ERPAG win - means that the product found in ERPAG will be considered valid and the product in Magento will be overwritten with the one from ERPAG
  • Webshop win - means that the product in Magento will be considered valid and the product in ERPAG will be overwritten with the one in Magento

In the Price field, you can choose which side will win as far as the selling price is concerned:
  • ERPAG win - means that the selling price for the product found in ERPAG will be considered valid and the selling price for the same product in Magento will be overwritten with the ERPAG price
  • Webshop win - means that the selling price for the product found in Magento will be considered valid and the selling price for the same product in ERPAG will be overwritten with a price from Magento 
  • Ignore - denotes ignoring the prices defined in ERPAG and Magento, i.e. prices in ERPAG and in Magento remain as defined


      When you have completed all the necessary settings (according to the needs and specifics of the Shop itself), you need to click on the SAVE button to record the changes.

      Since both Magento and ERPAG allow you to work with more Stores / Warehouses, after recording the changes, a new panel will appear where you can define (pair) the Magento Store with a specific store in ERPAG. Activate the "Edit" option and pair the appropriate Magento Store with the ERPAG warehouse.


After choosing a warehouse, record the changes.

Setting up items for synchronization in ERPAG

ERPAG allows you to create and select the products you want to synchronize with your Magento Store. Creating a product in ERPAG is already described on the following link: https://learn.erpag.com/project/create-new-product-1/untitled-4/basic-definition and in this manual we will only show details related to Magento.
So, go to the Products and Services list and activate the product you want to synchronize with your Magento Store.


From the dropdown list, select the web shop with which you want to synchronize (if needed, you can also select multiple web shops).

By choosing one or more web shops, a special panel for each web shop will appear on the form.


In this panel, you can define all the parameters necessary for sending to Magento. ERPAG will offer you some default values, but you can correct them at any time. The only information you cannot select is SKU. The SKU must be identical on both sides so that the synchronization process can function at all.

Name - may be different from the name of the item defined in ERPAG

Attribute set * - select the appropriate set (required field)

Price - enter the desired price for the product. If the price is not defined, ERPAG will enter the Default price

Categories * - select one or more appropriate categories (required field)

Status - you can select "Enabled" or "Disabled"

Visibility - you can choose "Not Visible Individually", "Catalog", "Search" or "Catalog and Search".

Description - you can enter a detailed description of the item

Short description - you can enter a short description of the item

In addition to the above-mentioned data from the web shop panel, ERPAG will also take the following data:
  •          Gross product weight and
  •          Unit of weight measurement


When the settings are complete, record the changes by pressing the Save button.

* Note: Magento and ERPAG do not have the same structure and functionality related to product properties and product categories. When defining a product in Magento, you have to choose the Attribute Set as a set of multiple different attributes (properties). ERPAG has no such approach, i.e. the products in ERPAG have no properties sets. Also, Magento allows the product to belong to several different categories which is not possible in ERPAG. Because of these specifics, product properties and product category in ERPAG do not match the Attribute set and Category in Magento.


Product Synchronization

After adjusting all the items you want to synchronize, you can synchronize that data with your Magento Store. From the Product and Services list, click the Web Shops button and then click on the shop with which you want to synchronize the data. Please note that ERPAG will synchronize all products that are defined for synchronization, not just those that you just entered or selected in the list.


The synchronization process takes place as follows:

So, in the event that ERPAG during the synchronization determines that the data synchronization needs to be updated using Conflict resolver, you need to know the following:

  1. ERPAG reads the product list you have in your web shop
  2. Comparison of products from the Magento list and ERPAG list is performed, based on SKU
  • a) In case there is a SKU in Magento that does not exist in ERPAG, a new product is inserted into ERPAG
  • b) In the case that ERPAG has a SKU that does not exist in Magento, a new product is added to Magento
  • c) In case there is a product with identical SKU on both sides, comparison of other data (name, price, properties, etc.) is made.
  • i. If the data is identical, no synchronization is performed
  • ii. If the data is not identical, the correction of the data based on the Conflict Resolver is done

So, in the event that ERPAG during the synchronization determines that the data synchronization needs to be updated using Conflict resolver, you need to know the following:

  1. If ERPAG wins - the Magento data will be corrected in accordance with the information defined in ERPAG
  2. If the Webshop wins - the data in ERPAG will be corrected in accordance with the information defined in Magento

ERPAG will also adjust the price of the product according to the setting in Conflict resolver:

  1. If ERPAG wins - the price in Magento will be adjusted in accordance with the price defined in ERPAG
  2. If the Webshop wins - the price in ERPAG will be adjusted in accordance with the price defined in Magento
  3. If Ignore - prices remain intact, or each side keeps its prices

In addition to the above operations, ERPAG reviews other parameters of the individual product, such as Product Description, Product Short Description, Weight and Weight UOM. In case it is needed (on the Magento or on the ERPAG page), ERPAG will automatically create or correct the data in accordance with the Conflict resolver.

After synchronization is completed, refresh the list of products in Magento in order to see the synced data.



Sales Order Synchronization
Orders created in Magento that don’t have the status of Fraud, Holded, Canceled or Payment Canceled Reversal can be downloaded into ERPAG. ERPAG will not download the Orders automatically, but you need to be logged into ERPAG, go to the Sales module and then select Sales Orders. Now from the Sales Order list, click on the Synchronization button and select the wanted web shop.


The process of synchronizing and downloading Sales Order runs as follows:

  1. ERPAG downloads a list of all the orders you created after the last synchronization date (reading the Synchronized date in the Setup of the webshop)
  2. Reviews the products that are in the Order and, if necessary, synchronizes products with ERPAG
  3. Performs a customer check (by name) and if they do not exist, creates them in ERPAG
  4. Creates Sales Order in ERPAG and loads products with quantities and prices as they are in the Magento Order regardless of prices found in ERPAG

In the case that Orders created in Magento do not have customer information (name, address, etc.), ERPAG will create a Sales Order where it will write Point of Sale in the name of the customer.

In the case that there are Orders in Magento containing items that you have deleted in the meantime from the Magento Product List, ERPAG will create a Sales Order with a Draft status because it is unable to determine the exact contents of the Order. In this case, you need to activate the Sales Order and correct the content yourself, or to enter the correct products that should be in the Sales Order.