How to scale your small business
A common misconception in the business community is that the “start-up” phase is typically the riskiest stage, when in actuality small businesses are at most risk of failing in their growth phase. With growth comes an increase in critical mass, significant capital investment and an increase in overhead costs. A business operating with more staff, more locations and more revenue shows growth on paper. However the truth lies in the Profit & Loss, this same example could well be making the same or less profit as before they grew with increased administrative burden. The most important thing to know when growing a business is the difference between growth and scaling; growth is an overall increase in critical mass, however scaling is an increase in sales while decreasing costs.
As a business owner, your job is to make calculated decisions while mitigating risk. The difficult reality for business owners is that even the most meticulously managed scaling costs money and capacity. When planning to scale up a business, the key is to assess the cost versus benefit of every decision to ensure that the returns on successful scaling are higher than the potential risks.
When scaling a product based business, close attention must be paid to cash-flow and the cash burn rate. Not every small business can afford a clever CFO to manage this perpetual machine, however negotiating better payment terms with your suppliers will help you increase your stock-turnover rate. If you can effectively forecast that you are going to sell around 25 widgets next month, and you negotiate for 30 day payment terms instead of prepaid, you will tie up no capital in that stock but still collect all of the profits.
Another tip for scaling a product based business is to introduce a wholesale channel to your operation. There are an array of risks involved with establishing a wholesale channel, thankfully with the right processes and technology you can get this up and running with minimal cost or disruption. Businesses who implement wholesale the right way will quickly see turnover and profits soar, and small businesses will commonly seek wholesale as a viable method of scaling. On the flip side, the implementation of an e-Commerce sales channel can also broaden your number of potential customers.
The common theme when discussing options for scaling with minimal risk is technology. The implementation of a cloud solution is the natural progression from manual record keeping like spreadsheets, and when configured correctly will provide you with the insights to scale your business; without the cost of installing an incumbent ERP system. ALTSHIFT has provided a platform for many small businesses to scale upon, and our expertise across many different industries and verticals will ensure we see you through your growth phase. Need a hand? Talk to the experts.
ALTSHIFT to become a Xero Platinum Partner
We're not usually driven by titles but this one means a lot to us. It’s a very proud moment to become a Xero Platinum Partner because it represents a coming of age for our business - we’ve reached a level of maturity and that’s something to celebrate for any small business.
In 2010 we brought on our very first Xero customer, today we service more than 400 customers in 4 different countries. During that time, app trends have changed, SaaS companies have come, some have gone, but one thing remains constant - our affiliation with Xero. We see Xero not as an app but the pillar of SME business, the focal point of a business software solution, we see Xero as a platform. It’s the backbone of ours and many businesses.
Today we become the first cloud integrator in the world to be a Xero Platinum Partner and possibly the only Xero Platinum Partner that isn’t an Accountant or Bookkeeper. This achievement puts us in the top 2% of Xero partners, a place usually reserved for the big accounting firms. It affirms something we already knew, that the role of an accountant is changing and so is the pecking order. Despite the perceived food chain, we know our clients come to us first for Fintech advice.
Of the 400+ customers we have on Xero, more than 130 are using one or many add-ons for a total combined eco-system of more than 70 apps. That means we have helped our customers integrate Xero with more than 70 different online applications. When others are talking about SaaS and the cloud, we are the ones actually doing it.
Despite this, there are those (Xero NZ included) that fail to recognise Cloud Integrators as an industry. So we won't be complacent and we'll continue to educate the market that what we do isn’t Accounting, Bookkeeping, nor is it I.T, what we do is business automation through app integration, and we do it in person not via Team Viewer or video.
For now it’s important to celebrate our success, to thank the team for all their hard work, to thank our clients for their ongoing support and most importantly thank Xero for providing us with the encouragement, tools, and framework to do what we do.
Without Xero we wouldn’t be ALTSHIFT.
Effective demand forecasting models
Demand forecasting is the complicated science of hypothesising expected sales demand for a given product or series of products. Typically demand forecasting consists of assessing future demand based from historical sales data, and is used to aide businesses in making decisions on what inventory should be held to make best use of cash. The absence of demand based forecasting leaves businesses vulnerable to lost opportunities through stock-outs, or could leave your business with a surplus of stock.
Pursuing demand forecasting to maintain a lean inventory has a number of benefits, one being increased sell-through. Sell-through is the number of times inventory is bought and entirely sold in a given time period, the goal here should be to purchase and entirely sell the inventory of a given product within 90 days. Achieving this will result in reduced holding costs and increased cash-flow. Being able to effectively anticipate customer demand will also allow you to make smarter staffing decisions around providing resource to facilitate spikes.
One method of demand forecasting is a time series analysis, this method is best suit for businesses that have several years of sales data to work from. When trends are clear, businesses will use their historical sales data to get an idea of the seasonal fluctuations of sales volume. This method will work best where sales trends are relatively stable.
In the absence of historical sales data, a method called qualitative forecasting can be used instead of the time series analysis. The qualitative forecasting methodology is typically used with new businesses, or where a new product line is being launched. This method will typically use market research to make a hypothesis on forecasted demand.
A factor to consider when demand forecasting is seasonality. Seasonality is a characteristic where sales experience regular cyclical changes that recur over the calendar year (such as an increase in sales during the holiday season). Trends can also occur over time that signal a shift in behaviour such as a product increasing in popularity. When it comes to demand forecasting both seasonality and sales trends should be taken into account when hypothesising the demand of a particular product. This data should then be used to prepare your inventory, marketing activities and overall operational processes. By effectively forecasting anticipated sales of a particular product, you’ll be able to increase your sell-through rate and reduce stock-out scenarios leading to increased customer satisfaction.
Your business ERP system will be the starting place demand forecasting, as this is where most of your data lives. Having worked with wholesale/distribution businesses of all shapes and sizes, ALTSHIFT has successfully executed ERP projects that serve as the backbone to effective demand forecasting. Planning to implement a new ERP system? Get in touch for a free consultation.
Flicking the switch on your new ERP
The beginning of the end of your ERP implementation project is go-live day, this is where you start to use your new system in your business. The many man hours spent on scoping, configuration, data entry, testing and training amount to the execution of this day. Most business owners fear this day, as it’s execution will make or break the entire project. There are three methods that “go-live” is typically executed with; all-in-one, parallel or phased. Each method has their own positives and caveats, however no one of these methods is the right way to tackle go-live. Your business must decide which method best fits your objectives and resource.
The all-in-one method of going live in your new ERP system is exactly as it sounds. Once all training, configuration and testing is complete, the entire ERP system is switched on and used all at once. Typically with this method, your staff will log out of the old system on Friday afternoon and log into the new ERP on the following Monday morning. This strategy is the quickest way to be fully operating in the new system, and your staff will not have the opportunity to revert to old processes. On the other hand, if there are any errors in the implementation or your staff have not been properly trained then this method carries the biggest risk of disruption.
The parallel method of going live is the act of using both the old and new systems in tandem over a defined time period. Your staff will learn the new system whilst still operating the old system leading this to be the lowest risk of the three methods. The caveat of this method being that your staff will need to twice the amount of work for the same outcome. This can lead to overworked staff and errors between the two systems if close attention isn’t paid. This method would only be recommended for businesses that have the resource capacity to execute.
The phased method of going live differs from the aforementioned methods. In essence, the phased method involves turning on certain modules on the new ERP and switching progressively. For example, you may decide to leave the core ERP functions of your old system on but move your purchasing over to the new system. This strategy averts much of the risk of the all-in-one go live as this is less of a shock to the business and staff. However by the same token running different parts of your business across two systems is inefficient and can lead to confusion among staff and departments. Connections that bring data from the old system into the new system during this phase can be very costly, and only provide the bare minimum ties. There is lower stress and risk involved with this method, however this method also drags out the timeline of your ERP implementation.
There is no one right way to execute go-live day, it is important to assess which of these three methods will provide the least disruption and can be effectively resourced. Working with an ERP implementation consultant like ALTSHIFT will take away much of the pressure of going live. With many successful implementations under our belt, we have the expertise to mitigate the risk of going live. Planning an ERP project, get in touch with us to discuss your options.
E-Commerce: Why you should integrate into your ERP
According to Statista, we’re projected to hit $2,842 billion (USD) in worldwide e-commerce revenue in 2018 alone (with that number almost doubling to $4,878 billion by 2021). Is your business ready for this unprecedented demand? Having your e-commerce platform integrated into your ERP system is commonly overlooked due to the perceived disruption a change like this can cause to the business. Unfortunately not having these critical sales channels tightly integrated into the rest of your operations will be detrimental.
Connecting your e-commerce platforms into your ERP system not only pays dividends in the form of customer experience, but also allows you to take a holistic approach to your distribution and fulfilment functions. Not only will integrating eliminate double data entry of sales from your e-commerce channels to your ERP, but it will also provide your e-commerce channels with up to the minute stock levels for each of your products. Having up-to-date inventory information available to your e-commerce channels avoids overselling of products and in turn makes happier customers. Just as having extensive per-channel sales data allows you the ability to plan for demand not only for purchasing, but also for managing your stock across your warehouses and 3PL providers.
The benefits of integrating your e-commerce platforms with your ERP are not exclusively limited to transacting sales and inventory data. Another key function people commonly overlook is shipping. Staff can make mistakes entering address information from one system to another leading to an unhappy customer. Completing this integration will allow you to enable live shipping rates to your customers, and your staff will be able to generate a shipping label at the picking stage with no additional work. Further to this, your e-commerce store can be setup to receive tracking information. This affords you a great opportunity to engage with your customers, sending out personalised emails updating them with their shipment details at scale.
Have you considered your process for releasing new products across all of your sales channels? If you’re an omni-channel retailer, it can become quite an arduous process to ensure your products and their associated pricing information all match across different systems. Centralising your products and pricing to your ERP will allow you to automate this release process allowing you to enter in the new product information, images and pricing tiers once. Your ERP will then update all of your different sales channels with these new products.
Leaving your sales channels to operate independently is a very unscalable practice, and with e-commerce sales rapidly growing your business may not be able to keep up. At ALTSHIFT, we specialise in working with omni-channel retailers to consolidate their business systems into a single translatable process across channels. If you’re not sure where to start when embarking on an integration project, get in touch with us to talk about your needs.
Improving warehouse efficiency
As more and more businesses move into omni-channel distribution, the efficiency of ones inventory operation becomes relevant. But one may ask, when is a warehouse considered to be at capacity? The answer to this may vary, but typically a warehouse is at peak efficiency where space utilisation is at 80 - 85%. Breaching this threshold will see diminishing efficiency from a movement and space perspective. Pallet movement is restricted making each replenishment take more steps to complete, temporary storage of pallets on the floor will also inhibit efficiency. More steps to complete a move results in increased costs and slower processing, a business in this position will also have to expand to more locations quicker.
One of the first things to look at when assessing warehouse efficiency is by looking at each product on the shelves. In order to understand your specific situation, you need to assess the sell-through rate of each SKU sitting in inventory. This is the rate at which you sell through your entire inventory of a given SKU within a defined time period. Using this information, make an assessment on which products you may be overstocked on. With this in mind, here are some tips to make most efficient use of your warehouse.
Quantify the storage profile of your warehouse in terms of capacity and utilisation, look up and ensure you’re making best use of your vertical space. How many cubic meters of overhead space are not used? When discussing vertical space, make sure any changes you plan to make do not conflict with the fire safety installation of the building. While you’re on the subject of vertical space, identify functions where stacking heights are lower. It isn’t uncommon to observe empty upper rack space in areas of a warehouse where packing and dispatch take place. Another aspect of shelving that is often overlooked is depth, switch to double-depth racking to further increase efficiency.
If you are holding the same SKU across different bins or locations, try to consolidate these to increase space utilisation. Matching the size and sales of your different SKUs to an appropriate sized pick slot will also maximise the efficiency of your picking slots. If you find you’re overstocked on a couple of products, consider storing this inventory off-site to free up rack space for products with a high sell-through rate. Where possible, introducing drop-shipping for these products will further decrease your in-house inventory costs.
Another factor to consider is the width of your aisles, you don’t want these to be too wide as this will lower your overall space utilisation. By the same token you don’t want your aisles to be too narrow to the point where they inhibit picking equipment from operating effectively. Try to keep your inventory of packing materials relatively lean to retain space for other products. A good way to do this is by taking with your packaging supplier, aim to have them hold some inventory for you and simply take delivery every few days.
Managing the efficiency of your warehouse is made far simpler with specialist warehouse management software. At ALTSHIFT, we have worked with businesses of all shapes and sizes to introduce solutions to improve operations. Thinking of overhauling your inventory operation? Get in touch with us.
What does an ERP implementer do?
When it comes to business software, the options are truly endless. Software to serve a particular purpose can come in all shapes and sizes requiring business owners to make snap judgements on which to purchase. Fortunately a cloud implementer can make this process easier. Cloud implementers are vertical experts that comprehensively understand the wider app ecosystem, and how these business apps can interface with one another. A good cloud implementer has an understanding of the issues you may be facing specific to your business or industry, and how to solve them. These issues you could be facing include:
Process inefficiencies
Manual data entry between systems
Concerns about business scalability
Lacking visibility into core business functions
Low customer service levels
Legal compliance
Vendor/Customer compliance
Unfortunately simply swiping your credit card and purchasing a software package will not exclusively solve these issues, in fact this step is only the beginning. In order to leverage the power of business systems to solve these issues, your business has to undergo a vast transformation to ensure your people and processes are ready for the new system. A good cloud implementer will take the reins of the software implementation, managing it like a project.
This process begins with a consultation, once you start engaging with a cloud implementer they will begin a comprehensive evaluation of the business. This consultation phase looks at what systems and processes are currently in place at your business, in order to get a snapshot of the current situation. They should also during this stage be collecting key metrics about your business, in order to understand how future changes impact the business. They will look to understand how your systems/functions currently talk to each other and start piecing together how any integrations should be set up if applicable. With all of the information collected about your business’s situation, the cloud implementer will begin to recommend a solution. The implementation firm will be able to leverage relationships with the different software vendors to negotiate a contract on your behalf. Once licenses for the software have been acquired, the implementer will begin with the project.
The process of implementing a new system is unique for each business, but generally consists of data entry, configuration and testing. A bulk of that time will be spent cleaning up your pre-existing database, or building a new one from scratch. The exact time this process takes depends on how many customers and vendors you do business with, the number of products (and variants) you stock and any associated production processes that need to be implemented. Once a database has been established in the new system and it has been configured, tests will be conducted on all of the workflows and processes. This testing is performed by inserting false transactions, and could involve multiple systems within your organisation. When testing is complete, the most important component of the implementation begins; change management of the business. Working towards a predefined go-live date, your consultants will begin training all staff on how to operate the new system.
At ALTSHIFT, we have successfully executed many ERP implementation projects with businesses in all kinds of industries. This multifaceted expertise helps us to understand your business goals, and to set in place the platform to allow you to exceed those goals. If your business is thinking of change, get in touch with us for a free consultation.
Maintaining lean inventory for distributors
In today’s economic climate, businesses are on a constant rolling diet. Owners and inventory controllers strive to pilot the leanest possible operation with next to no liabilities. Particularly in the Distribution scene, these companies are being run on extremely lean inventories - thus reducing the amount of capital tied up in inventory. Other companies will stock up in order to always have what the customer ordered.
There are pros and cons to both of these strategies, when a company chooses not to stock up they run the risk of losing an opportunity once a customer comes calling. By the same token, the distributor who stocks up on an item finds themselves in strife once they realise they’re not able to move the product quickly. The vital metric to any distribution business is sell-through rate. This metric is the number of times inventory of a product is bought and entirely sold in a given period. The more times a distributor can turn over it’s inventory in a year, the more money they will make. You can maximise your stock turns by avoiding stocking items that you cannot turn within 90 days.
The amount of inventory that you initially purchase is going to depend on where your customers are located and the quantity that they can reasonably demand. If your customers are in close proximity to your warehouse, then you can simply ask them how much product they plan to procure over a given period. On the other side of the coin, if your warehouse is servicing a far larger area of customers then you’ll need to have a buffer for any unexpected spikes in demand. Having good relationships with local suppliers comes in handy here as they can help you fill this demand within a reasonable timeframe.
One of the biggest errors a company can make is investing in too much inventory. If you aren’t able to move this product quickly, the inventory will be taking capital and shelf space inevitably costing the business cash-flow. The space taken by the slow-turning inventory could be better used stocking product that plays to what your customers want to buy. This comes back to the sell-through metric mentioned earlier, this metric is key to the success of any distribution business. The trick underneath it all is to hold just enough product to not run out of stock. Achieving this balance is key to your success as a distribution business.
Another factor to consider when deciding how much stock to purchase is the product life-cycle. Products like food and beverages are high-risk items which have a finite shelf-life, whereas gardening tools are relatively low-risk and can be kept on hand. Another trick of the trade is to sell your stock before you’ve even paid for it leveraging payment terms. If you only have to pay for the stock 30 days after it is sent, you could sell the stock and have the cash in hand before you settle the bill with the manufacturer. This way you’re essentially acting as a middle-layer, never “owning” the stock, but clipping the ticket along the way.
When it comes to managing lean inventory, this task is impossible to do at scale without a high level of visibility into your purchasing, sales and inventory operations. The implementation of a specialised ERP platform will give you the power to monitor your sell-through rates and other metrics to enable you to make smarter purchasing decisions. If your current system isn’t quite up to scratch, Alt Shift can manage your ERP project from scoping to implementation and training. We can provide you the tools you need to take your business to the next level. Get in touch with us to book in a chat.
Why mobile should not be overlooked in B2B
Imagine the ability to quickly bring up a catalogue of your products in front of a customer, know how much stock you have; and be able to place an order in seconds without a Wi-Fi connection. Unfortunately many businesses leave revenue on the table by failing to implement this level of visibility into their sales process.
According to Statista, there will be almost 5 billion mobile phone users globally by the year 2020. Of those 5 billion users, nearly 85% will be using smartphones. With the rate people are adopting mobile phones and the internet, smartphones are in good stead to entirely transform the face of commerce. Here are 5 reasons why mobile should definitely not be overlooked in B2B:
1. Most B2B business happens over the phone already. The reality here is that most B2B transactions that occur are taken over a phone call or via chat apps. Channelling this into a purpose built B2B module is simply but a natural evolution in the way we do business.
2. Mobile phones are very handy. Only on your mobile can you shop, read the news and listen to music at the same time. As mobile technology has advanced in great strides, we now have the ability to multi-task to our hearts content.
3. Space constraints. In the wholesale/distribution business, the most scarce resource is space. A mobile phone is far easier to pocket than a full workstation.
4. Always on. In the B2B world the wheels of commerce continue to turn 24 hours a day, 7 days a week. We all know that our smartphones are slowly blurring the lines between work hours and our home lives.
5. Repeat business is what fuels the world of B2B. For somebody who needs to buy goods from you on a regular basis, a B2B app is an absolute god send.
At ALTSHIFT, we work with wholesalers and distributors and have provided B2B solutions of all shapes and sizes. Have you got something in mind for your business? Get in touch with us!
Calculating the cost of a new ERP system
You may have an ERP system in place at your business such as MS Dynamics, Sage, Pronto, Netsuite, Accredo or one of the many other incumbent solutions. The reality is that this ERP system may not be serving your business as well as it did when it was first implemented. This poses two courses of action:
Continue to maintain your existing ERP system
Implement a modern ERP system and reap the benefits
Granted that committing to a new ERP system can be costly, but how costly exactly? There are plenty of factors involved in implementing a new ERP system from outright hardware purchases to installation of specific software modules. Most ERP pricing models only look at the initial capital outlay for hardware, software and implementation, but fail to account for the ongoing costs relating to running an ERP system.
As no two businesses are the same, the cost of an ERP system is variable dependent on factors such as the number of staff that you have, the scope of the project, whether customisations are required or even the deployment itself. Plenty of software vendors will allow you to buy specific modules on their platform allowing you to just purchase the core ERP module and saving on cost, however one important factor to note is expandability. Check in with your vendor to understand the costs involved with expanding your ERP system as your business needs change. Ideally you would implement the ERP system within the bounds of the out-of-box application, however unique business processes necessitate customisation which can very quickly drive up the cost of your implementation. Customisations need to be added to the ERP in such a way that the software can still be updated without breaking, otherwise each time the ERP software is updated additional coding must be done to ensure it is compatible.
Here is a list of costs you may face relating to the implementation of a new ERP system:
Hardware and related operating systems:
ERP system licensing (SaaS model or up-front)
Process planning, development and documentation
Staff training
Implementation consultation fees
Now that we have an idea what it would cost to implement a new ERP system, here are some direct benefits:
Leaner inventory, less capital tied up in stock
Increased productivity through workflow enhancements
Reduced wastage/spoilage
Less last minute changes causing wage overtime or air-freight
Increased revenue due to better customer service
Decreased time-to-market for new products, increased margins
There are also some indirect benefits that are a little harder to quantify, but still very relevant:
Increased employee retention and productivity through lower day-to-day frustrations
Better information leading to smarter in-market moves (pricing, specials etc.)
There are many different angles to look at when considering the cost of implementing a new ERP system and creating a ROI statement. Just be sure to go through the process, documenting everything as you go along to ensure that all stakeholders have visibility and can clearly understand what the project will achieve. In engaging with an ERP project consultant, such as Alt Shift, they will simplify this entire process for you. If you would like to understand how implementing a new ERP will benefit your business, get in touch with us.