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Dynamics of ERP Software - Accounting and Inventory in FMCG

Fast moving consumer goods (FMCG) companies are part of the most challenging industries. They deliver products to customers at a high rate of turnover and with a high level of innovation. FMCG also handles many traditional products which involves the effective understanding of demographics and geographic locations for defining distribution logistics.

The FMCG sector is a highly competitive one as most organizations are operating with large volumes and medium to low margins. Each company seeks to motivate, excite and encourage people into buying and using their products. Product costs are of the highest importance, and supply and production processes are closely monitored. Multi-channel sales, pricing and discount policies, promotions, contract management with distributors or key accounts are key elements in delivering results as planned.

All of these processes and activities cannot be effectively managed without a dynamic, and integrated business software solution that ensures optimal flow of information across all organization's processes.

Unique challenging characteristics of the FMCG industry:

Consumer loyalty: Build loyalty by customer engagement. Information of stocks on the shelves and timely replenishment is the key to success. There is also a need to seamlessly deliver a highly personalized experience to your consumers by providing visibility of your products on the shelves for them to make choices.

Vendor/supplier relationships: Not only is it crucial to build customer loyalty, but also creating strong long term relationships with the vendors and suppliers of the products. Choosing vendors, reaching valid costs, signing contracts, accomplishing the best delivery cycle and making payments all affect your relationship with the suppliers of your products. Which in turn, affects consumer satisfaction and directly impacts your business growth.

Regulatory control: One of the very serious issues for a food and beverage producer. Lot traceability, for example, has to be of the highest standard; it must be thorough, agile and quick in the event of a product recall. Shelf Life: Products like bread and dairy products (especially when dealing with fresh foods) only have a few days to sell and therefore need very specific order processing modules.

Promotions: Different sales channels tend to favor different types of promotions and there are countless promotion mechanisms within each channel such as buy one get one free; extra fills at same price; price flashes; discounts; free cases and so on.

Orders to dispatch process: Sales personnel need to interact with customers to order promoted stock; and the dispatch department may need to clear standard stock prior to release of “promotional” stock (to avoid short-dated stock issues).

Special focus on accounting and inventory management in the FMCG industry:

Keeping an accurate record of your money is vital for every business, but some aspects of retail set it apart from other industries when it comes to accounting. Accounting for a retail business comes with the challenge of complex calculations and comes in conjunction with tracking inventory. Tracking your inventory has to include calculating costs as well as monitoring the number of each item you have in stock.

To do this, you must make some cost-flow assumptions. Note that this does not track the physical movement of goods sold, but rather, assigns cost to the inventory so that you can later determine your profit.

For companies that sell goods and services, inventory (or stock) is rightfully called the lifeblood of the business.

Companies that hold and sell inventory face a double challenge.

  • On one hand, in-demand products must be available when customers are ready to buy
  • On the other hand, acquiring and managing stock to meet this objective can be very costly

How do companies forecast and order inventory?

Companies must order new inventory to restock what they use up. The departments responsible for this try to order the exact amount, soon enough, to ensure that products are always on hand to meet customer demand. At the same time they try to avoid ordering too much or ordering too soon, because such orders result in excess stock on hand, which brings extra storage and handling costs.

The vigorous characteristics of the FMCG industry call for dynamic ERP software systems!

Dynamic ERP software system will be able to track your finances and make the accounting processes more manageable. The integrated nature of ERP software systems with data analytics also assists in the process of inventory forecasting.

Benefits of a dynamic ERP software system for the inventory and accounting roles of an FMCG:

Accounting software keeps track of all of your finances, including purchase and sales orders, invoices, accounts receivable, and accounts payable. The best accounting software helps you fill out important financial documents like income statements, balance sheets and cash flow statements.

Finance and Costing
  • The most important business indicators allow you to improve your business. The solution provides detailed and complete profitability reports on products, product categories, supply reports, production, sales, deliveries, customer status, contracts, and distributors, with just one click and in real time.
  • A dynamic ERP’s stock verification facility enables the automated and appropriate raising of PO based on the level of stock, and the software’s monitoring and tracking facility automatically raises ‘Reorder Level’ intimations whenever the stock level of A and B class items go below the prescribed limits.
  • The ERP system is also automated to handle promotional activities to ensure the appropriate stocking and disbursement of promotional material
  • The ERP’s Vehicle GPS Tracking facility integrates the GPS system with the company database, thereby facilitating the generation of all related analytics like delivery status analysis, on-time delivery analysis, delays, etc.
  • The vehicle planning faculty of the system automates distribution and demand analytics to provide vivid details on the route-wise availability of vehicles, and route-wise allocation of units of stock for delivery; and trigger notifications with cost-efficient dispatch plans.
  • The vehicle planning faculty also enables the generation of each vehicle’s trip-wise & vehicle-wise P&L statement, which supports the determination of the transport operation’s efficiency

How a dynamic ERP software system can expedite the general growth of your company:

The dynamic properties of an ERP system are almost perfect when it comes to the intricacies of the FMCG industry; smoothly facilitating the functions and operations needed for efficiency, innovation, and definite business growth.

Integration and Dashboards
  • The total digital linking of the stores and finance department rules out all errors between PO and billing and enables the correct deduction of money through the projection of exact debit note deviation value.
  • The system cross-checks the quantity of stock present in the inventory against the stock mentioned in the bill and gives a clear picture of any discrepancies. This ensures the appropriate deduction of the difference in price and avoiding over-payment.
Monitoring and tracking
  • Product-wise and unit-wise monitoring and tracking of WIP in real-time give clear visibility into the status of daily-target vs. actual-progress. Task-wise lead time tracking for each job automatically triggers escalations through the appropriate hierarchy and gets the attention of authority. This ensures performance efficiency of man and machine.
HR and Payroll
  • The integration of the attendance registry with the in/out time registry system captures details of employee attendance details (early, on-time, late arrivals, early/on-time departures, and over-time) and generates the accurate payroll fitting for all the employees of the business at the touch of a button.
Paperless process
  • Internet-powered anytime anywhere, can be accessed from any mobile device to facilitate the quick and uninterrupted business functionality and also renders the process paperless.

Thus armed to the teeth, a dynamic ERP solution streamlines, automates and eases the efficient flow of the business processes of FMCG industries, and empowers its business stakeholders to make faster and better management decisions.

Key characteristics of a dynamic ERP software system for FMCG’s:

A dynamic ERP’s robust yet flexible attributes address the industry-specific business process requirements of FMCG companies. The following are a few of its many benefits for the industry:

Transparency and flexibility of ERP: The ERP systems for FMCG are now flexible and customized in terms of implementing only the functions needed. Typically within ERP systems now, there are modules for Plant Maintenance, Supply Chain, Manufacturing and Financials. Within each of these modules, there are sub modules such as purchasing, inventory management, promotions, inbound logistics management, deals and prices.

Supply Chain Collaboration: Collaboration is not just information sharing, it is doing what you do now in terms of interacting with your internal and external suppliers, just faster and better. Collaboration only works when you implement a truly dynamic ERP software system that is properly integrated.

Corporate Performance Management: Corporate performance management (CPM) encompasses the worth of an ERP system by renovating operational data into reliable, consistent data optimized for analysis and reporting. CPM will help FMCG businesses to uncover the effects of changes, recognize prospects, gain a marked competitive benefit and strengthen business relationships.

Role Based Portals: Personalized Intelligent Portals are used to customize the information being delivered to an individual. What is important to the corporate level executive may not be appropriate for an operationally focused manager, so the information provided is role based.

In summary, here is how you can utilize a dynamic ERP software system in your company:
  • E-commerce integration.
  • Serialized inventory.
  • Multiple units of measure.
  • Allows for the tracking of internal and external lot numbers.
  • Rules-based automated allocation of received inventory to backorders.
  • Tracks inventory across multiple warehouses and locations.
  • Manages the movement of products between warehouses or related companies.
  • System-generated purchase orders, and ability to link purchase orders directly to sales orders.
  • Track kits made up of multiple products grouped together for sale.
  • Enables tracking of true inventory costs including duty, brokerage, freight etc.
  • Pre-built reports plus access to detailed sales information using various external report writers.
  • Sales budgeting by product or by customer.
  • Makes it easy to account for monthly expenses, amortize annual costs over fiscal months, and handle period end accruals.
  • Makes it simple to pay vendors by credit card, yet still track the costs and expenses to the specific individual vendors – whether payment is made up front or after the delivery.
  • Bank reconciliation. Multiple simultaneous payment runs are handled, allowing departmental approval processes, and multiple payment types. Accounts in any currency.

  • Whether you are a small, mid or large sized company working in the complex and highly competitive world of FMCG’s; buying a dynamic ERP software system is most definitely the smart choice to separate your business in the eyes of all stakeholders.

    For more details on a customized all-in-one dynamic ERP software system, please contact our professionals and they will assist you in every step of the way.

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