During this pandemic, we have been spending more time at home. We are having remote meetings. We are working in our jeans or maybe even our pajamas.
This time has changed how many businesses who run Visual ERP operate. Here’s some of the extra special things that are happening:
• “Donating N95 masks to their local hospitals”
• “Using their sewing skills to make protective masks”
• “Making infection control face-shields”
I am sure there is a lot more. Thank you.
On the down side, the business volume for some companies has slowed. But in adversity comes opportunities. I would like to share what some Visual ERP companies are doing.
- Rather than layoff people, one of the companies is training their staff to give them new Visual ERP skills. And not just any skill. They are focusing the efforts on estimating which is a backlogged area. What a great idea. Get more quotes out to customers, so they can get more business.
- Another few are implementing electronic banking for vendor payment via EFT’s/ACH’s. Last time I wrote about a blog about this was July 2016. The justification was a possible mail strike in Canada and also the time savings benefit. But now it makes even more sense for different reasons:
- The person generating the payments has the ability to do a payment run even without being in the office. No need to touch cheques, put them in envelopes and mail them.
- Also, the check/cheque signer can approve electronically and thus doesn’t have to be in the office. Of course, you would want to provide sufficient documentation to support the payments but that can be done with reports.
- There is less mail, thus allowing the postal service to deliver more critical goods. And the payments will arrive almost instantaneously. They would not be “stuck in the mail”.
- On the receiving end of the payments, the person doesn’t have to be in the office to get the payments, create the deposit slip and take it to the bank. They would get notification of the payment and the invoices paid via email.
All in all, a good use of the time now to save time in the future.
- Review slow-moving/obsolete inventory and determine if it can be converted into a different saleable part or if it can be disassembled into parts that could be sold. Here’s the process they are going to use.
A. Convert to a Different Part ID. To make it easier to describe let’s say we sell rocks. And we have way too many red rocks. People want blue rocks.
Work Order Structure
I. Set up a Work Order with the final Part ID being Blue Rock
II. We have one operation called Paint
III. The material requirement would be Red Rock
IV. We would have additional material for Blue Paint
Processing the Work Order
I. Issue the Red Rock to the Work Order
II. Report the time spent to paint the Red Rock blue
III. Issue the amount of Blue Paint. Hey – you might even have the part set to Auto-issue these materials.
IV. Receipt the Blue Rock into stock
There are now Blue Rocks available for sale. If you had an inventory reserve for the Red Rocks, you can now reverse them thus having a positive impact to profit.
B. Disassemble a finished goods part and make it into multiple smaller component parts. In this case, let’s say we have 20 extra bicycles. They are over 3 years old and aren’t selling. Plus, we don’t anticipate many bike sales with the potential downturn in the economy. We do however anticipate people will be repairing their bikes to make them last longer.
We tossed around the idea of doing the following:
• The 20 bikes would be returned to the work order thus opening up the work order.
• Then the parts on this work order would be returned back into stock with an issue-return. Now we have 40 tires, 20 handlebars, 20 seats plus whatever else was salvageable.
This would work well for the materials, but the other costs that exist in the old work order would be a problem.
• If the work order was for 20 bikes and all the materials were issue-returned that would leave the labour, burden and service costs on the work order. That would mean the work order would need to be cancelled and those cost expensed.
• Or the more likely scenario, the original work order was for 30 bikes. The other 10 had been received into stock and sold 3 years ago. The other costs in the work order would be labour, burden and service to make 30 bikes. Let’s say $600 or $20 per bike. Since the work order now only has 10 bikes received, Visual’s actual costing would now show that the 10 bikes cost $60 each. An entry would be created to expense these costs against the 10 bikes previously sold. If the company is running standard costing, this difference would go to production variances.
This was not what we wanted to happen.
We decided to use Visual’s co-product functionality, which allows 1 work order to create multiple parts. Think donuts and donut holes. You are not limited to 2 parts, so we made full use of this feature. Here’s the solution we came up with:
Work Order Structure
I. Set up a Work Order using co-products such as:
• Tires – 40
• Handlebars – 20
• Seat – 20
• Front Fenders – 20
• Back Fenders – 20 and the list could go on.
• Scrap (for the parts that cannot be reused)
Each co-product part would have costs allocated based on percentages entered.
II. There would be an operation called Assembly.
Processing the Work Order
I. Issue the bike to the Work Order thus taking it out of stock
II. Report the time spent to disassemble the bike
III. Receipt each of the co-product parts into stock
IV. Receipt the scrap part into stock and then adjust it out. You may want to use an adjustment reason or a specific GL account to track this.
V. Close the work order when all work has been done
This scenario allows us to have the costs flow to each component. They will now be in stock, ready for sale.
4. Reconciling Subledgers – You may have a bit of time to research why one of your subledgers is out of balance. It could be Accounts Receivable, Accounts Payable, Bank, PO Accrual, Inventory or WIP. I have to admit the last 2 are my favorites. I have even been working at improving my queries to find the differences more quickly. Gosh. It sure is fun.
5. Review WIP Balance Report for closed work orders. Here we found 3 situations.
A. Work orders were closed with no received quantity. We set the status to cancelled which means these costs will post to Cost of Sales. The account will be based on the Product Code on the work order. If this had been set to closed in error, the status could be set back to released.
B. Work order had been partially received then closed short. This left some value on the WIP Balance Report. We set the Posting Candidate to Yes which will push the costs to the previous receipts during the next costing run.
C. The work order was on the report but had zero cost. Parts had been issued to the work order but then they had been returned back to stock. Here we went to Costing Tools – Recalculate WIP Balances for the specific work orders, to assess and fix the balance.
All these steps fixed the report which was good.
I hope you doing well and managing these challenging times. And that you are finding creative ways to make it through. These are unprecedented times and I truly hope, from the bottom of my heart, that we all come out stronger on the other side. Stay safe.