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Summer 2012
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Sales-Side Optimization

Integrating material optimization with your ERP system can help salespeople be more responsive to customers’ requests for quotes.

Whether you sell long products, flat products or both, if you are interested in minimizing scrap, and thus maximizing profit, your production department probably uses a material optimization package. FastCAM, ProNEST and SigmaNEST are popular choices among metal service centers today.

Very few enterprise resource planning software packages include material optimization as standard functionality, however. Why? Most ERP vendors embrace a kind of “wrung what you brung” philosophy that leaves complex functionality like material optimization to vendors that specialize in that type of software. Although few metal-specific ERP systems include built-in material optimization functionality, some are integrated with a third-party material optimization package.

Whether or not a particular ERP system includes material optimization functionality is typically of little concern to production department employees, who are licensed and trained to use full-fledged material optimization packages. On the other hand, when a company’s ERP system is not integrated with a material optimization package, sales-side optimization can be a big problem.

By way of example, assume that you are an inside sales rep and your customers are constantly calling, emailing and faxing requests for quotation. Further, assume that many of these RFQs include a list of cut sizes, which may include hundreds of pieces in dozens of different sizes. If you are extremely sharp, you might be able to do a portion of these RFQs in your head or on a piece of scratch paper, but what about the rest? More than likely, you will have to ask someone in your production department to optimize them.

Naturally, this can be a problem for both you and your production department. It can be a problem for you because now you are at the mercy of your production department, and they most likely are very busy these days. It could a take a long time for you to get back to your customer, which is never a good thing. It can also be a problem for your production department, which probably has more pressing things to do (like focus on production orders).

Some service centers have alleviated this problem by licensing their sales department to use a lightweight, inexpensive optimization package. The sales rep simply bounces back and forth between the ERP system and the optimization package. This is not a bad solution. It is certainly better than having sales reps running to the production department all the time. However, for three main reasons, it is not an ideal solution. First, your sales reps now have to be trained to use another software package. Second, it is not time efficient (although it’s more efficient than having to wait for the production department to run the data.) Third, it leaves the door open for data entry errors because the two systems are not connected.

Ideally, the sales order entry and quoting procedures in any modern, metal-specific ERP package should be integrated with at least one third-party material optimization package. Software integration is highly technical and can be difficult to understand, but as a manager or owner of a service center, the most important concept to grasp is that disparate software packages can be “loosely” or “tightly” integrated. When two applications are tightly integrated, this is sometimes referred to as a “seamless integration.” Obviously, a seamless integration is most desirable.

When ERP software is seamlessly integrated with a material optimization package, the user of the ERP software is not required to leave the ERP software in order to perform optimization tasks.

Let’s return to the example of the inside sales rep. You are now on the telephone with a customer that needs a quote for a number of different sizes of 3 x 3 x 3/16-inch A36 angle. You input that list into your ERP system and you press a designated function key or click a button labeled “optimize.” What happens next will depend on which ERP system and material optimization packages are being used. For sales-side optimization, the default behavior should be to send a list of standard sizes to the optimization engine as input for the job. For 3 x 3 x 3/16 A36 angle, that list will include just two sizes: 20 foot and 40 foot. Furthermore, the ERP system should, by default, instruct the optimization engine that there is an unlimited supply of those sizes available for consumption.

Why should the ERP system send what is obviously fictitious information to the optimization engine? The answer is simple. Quite often, the sales rep is trying to produce a quote and, therefore, the quantity available for consumption today is typically unimportant. Okay, but shouldn’t the ERP system send the optimization engine a list of available nonstandard sizes? Not by default, for three key reasons.

First, nonstandard-size inventory is very difficult to maintain and is often inaccurately reported by ERP systems. Second, nonstandard-size inventory turns over very quickly (the goal of a well-run production department) so even if the nonstandard size data in the ERP system is reliable, the nonstandard sizes available today are unlikely to be the same nonstandard sizes available tomorrow. Third, most service centers want the breathing room that quoting standard sizes gives them.

As stated, this is the default behavior. If you are confident that an order will be placed, the ERP system should allow you to add nonstandard sizes to the list of input sizes or reduce the input quantity of standard sizes to a more reasonable value. For example, if you are aware that you do not have any 40-foot lengths in stock, you should be allowed to remove 40 foot from the list of input sizes. When the optimization engine is finished doing its work, it will return the results to the ERP system, and the ERP system will basically take it from there.

[Ideally, the sales order entry and quoting procedures in any modern, metal-specific ERP package should be integrated with at least one third-party material optimization package.]

Editor’s note: This article was contributed by the experts at Bayern Software.

Bayern Software, Carmel, Ind., offers the STEEL PLUS integrated inventory control, sales, purchasing and accounting program for metal service centers and distributors. For more information, visit www.bayernsoftware.com.

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