Leading by example

“Henry Ford, as he developed the automotive industry, looked at the assembly line and just-in-time planning,” says Greg Lafferty, senior account manager at Practical Software in Concord, North Carolina. “And over time as computer systems developed, tools were created that facilitated that initially into the larger [Fortune 500] organizations, and now into mom-and-pop organizations, which can help them with production scheduling, order processing, with their inventory supply and their purchasing.”

 

 

 

ERP systems use Electronic Data Interchange technology, or an EDI, that allows for the exchange of data with other computers. The assembly of automobiles, for example, works smoothly with an EDI by gathering inventory data, and returning an output that helps to organize the flow of assembly. An example of this would be ensuring red and green pre-painted doors make it onto the correct vehicles when they arrive at the assembly line.

 

This type of business management software is especially important for growers because it eliminates much of the manual data entry for processing sales orders. This saves an incredible amount of time and labor, and also eliminates costly mistakes from rekeying in data.

 

 “All of our growers have it integrated so that orders come in, the notices go back out, the invoices go out, the payment application comes in, and it flows.  The goal is to be able to serve a higher volume of customers with the same amount of staff, he says. “Instead of hanging three orders an hour, you would like to be able to just use EDI and bring over 1,000 orders a minute and let that data come in and be processed.”

 

 

Companies like Fastenal and Home Depot take advantage of a system called pay-by-scan, which also is called consignment inventory. This system analyzes costs and bolsters margins to overcome price pressures, Lafferty says.

 

With pay-by-scan, you won’t pay for products until you use or sell them. A supplier will stock your shelves with raw material, or if you’re a retail store like Home Depot, your store’s shelves will be stocked with products to sell.

 

This process is used quite a bit in traditional manufacturing. For example, if someone ordered five sheets of metal (or five of a particular product) from a manufacturer and have used (or sold) three, the supplier will only charge you for the three that were used and not the two still in stock.  

 

“Growers are really starting to look at those kinds of things and go, ‘Wow, we probably ought to look into that.’ And a lot of them have,” he says.

 

Growers have been supplying to Home Depot using pay-by-scan for a while now, but growers are now considering using that same method with their own vendors, such as those who sell them pots and tags, and even other subcontract growers, so they’re only paying for what they use.

 

 

When purchasing, many times growers will purchase the same amount they did the previous year, give or take 3 percent.

 

It can also help to split up bulk orders when it makes sense. “Maybe you don’t have to order it all at once. Maybe it’s more efficient—for pricing and holding costs --  to pace that out so you get a 30-day supply at a time instead of a year’s supply,” Lafferty adds.

 

At the same time, it’s also analyzing your safety stock, or the amount you’ll have on the floor as you’re waiting for a shipment, making sure you have enough, but not enough to cause a financial loss.

 

All the while, the ERP system analyzes supply, demand, time it takes to receive supply, quantities and price breaks—then recommends what you should be buying.

 

For more information about software solutions for your growing operation, visit www.growervertical.com.