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An introduction to stock control systems.

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29th Sep 2006
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If you are ever involved in selecting or implementing a stock control package, AccountingWEB consultant editor David Carter discusses some of the points you will need to consider.

Integrated stock control
The first point to get clear is that a 'stock control package' will usually be a combination of several software modules working in unison. stock issues will be processed by the sales order processing (SOP) module, while stock receipts will be processed by the purchase order processing (POP) module. The resultant stock ins and outs will be instantly updated to the stock records on the stock module to maintain an accurate real-time balance of stocks.

So, anyone who looks at stock is also looking at SOP and POP. And if you are a manufacturer, you will probably be looking at WOP (works order processing) as well.

In addition, stock is very closely linked to accounts, since the SOP module will create sales invoices which are updated to the sales ledger, and POP receipts are matched to purchase invoices in the purchase ledger. So when we talk of stock control we are discussing up to seven modules (Stock, SOP, POP, WOP, SL, PL and GL) all working together as a single system.

Will your senior managers be able to cope?
The second point to make is that it is harder to be successful at stock control than accounting. Successful stock control is easy enough to measure - do the stock balances on the computer tie up with what's actually in the bin? But in many companies, workers don't trust the computer figures.

To be brutal, it all depends on how competent your senior managers are. A stock control system covers multiple departments, all of which will have to co-operate in order to make it work. Only senior managers can ensure that departments work with each other, but managers themselves are often disorganised.

A stock control system will lock all the departments together into a single environment, which is incredibly efficient, but is not flexible. How efficient are they now? On second thoughts, might it be better to leave them to muddle through separately with spreadsheets and bits of paper as they do now? Putting in a computer may simply 'speed up the mess'.

And remember that stock, unlike accounts, is real-time. If the accounts computer goes down for the afternoon, nobody outside notices. But if the stock control system goes down, the entire company immediately grinds to a halt.

How normal are you?
Having decided optimistically that you are up the task, you now have to work out what you want the system to do, or in the jargon, to come up with a specification of requirements. Accountancy is governed by strict rules, which everyone has to follow, so accounting in one company will be the same as in any other. But there are no rules in the operational side of business - anyone can do things in whatever way they want and everyone is different.

Many companies assume they are normal, that what they do and the way they do it is the way everyone else does it. It's only when they've bought the software and try to get it working that they realise it doesn't actually work the way they want after all. Customers usually blame the software supplier in these cases. Wrong. The users are the people who know their businesses and it's up to them to work out what systems the company needs, not the supplier.

Key quesions
There are several key questions about any stock system that you will need to answer in order to define your system specification:

Do you supply ex-stock or to order?
Stock control packages are usually designed for the typical distributor who delivers ex stock. They place orders with suppliers in advance, based on a forecast. But many companies don't put orders on to their suppliers until they receive a customer order themselves. The software then needs to be able to cross-reference the sales order to related purchase orders and production orders.

How will sales orders be entered?
This is crucial. If the orders come in by post and someone types them into the computer, that's simple. But if you have a telesales operation with staff talking to customers and typing in the order while they talk, you are going to need a real-time trading system which has to be slick if it is going to work.

Do you manufacture your own products?
If you make your own products, you may need to buy a suite of manufacturing modules as well - Bill of Materials, Works Orders, and perhaps full manufacturing resource planning (MRP II).

Specialist requirements
On the product side, do you need to record batch or serial numbers? Do you need to quote supplier part numbers on purchase orders rather than your own part numbers? With customers, do you have some customers where you take orders from A, deliver to B, and invoice to C? How complicated is your discount structure?

Assemble a test pack to check your spec
There are so many things to think of, and you may think that getting them all down in a specification of requirements is going to be very difficult. You are right, it's almost impossible. Therefore don't rely on a written specification of requirements, but put together test pack to physically test any package you look at.

The test pack is a collection of typical transactions and documents for you to enter into the systems you are reviewing. Most organisations will have on file all the orders received in recent months. Choose a representative sample from this file, staring with a simple order ' one item ordered, standard pricing. Then find a more complex one ' several items ordered and maybe with special prices or discounts just for this customer. Now find a part-delivery where there were several invoices for the one order. Then maybe an export order in foreign currency. Or maybe an order where the goods were supplied direct from the supplier rather than from your own warehouse. And don't forget to include an order with a credit note. Because everything is interconnected, raising credits in an ERP or accounts package could be very tricky.

If you are interested in purchases and costs, go through a similar process with purchase orders. Find half a dozen typical purchase orders and attach any related delivery notes and supplier invoices. Accounts departments don't get very much involved on the sales side, but purchases and cost analysis are very much their area, so ask them to include any type of transaction that goes into the accounting system including credit notes, timesheets, cheque receipts, BACS payments and so on.

In addition to the test transaction set, you also need to assemble a set of test reports. Get hold of the reports that people find useful and photocopy them too. There will probably be a mix of reports ' some standard reports from your current package, some put together as spreadsheets in Excel.

Once you have collected all these documents you should have a big, thick pile of photocopies. Take them to the software suppliers, get them to put the transactions through their packages and see what comes out the other end. The results should give you a clear view of the programs that most closely fit your requirements. For more detail, see How to buy ERP software - the test pack

Potential suppliers - who do you buy from?
As soon as you get into operational side of business software, life becomes something like the City of London. There will be well known big names with big marketing budgets, but below them will be a myriad of small 'boutique' specialists.

Accounting software vendors
The big brands are accounting software vendors such as Sage, SunSystems, Microsoft, Access and Pegasus. You probably bought your accounts package from one of them, so it's natural to ask if they offer stock control as well.

They certainly will. But accounting and stock are utterly different, so being good at accounts doesn't necessarily mean they are any good at stock. Even if the software is good, how good is the local reseller who will install it? Every reseller can install an accounting system, but stock control skills are much more variable and you will need to confirm that your reseller really does understand this part of your business.

Entry-level stock systems sold via resellers
Sage Line 50 and QuickBooks are both accounts packages at heart. Quite often one sees big Line 50 installations, but really this is not right as Line 50 is not designed to maintain real-time stock balances.

TAS Books and newcomer Mamut both have industrial strength order processing and stock modules, Mamut in particular. The only problem here is that the dealers are most often firms of accountants who don't know very much about stock control.

Also worth a look at the budget end of the stock control spectrum are CS Group's Chorus, Dataflow, Hansa and the Dutch system AccountView.

Mid-range stock systems sold via resellers
At mid-range, Pegasus Opera II and Exchequer from IRIS Enterprise both offer good distribution suites and Sage has a variety of options, both in-house with Line 100, MMS, Sage Manufacturing and the Advantage series as well as add-ons from third-party developers. Once again, check that your dealer is competent in both accounting and stock. As you move into the upper mid-range, with suppliers like SunSystems or Microsoft Dynamics, you don't have to worry so much about a lack of reseller skills. But of course, you have to pay for them.

Enterprise stock control systems
Stock control is at the heart of many ERP systems, which evolved out from a marriage between financials and manufacturing modules. Suppliers range from the Big Three: SAP, Oracle and Microsoft Dynamics, who focus on top corporates, down to companies like Scala, Epicor and Sage's Enterprise division who are stronger in regional markets. If you are big enough, these vendors will deal with you directly, but given the scale of many ERP installations, projects are often handled by specialist resellers or independent consultancies.

Stock control specialists
In addition to the cross-industry packages sold through the accounting software vendors' reseller networks, there are also small 'vertical-market' suppliers. They often specialise in software for particular types of industry. They write their own software and sell it direct and can often be found via adverts in the industry trade press

In practice, these specialists often tie up with the big-name vendors to create hybrid packages. Not knowing much about the accounting side, they simply interface their package with a well known set of financials software. Then everyone is happy. Customer and supplier enjoy the comfort of a well known name, while the accounting vendor now has a presence in this vertical sector.

The mistake many people make is to look only at the big names. The specialists may be small, unknown outfits, but they are often highly skilled and know their special market very well. And finding a supplier who can understand your business is the key to a successful implementation.

Entry-level stock control specialists
At the entry level there's one specialist who deserves a particular mention. Anagram Systems specialises in distribution software for systems with one to 20 users, with the price of its Encore package starting at £1,250 for a single user. Anagram has been writing nice, easy to use, stock control software for 26 years, but is not so good at self-promotion. Instead it relies on a collection of letters from contented users on the company website.

Another UK software studio, Fayers Bespoke in Bury St Edmunds, recently moved into the market with Mercury, a web-based EPOS and stock control/business management suite for the retail industry priced at £2,000.

Mid-range stock control specialists
One good stock specialist I've worked with is Lakeview. There are many more. Two whom I've seen regularly at Softworld and seemed to know what they were talking about were IBS with its ASW package and Westland Systems with Open Logistix.

About the author
David Carter has worked in the computer industry for more than 20 years. Originally starting as a salesman with IBM, he has worked in production control, finance and distrubiont. Since 1989 he has been an independent consultant helping more than 100 small and medium-size businesses to select and install accounting and ERP packages. He has been writing about technology for more than 15 years and is best known for his software Lab Tests and pivot table tutorials on AccountingWEB, which have been accessed more than 100,000 times.

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