Before getting into the details of standard costing, it is important to understand that in order to implement this type of accounting system you need to have the right software to support such a system. ERP software packages like Macola Manufacturing Pro or Distribution Pro and Sage 100 have robust inventory management systems that can really help guide you through the process of standard costing.

So what exactly is standard costing, and who should be using it? Think of standard cost as a management tool. It provides the ability to create budgets, benchmarks or goals against which actual costs can be compared and measured against. The actual performance differences from the standards can be quantified in dollars and/or percentages. In most cases, variances from standard equate to real gains in profit or loss for the period.

Standard costs can be created for most elements of inventory costing, such as:

1. Materials
2. Direct Labor
3. Overhead (fixed or variable)
4. Outside Processing Costs
5. Costs for getting inventory from suppliers to your plant (“Landed Costs”)

Companies that make “widgets”, meaning the same items over and over, are best suited for standard costing. Their raw materials, amount of labor time to produce them, and other factors are relatively stable and highly predictable. A purchase price variance, where the raw material cost differed significantly from the standard cost, deserves management review to determine if it was just an anomaly, or if there is reason to change the raw material standard. Any changes would result in increasing the total cost of the widget, and perhaps cause a change in the price of the widget to maintain desired margin levels.

Companies that manufacture to order, on the other hand, are usually dealing with a one-off, where the quote or estimate is the best benchmark for performance. Often, each line item of cost has been carefully estimated, such as the cost of materials, amount of certain types of labor, etc. Comparing the actual results of the manufacturing process to the estimate (rather than comparing to standards) will give management the insight into how well the estimate was prepared, or how well the purchasing and manufacturing was executed. In this type of environment, an average cost method is more appropriate, eliminating the clerical effort to set up the standard costs in the first place.

There are plenty of systems out there that can automate the inventory management process, like a Scanco or a WiSys, that integrate directly with your ERP software. This is vital because inventory management is so much more than just product sitting on a shelf in a warehouse. In addition to making your warehouse staff more efficient, cutting down on labor costs and allowing your business to grow without needing to add extra staff, a good inventory management system can improve virtually every other department in your organization.

• Purchasing – Having real time information with regards to inventory levels will allow your purchasing department to make better informed decisions on what and when to order, resulting in better pricing and cost reduction.
• Manufacturing – Knowing what raw materials are on hand, as well as the stock levels of finished product both help organize the manufacturing process and reduce lead times. Knowing not just the priority of various manufacturing jobs, but knowing your raw materials inventory for those jobs is an invaluable insight.
• Customer Service – Using barcoding helps to automate the picking process, meaning orders are shipped with a higher level of accuracy than through manual picking. This not only reduces costs of returns, but it keeps inventory levels more accurate and keeps customers happy. An accurate inventory count also reduces backorder issues.
• Accounting – Having an inventory control system that is fully integrated with your ERP system allows your accounting department to automatically track order entry and create more timely invoices. And with purchasing being more accurate, both accounts payable and accounts receivable are prone to fewer errors. And by not having cash tied up in extra inventory, the overall cash flow of the organization will improve as well.

Possibly the most important aspect of an integrated inventory management system is that it is scalable. Implementation of such a system will allow you to be more efficient, leading to overall growth.  And your system can grow with you, unlike the pad and paper system that only allows for more human error and waste as your organization grows.

One of the most popular ERP software packages for mid-sized companies is Macola ES. While there are thousands of Macola customers across the country, there several more that are still kicking tires as to whether or not it is time to pull the trigger on an ERP implementation.

Regardless of which camp you might fall into, a cloud hosted Macola solution might be just what the doctor ordered.

You’re Already Running Macola ES

So your company already has Macola ES and things are working great. But your servers are starting to reach the end of their shelf life and IT expenses to keep your infrastructure up and running continue to rise. 

The time might be right to move into a new cloud solution. Rather than invest in a new collection of servers, by moving your system into the cloud, you are guaranteed to have your existing Macola system being run by the most up to date servers on the market.  And technology updates are done automatically at no addition expense to you. A cloud hosted solution also includes state of the art security. Combined, you would be able to drastically cut back on internal IT expenses, while never having to worry about budgeting for large scale server infrastructure upgrades every few years.

You’re Looking to Implement a New ERP Solution

Similar to a company already running ERP software, investing in a cloud hosted Macola environment has the advantage of not needing to invest in in-house servers. You also would enjoy the benefit of being able to reduce IT support costs as well.

But the biggest advantage that a new Macola use has when doing an ERP implementation is that the migration is much smoother than doing an in house implementation. Whether you are running a proprietary ERP system or implementing ERP for the first time within your organization, by choosing a cloud environment, your implementation partner can take a copy of your data, upload to a test environment, and get your implementation dialed in while you continue day to day operations uninterrupted. This couldn’t happen if the new ERP solution was to be installed on your current in house IT infrastructure.

Once the test environment is set up, training can be done online, and when it is time to go live, it’s just a matter of taking your most recent data and uploading it into your dedicated cloud solution.

In either case a cloud hosted Macola solution has many advantages of a traditional in-house setup. Whether a move into the cloud is the right choice for your organization requires an internal audit of your current processes, current IT infrastructure and the costs surrounding both options.

In addition to the financial outlay, a company must be ready to commit the other resources required to properly train staff, migrate data to a new system and adapt to process changes. Sadly, several companies fail to prepare properly and fully commit to the process, causing less than expected results. This will often times sour a company on any future ERP investments.

Most failed ERP implementations can usually be boiled down to a few very common causes, which we will outline in below.

Lack of Understanding of System Requirements

When it comes to ERP software, many companies will realize that they have outgrown their current systems. That is all too often where system requirement analysis begins and ends. Companies that are successful with their ERP implementations often conduct a business process analysis of some sort in order to identify areas of inefficiency and as well as issues that are currently unaddressed.  Then, armed with that information, they can choose the software package that best suits their needs. It allows a company to remain in complete control of the selection process and gives a better perspective on what to expect with regards to anticipated ROI.

Forgot to Include the Clock Punchers

Too often, C-level management will undergo a new implementation process without ever seeking out the input of the end users. The reality is that the CEO or Controller isn’t going to be the one performing cycle counts in the warehouse or entering debits and credits into the accounting module. By seeking the input of the end user, a company not only can more easily identify issues with the current system, but it also helps foster an environment where change is welcomed. Because they are a part of the process, the end users in your company are more likely to see the value in a new system, and be more willing to “buy in” to changes. This will also save you time and money when it comes to training as well.

Underestimating Implementation Times

Another common issue is that companies underestimate the time it will take to implement a new system and train staff. Migrating your data from an old system into a new system is a time consuming process. And ERP software training for your staff is also a huge undertaking.  Too often, companies will rush their go live date. In addition to ensuring that your new ERP solution isn’t running as efficiently as possible by doing this, you will almost inevitably encounter more problems down the road that cause slowdowns in production and increased support costs. All of which has a dramatic negative impact on ROI.

Whether you are implementing your first ERP system or your fifth, there will always be hiccups and wrinkles. Preparing for this in advance and allowing the time for a proper implementation will help you reap the ROI that you are looking for.

It’s important to know that with regards to implementation, costs might be divided differently when you compare the cloud to in house solutions, but in general, costs are about the same.  This is because the general principles of an ERP implementation remain constant, regardless of where the software is going to be hosted.

Where the bulk of the savings occur is in infrastructure and support costs. In moving to the cloud, the need to purchase in house servers is mostly eliminated.  Some companies may choose to keep one small server on site for emergency data backup purposes.  But aside from that, infrastructure costs, including the cost of upgrading your servers every 3-5 years, is eliminated.

Moving to the cloud will also drastically reduce, and in some cases eliminate, the need for an IT support staff, saving tens of thousands of dollars each year.

While those cost saving benefits are fairly obvious, there are also some not so obvious cost savings involved with the cloud. Most businesses don’t account for the costs of upgrades and patches to their brand new software when they lay out the initial investment for a new ERP solution. But those costs are inevitable.  However, in a hosted environment, those patches are typically done automatically and are just built in the price of the solution.

You will also see ERP software vendors begin to shift their focus to cloud based applications, meaning that the available support resources for a traditional in house system will become less and less, as the software becomes less widely used. This means that your software will become obsolete quicker with an in house solution.

While this is an issue that won’t become a major issue for several more years, it is certainly one to consider when deciding whether or not to move into the cloud.

Understanding all of the costs benefits of moving to the cloud, both short term and long term is vital.  And it is equally vital to find a cloud hosting partner that can clearly outline those savings and how they will be delivered to your organization in order to maximize your ROI.

The number one reason behind the growing interest in ERP is cost reduction. According to the Forrester study, a well implemented software solution can cut administrative costs by up to 22% and cut operational costs by 23%. This is because the software provides real time data while eliminating re-entry, allowing businesses to make better informed decisions on processes ranging from supply chain management to accounts receivable.

Another reason why ERP is gaining momentum is that it allows companies to streamline their processes. Through a business process assessment, you can identify redundancies and inefficiencies, which can improve completion and delivery times by 24%.

And as you cut costs and streamline your business, growth becomes inevitable. Modern day ERP systems are fully scalable, allowing your system to grow with you. Forrester says that 28% of all technology spending in midsized companies is earmarked to help manage growth. Investing in a scalable solution helps to reduce the need to invest in costly hardware and equipment costs that might not be necessary with a more efficiently run system.

As your business expands, your ERP solution can be deployed across multiple locations and even in multiple countries. This allows you to keep up with the global marketplace.

The numbers all point to ERP being a leading contributor to the bottom line, and is being seen as a shrewd investment for business owners, regardless of their industry.

For midsized companies, moving into a larger solution like an SAP or Oracle might not make financial sense.  But a solution like Sage 100 or Macola ES can still deliver the same benefits at a much more cost effective price. Finding the solution that best fits your needs is a vital step to maximizing your ROI.  But modern business has dictated that ERP software is becoming a vital element to day to day operations.

EDI is a system of communication between two companies that has been around in some form since the 1980’s.  In short, it allows for the transformation of data between two companies without the need for humans to play middle man. Essentially, it allows for a customer to place an order that is automatically entered into your system.

EDI systems use prefabricated formats for all documentation, allowing companies to communicate with each other, even if they aren’t running the same ERP system.  You just need to have an EDI system in place that integrates with your ERP system than can translate the data.

Most ERP software packages out there have some sort of EDI module, typically sold through a 3^rd party solution provider.  For example, Vantage Point EDI and Red Tail EDI are both specifically designed to integrate with Macola and Sage products respectively.

The great thing about EDI, is that it is designed to work with a number of different forms and processes like:

• Purchase and Sales Orders
• Returns
• Shipping notifications
• Delivery notifications
• Invoices

By automating all of these forms directly into your ERP system, not only are you cutting down on the risk of human error, you are also making the entire process more lean and efficient.  There are even some major retailers that won’t do business with a company unless they have an EDI system in place.

To date, EDI remains underused, however the growing trend is beginning to lean towards adoption for small to midsized manufacturers and distributors. Check back for a future blog post where we will go into detail on how EDI can specifically make your business processes more efficient and save you money.

Every ERP system out there is going to allow you to compile data in one place, at your fingertips, keeping multiple processes connected. But unless that data is organized in a way that allows you to make interpretations relevant to your business, all you have are a bunch of numbers and not a lot of information.

Macola ES is a great ERP solution for midsized companies that can link your shop floor with your warehouse and your warehouse to your front office.  And taking that computing power to the next level is Pulse Utilities from Leahy Consulting.

Pulse Utilities was designed specifically for Macola ES and pulls data directly from your Macola database in order to populate a completely customizable dashboard. It’s a near real-time aggregator of data that can automatically create reports in multiple formats from spreadsheet to graph, allowing for more informed business decisions.

One of the more unique tools offered by Pulse is their cash flow forecasting feature. Using a few preset variables, you can calculate estimated cash flow anywhere from one month out to one quarter out to a year out.  This allows you to stay flexible and understand when and where a tweak needs to be made in order to ensure enough liquidity for an upcoming project.

It also allows for the aging of purchase orders and can track inventory in real time.  If you have an e-commerce website, the inventory tracking allows you to know immediately what you have available for shipping and what needs to be placed on back order.

Drill down data to get a true look into the numbers of your operation. The entire platform is 100% customizable to your needs and can be easily exported to Excel.

Adding Pulse Utilities to your Macola ES system is like adding a vitamin supplement to an already healthy diet. It will give you that little extra advantage maximize the efficiency of your day to day processes.

Moving to the cloud doesn’t have to be a chore, or even a scary proposition. With The Attivo Dedicated Cloud, making the move is done in 4 easy steps to limit and speed bumps you might run into with another hosted option.

Step 1

Because you are using your already existing ERP software, the first thing we will do is install that software onto the servers in our data center.  We use your already existing licenses to do so, meaning there is no need to purchase new software.

Step 2

Next, we upload the most recent copy of your data to the servers.  We do this while you are still working on your in house system, to eliminate any interruptions in your day to day operations.

Step 3

Now that your software and a copy of your data are in our dedicated cloud, we provide you with a login and password so you can operate in a test environment. Again, this is all done while your day to day business activities are still being performed from your in house servers. However, because you are using your data and your software, the test environment runs exactly like it will when you eventually go live.

Step 4

Once you have had time to test out the cloud environment and are ready to go live, we will take the most recent copy of your data and upload that into your dedicated cloud servers, allowing your organization to hit the ground running. 

Because the transition allows you to test out the environment with real data and software, it helps minimize any hiccups that inevitably arise during a major transition. And once you’ve gone live, the hosted environment provides you with 24/7 access from any device with an internet connection.

A lack of a good ERP system can definitely lead to a lagging front office, which ultimately will harm your lead times. Making sure your data is connected under one software platform that is also intertwined with the manufacturing process can help to greatly reduce the time it takes to bring a product to market.

Not only can ERP software automate things like a request for quotation, but they can also provide real time data with regards to raw materials on hand for production, as well as finished products in inventory ready for delivery, helping to reduce materials ordering costs – and the lag time waiting for materials to arrive – as maximize the shop floor’s time by reducing or eliminating extraneous jobs.

In addition, having all of your processes linked together can provide a very accurate picture of each separate process, and the run time to complete that process, in order to identify bottlenecks so management can determine where to focus their resources and energy.

Imagine the most congested part of your morning commute and then imagine how much better it would be if just one extra lane were added. Implementing a new ERP system doesn’t have to be a complete and total overhaul of your current processes, but it most definitely can help you determine where you need to add an extra lane to increase overall efficiency.

Understanding all of the processes that go into your lead times, including front office processes, is the key to increasing efficiency and improving revenues. It can also help you mitigate wasteful initiative designed to overhaul an entire system, when just one process needs tweaking. Ultimately, there are a lot of moving pieces that determine a products lead time. ERP is a good way to intertwine those different steps to get more lean while improving profits.

In the world of cloud computing, a lack of speed can kill. What we’re talking about is your internet connection speeds. When it comes to a dedicated cloud solution, having a fast connection speeds really can make or break your cloud solution.

We’ve talked a bit in the past about making sure that your business is prepared for a move to the cloud, but today we are going to get into a bit more detail about internet speeds, starting with the basics.

Download vs. Upload

It seems like common sense, but it is important to understand the basic differences between the two.  Download speeds are the rate at which data is transferred from a remote location to your computer. For example, the speed with which you can download a song or album to your computer. Upload speeds are the rate with which you can transfer files from your computer to a remote location.

Download and upload speeds are not created equally either. Most internet service providers (ISPs) will offer much faster download speeds than upload speeds, because the majority of people spend time downloading music, software or streaming media to their computers. This is true for both residential and commercial internet connections.

In fact, there are great websites that allow you to test your connection speeds like this one. If you were to test your home connection and compare it to your business network, you will almost universally notice that your home download speeds are superior, and upload speeds are relatively similar.

Testing out a Data Center’s Speed

If you already host certain applications in a cloud environment, you should be able to access your cloud servers through a web portal and run a similar test.  If you don’t any cloud hosting provider you’re talking to should be able to provide you access to such an environment where you can test the data center’s speed.  What you’ll notice is that the upload speeds of a data center are much faster than anything you can get even with the best of commercial or residential services.

This is extremely important because most businesses spend time uploading data into various ERP software solutions, and in a cloud environment, having a dedicated private cloud increases the speed at which employees can manage data from remote locations.  You aren’t limited by your in house connection speeds, because you are working off of a remote server with a superior connection.

Greater speed leads to better productivity, which ultimately leads increased revenues — proving that just like in sports, speed is the winning formula for cloud computing.

In reality, there are two different kinds of cloud environments: a private cloud and a collocated cloud. Understanding the differences between the two can be a little tricky.

A collocated cloud is kind of like a BYOB party. You have an offsite location that can provide cloud services, but it is up to you to bring your own servers. In addition, it is your responsibility to upgrade your own servers every 3-5 years. While you get a lot of the security and convenience advantages that a cloud hosted environment provides, cost saving are minimized by the need to provide your own hardware.

A dedicated cloud solution is different in that the data center that will be housing your cloud solution will also provide the servers that your software runs on. It also provides regular hardware and operating system updates at no additional cost to you.

A dedicated cloud provider can offer their services at a lower price through a process known as virtualization. What virtualization means is that you are leasing space on an existing server for as long as you deem fit for your business. Each server acts like an apartment building. There are several “units” available on the server, but you are only given access to your specific space on that server. While you are technically sharing a server with other companies, only you have the password and login to access your data. Similar to how you might share an apartment building with a number of other people, but only you have the keys to your specific apartment.

You can move your ERP software, like a Macola ES or a Sage 100 into a dedicated cloud environment providing 24 hour access from anywhere in the world, knowing that all the infrastructure needed to run your systems is regularly upgraded.

There are obvious advantages to both types of cloud environments depending on your particular needs and preferences. Some individuals prefer to own their infrastructure. But in order to maximize the cost effectiveness of a cloud hosted solution, a dedicated or private cloud is definitely the way to go.

That being said, there are also several pitfalls that a company that rushes into a cloud hosted solution may encounter that can all but erase any savings.

One of the key areas that companies need to make sure they are vigilant with is redundant data storage. Having a good ERP system in place can go a long way to ensuring that key data isn’t duplicated. But it is still a good idea to make sure that duplicate data is kept to a minimum, as most cloud storage solutions charge per MB of storage.

A recent poll of IT professionals saw that 51% of them said that more than half of the data they had stored in the cloud was duplicate data.

Keeping with the theme of data, disaster recovery is another area that IT professionals see as a potential cost burden. It is extremely important to make sure that the cloud solution that you choose has some sort of redundant data backup, and in ideal conditions, a secondary facility with a “hot” server ready to go live in the event of a natural disaster.

Many IT professionals estimate that recovery following a disaster can be up to 3 days. That can be a crippling cost with an extensive ripple effect on revenues. But it is absolutely avoidable with the right solution.

It is also important to understand the nature of your SSL certificates and clearly go over them with and potential cloud hosting partners. If their certificates aren’t in compliance with your industry standards, you could find yourself with a higher cost of maintaining your SSL certificates and worse yet, leave yourself open to lawsuits and fines regarding privacy violations.

Of course, every single one of these issues can be avoided by simply doing a little homework, managing your internal data, and finding a cloud partner that fully understands your individual needs and is equipped to serve those needs.

Industry experts are predicting that ERP platforms will begin to evolve in the coming year to focus more on the customer rather than specific modules. The assertion falls in line with a blog post we wrote here last year predicting that the next step for ERP was to begin integrating social media like features into its interface.

Pretty much since the inception of ERP, software vendors have focused on features.  And while features will still be a component of future ERP solutions, we are moving to a point where concentrating on who exactly will be using the product will be equally important.

Industry leaders will welcome feedback from their employees not just on functionality, but on usability with regards to current ERP systems.  And as this information is evaluated, and the business landscape in general changes, C-level employees will begin to seek out ERP software that is flexible enough to grow and evolve as their unique business needs change.

Whether that is through mobile platforms, Cloud hosting solutions, or simply upgrading their in-house systems, companies across all industries are realizing that their ERP system has as much to do with growth and customer retention as any other aspect of their business.

Ultimately, the need to be more flexible will force vendors to focus on the speed with which their programs function. Eliminating lag time and arriving at real-time, or near real-time, functionality will be the key metric that sets one software package apart from the next. And that circles back to usability.

Understanding the individuals who will be utilizing the software and tailoring the interfaces of those particular modules to best serve those people is the key to taking ERP software into the next phase of its evolution. And with the continued progress of mobile technology and cloud computing, 2013 seems primed to be a year that ERP software enters the next phase of its evolution.

As the calendar turned over to 2013, once again pundits are declaring this to be the year that cloud computing truly explodes in the United States. Research done by Gartner suggests that this might actually be the year that companies begin to migrate to dedicated cloud hosting solutions en masse.

According to a recent survey of 2000 CIOs done by the research giant, cloud computing was listed as one of their top priorities for 2013. Each year Gartner also projects the top ten business technologies for the coming year, and again, cloud computing made the list.

Big data analytics also made that list.  Essentially, big data analytics is the process of crunching large amounts of data to try and find hidden patterns and correlations that can provide businesses with a competitive advantage over their rivals.

It should come as no surprise then that many companies are moving their ERP systems into the cloud to leverage both IT solutions.

ERP software is a great tool for not only storing data and synchronizing it across all facets of your business, but it is also great at providing real time reporting and visibility. Its crunching data for you, and can be used to produce any number of different reports and forecasts.

By taking that ERP software and moving it into the cloud, C-level executives have 24/7 access to their company’s data and systems, providing them with the agility they need to stay ahead of the curve.

Because a cloud solution can be accessed from anywhere at any time so long as you have a device that can connect to the internet, it’s a natural supplement to make your business processes more efficient and cost effective.

It only makes sense that executives are starting to see why ERP software and cloud computing go hand in hand with one another.