There are some distinctions of business purchases, strategic and non-strategic. Strategic purchases are those that have a direct effect on the business and the bottom line. Non-strategic are those for everyday items like office supplies, travel, commodity items, etc. In the case of manufacturing companies, strategic purchases can be raw materials, production equipment, energy, skilled labor, computers, and business operating software.
For wholesale distributors, strategic purchase examples are for buildings, equipment, computers and business operating software. Brick and mortar retailers need to acquire space in the right location, stock the stores with the correct amount of inventory, advertisements, computers and business operating software. E-Commerce retailers on the other hand don’t need to worry as much about storage as they usually sub-contract out to 3rd parties, but they do need computers, web advertising, and business operating software.
The common threads in these industry segments are inventory, computers and business operating software among others. These are considered strategic purchases because they impact the flow of materials for production, provide the inventory needed to sell and ship to customers, help keep track of receivables, payroll and payables and help plan what, how much and when to order the inventory. In other words, the cash and profits to run a business are directly dependent on these items along with skilled labor.
Business operating software not only includes an ERP or accounting solution but also inventory demand planning that includes forecasting, replenishment planning and optimization of the inventory.
A company must determine how to properly gauge the value impact these strategic purchases deliver to their company. If you pay too much, then you might not realize a good and timely return on investment (ROI). If you go low and drive a hard bargain for the lowest possible price, you may be in jeopardy of not achieving your sales, service and profit goals. The old adage “that you get what you pay for” is very true for strategic purchases. It might seem like a good deal initially but later you realize you have to pay for additional modules and or services and time. Not only does it end up costing more in money, consider the cost of the time you lost and potential negative impact to your customers.
Inventory planning and optimization software is a strategic purchase that warrants close scrutiny in selecting a solution that meets the majority of your planning needs. Notice I said most of your needs, the reason is that many times not all the needs are required initially (you need to walk before you run), or they may be more of a nice to have type requirement.
The evaluation of the inventory planning software should take into consideration both tangible and intangible factors. Tangible factors will include: product features currently available and on the roadmap; published customer success stories (case studies); length of time in business; references and more. Intangibles can include: experience of the team as both inventory and product planners and managers; innovations in the product and technology and deployment, friendliness of the sales and support staff; perceived ability to work together to achieve goals. Collaboration with your inventory planning solution provider is a very key element that should not be taken lightly. Their experience and knowledge can dramatically improve your own planning and service success.
Setting the value of the purchase of an inventory planning solution should include all of the above when considering the price, you pay. In general, advanced inventory planning and optimization solutions like those offered by Valogix will provide you with a significant return on investment for a long time.
Advanced inventory planning and optimization software not only automates the entire planning process but also it dramatically increases the positive cash flow of a company. By smartly reducing inventory investment, reducing stock-outs, decreasing expedited shipping costs, and reducing planning time all contribute to more available cash. Add to that increased sales and productivity and the gains will also lead to an improved competitive advantage.
The bottom line, the price you pay is an important factor. However, measure it carefully against the value you can except to receive both in the short term and in the long term.