Tracing one product’s journey through an ERP system

April 1, 2022
Kaily Hirsch

We're pretty accustomed to instant gratification in our modern world: when we need something, getting it is as easy as clicking a button. But have you ever stopped to consider the journey a product goes on before reaching you? Think about the t-shirt you have on. It's a simple product, but took a lot of work to get into your hands. Many products spend a majority of their journey to you being tracked by an ERP system. Imagine you want to make and sell t-shirts. You need to consider things like manufacturing, orders, and returns. Pretty soon, a simple t-shirt turns into a highly complex process. But an ERP will guide and keep track of your t-shirt through this journey. 

Let's take a look at the process:

Before you can create something, you need the right materials. While some companies make their own materials, most will source them from suppliers. When making a t-shirt, this means finding fabric. The cost of fabric plays a vital role in determining the price of your t-shirts. You'll need to consider how much the material is, how much it costs to ship, and other additional landed costs if it arrives from a different country. You'll also need to determine how much it will cost to store the fabric. A procurement module within an ERP system manages all of this information. This module will automatically keep track of fabric cost, supplier performance, and more. 

Now that your materials have been procured, it's time to make your t-shirt. Manufacturing is a complicated process that requires keeping track of dozens of moving parts. A Bill of Materials (BOM) is created to make this process easier to manage. A BOM includes the materials needed to make an item and also includes the tools and labor used. You can customize a BOM and add unique components. When making your t-shirt, you'll be able to factor in how much thread and fabric you use. You'll also be able to factor in the cost of operating sewing machines and the price to pay the seamstress. Because things often don't go as planned, the BOM can be customizable for each work order. It will let you change things, like the labor and material that were actually used, not just what you predicated would be used. 

Finally, you have a  t-shirt. The finished product now needs to be received and stored in the warehouse. This process sounds simple, but it's often where the most mistakes are made. Without a good organizational system, products can get lost in the shuffle of the warehouse forever. So, how do companies keep this from happening? Warehouse management is a vital part of an ERP system. Your t-shirt will need to be tracked as it moves across warehouses and locations. Your system needs to know how much inventory you have in each location, whether that be different warehouses or sublocations within one warehouse. When your t-shirt is in an easy-to-find location, it will simplify the order fulfillment process.  

Your t-shirt is ready to be sold, but it needs to find its way into the hands of consumers. There are lots of different ways to do this. If you want your t-shirt to be sold in traditional brick-and-mortar stores, you'll likely work with a sales rep. This person will contact shops and boutiques to see if they are interested in selling your shirt. The sales rep will negotiate bulk orders and issue invoices. They may need to do this on-site and be able to see if they have enough inventory to fulfill the order. If you want to take the modern ecommerce approach, you'll be able to hook up platforms like Shopify and Amazon directly with your ERP. Orders from these platforms will be managed in your ERP, simplifying the process. 

It's time for your t-shirt to find its way out of your warehouse and into the world. Once an order is approved, a pick ticket will be created. This pick ticket will have information about the product and its location. Your  t-shirt will be quickly found and moved to the packing station using an order scanning app. Packing in a unique location reduces the chance of mistakes. Packing slips and shipping labels are generated based on the destination shipping location on the original order or invoice. At this time, the customer may also be sent a shipment confirmation and/or a tracking number. 

Finally, your  t-shirt is happily in the hands of a customer. This isn't a guarantee that its journey is over. Sometimes the customer isn’t actually happy, so returns management is an essential part of ERP software. Like everything in an ERP, it will look different for every business, but one of the most critical functions is ensuring the old returned merchandise isn't mixed in with new inventory. Returns will be received at a specific location and inspected. The business will decide to repair the item, discard the item, or re-shelve it to sell it again. Returns play an essential role in quality assurance and reporting. If there is a commonality between returns, businesses will try to eliminate that. For example, if t-shirts made with material from a particular supplier tear quickly it will lead to more returns and product complaints, so you'll want to stop ordering material from that company. 

You've followed your t-shirt from manufacturing, to sales, to returns. But at the end of the day, how do you know if this t-shirt is making a profit? Reporting functions within an ERP show you the bigger picture. You'll be able to see what t-shirt colors or sizes are the most popular, how buying preferences change, and where you need to improve your business functions. Maybe you'll realize blue t-shirts are most popular in the fall. You’ll then be able to manufacture more to avoid stockouts and improve sales. Or perhaps you'll learn that yellow t-shirts have stopped selling altogether; this could indicate an issue with the quality of yellow shirts. Without reporting, you run the risk of staying in the dark on a variety of issues. 

This t-shirt’s  journey through an ERP is a pretty basic example of what ERP systems can do. The reality is that many company’s workflows are far more complicated. The journey of each product through an ERP will be different. A food supplier won't use ERP the same way that a computer reseller does. Every business is different, and each comes with its own unique needs. The good news is that modern, cloud-based ERP systems like Paragon are designed to handle a variety of complicated workflows so that no matter what, your product is safe along its journey. 

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