When it comes to enterprise software, a truism is that the software contains “best practices.” Companies should change their processes to fit the best practices contained within the software. This will lead not just to better efficiency but makes the software easier to implement and upgrade. But as one company’s journey to logistics maturity shows, this often works better in theory than in practice.
Some organizations have processes that need to be different and DO NOT fit standard “best practice” configurations. Convoy of Hope is an example of one such organization.
Convoy of Hope is a faith-based, nonprofit organization whose mission is to feed the world through children’s feeding initiatives, community outreaches and disaster response. Based in the center of the U.S. in Springfield, Missouri, where major north/south and east/west interstates cross, they are well positioned to provide both ongoing food security and disaster relief.
Convoy of Hope’s Kregg Hood – Sr. Vice President, and Sarah Jeffries – Inventory Management Director, talked to me at the HighJump Elevate conference about their organization’s growing supply chain maturity.
The donor aid provided to the nonprofit has grown very rapidly over the years. By 2014 they came to the realization that they needed to move from the 327 spreadsheets they used to manage inventory and dispersals from their warehouse to a digital warehouse management system (WMS). “If not for HighJump,” Mr. Kregg said, “we could not do what we do.” They implemented HighJump WMS for Microsoft Dynamics GP.
The WMS provides near perfect inventory accuracy. The company ships out approximately $100 million in product (wholesale value) in a year. At any given time, the warehouse holds between $12 and $15 million in goods. During the last audit, the fact that the auditors were scheduled to show up had been accidentally deleted from their schedule. The auditors showed up at 6:30 in the morning looking to randomly audit products valued at $5 million. Despite not being ready for the auditors, by day’s end the auditors had completed the audit and found only four errors totaling 240 dollars in value.
Inventory accuracy is very important for nonprofits. Convoy of Hope, for example, receives gifts in kind from large companies like Walmart, Niagara, Walgreens, and Nestle Waters. Being a trusted nonprofit is critical to receiving these gifts and attracting talent. Charity Navigator, America’s largest independent charity evaluator, has given Convoy of Hope top ratings for 14 years running. The inventory audit is one of the things Charity Navigator looks at in compiling their ratings.
But getting to this point was not easy. The implementation consultant Convoy of Hope used assumed this nonprofit operated like traditional companies and proceeded to configure the solution using a standard receiving process. Big mistake!
The implementation began in November of 2014, but by February of 2015 they brought the implementation to a “full stop” as they detected more and more unit of measure (UOM) errors. The problem is that when a nonprofit that relies on gifts in kind places an “order” they don’t know exactly what they will get. Their sponsors may send products they don’t sell anymore; the charity often does not know with any specificity exactly which products they will get, how much they will receive, and whether the goods will be palletized or loose pack cases. For these reasons, Convoy of Hope can’t properly value the goods ahead of time. “Our balance sheet was all messed up,” Ms. Jeffries said. “2015 was a garbage year.” By year end, with heroic efforts, the problems had been resolved to the auditor’s satisfaction.
During the reimplementation that followed, they moved away from generic purchase orders and advanced ship notice (ASN) receiving to a system where they use ASNs to give them an idea of what and when goods will arrive, but they do not pre-value the gifts. At the dock, everything is counted twice, and Ms. Jeffries must sign off on the value of the inventory, and make sure the purchase order matches the inventory values, before goods are put away.
The WMS provides other benefits to Convoy of Hope. During natural disasters, shipments increase from perhaps five loads in and out a day to twenty loads per day. Further, the organization runs lean. A good nonprofit’s operating costs are 12 percent or less; Convoy of Hopes’ cost are in the 8-9 percent range. In assigning outbound loads to drivers, many of whom are volunteers, it is important that driver preferences on the types of loads and locations they wish to deliver be honored. Donors can have their own restrictions; they may restrict which types of organizations receive their charity and these rules must be followed as well. The efficiencies and business rules driven by the WMS help in all these areas.
Best practices are important. A company should not seek to customize an enterprise solution to fit their processes without good reasons. But it is important that consultants listen, seek to understand an organization, and consequently understand when a best practice is really a “best practice.”