2012 Learning About Inventory from ERP Implementations WIS Customer Forum Oct 2012 KPMG LLP

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Transcript of 2012 Learning About Inventory from ERP Implementations WIS Customer Forum Oct 2012 KPMG LLP

  • Slide 1
  • 2012 Learning About Inventory from ERP Implementations WIS Customer Forum Oct 2012 KPMG LLP
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  • 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 1 Why are Retailers Moving to ERP Systems? Importance of one source of truth for both financial and management reporting Enhanced receivable/billing process and matching A unified and single reporting system to analyze the statistics/ numbers/ status etc in real-time, across all the functions / departments Automatic and coherent work-flow from one department / function to another to ensure smooth transition/ completion of processes ERP systems are more secure as centralized security policies can be applied to them and all the transactions happening via the ERP systems can be tracked Single Database is implemented on the back-end to store all the information required by the ERP system and that enables centralized storage / back-up of all enterprise data. ERP systems make it easier for order tracking, inventory tracking, revenue tracking, sales forecasting and related activities
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  • 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 2 ERP Challenges Cost IT or Finance Led rather than business IT resources not sufficient to deploy and maintain Data Governance It is hard to customize Very few companies can effectively use ERP right out of the box It must be modified to suit their needs, and this process can be both expensive and tedious. Even when a company does begin changing the system, they are limited in what they can do Cant undo your conversion Disruptions to transaction flows Interface failures between SAP and other systems
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  • 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 3 ERP Challenges Challenges our clients have faced: Ensuring you leverage all of the ERP functionality Importance of accurate process, system and accounting flows Master data and department hierarchy There is not standard definition of cost in Retail Organizations often define cost differently for domestic vs. globally sourced product ERP conversion planning physical Inventories, accuracy of item files, open POs Chart of account mapping & testing Perpetual inventory management (negatives, dept rings) 3 way match and associated issues Inventory shortage and of inventory adjustments tracking Importance of receiving accuracy Bill of material items
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  • 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 4 Discussion Converting to Cost Challenges our clients have faced: Communicating the advantages Challenges of change management Organizations often focus on financial reporting when converting to cost rather than management reporting Payables- accuracy & matching issues, import reconciliation, level of matching (summary, line item) Payables -practice of paying the lower of invoice Merchants - discipline of master item files accuracy Merchants vendor compliance and enforcement Merchants new management reporting margin reporting in particular Importance of receiving DC & Store Store Operations cycle counts, mark-outs, inventory processes, reporting, POS discipline, finish goods, unidentified inventory, dept rings, RTV
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  • 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 5 Financial Considerations Which method of accounting? Assess the financial impacts of moving to cost and outline mitigation strategies Assess any tax impacts related to moving to cost and outline mitigation strategies Provide a summary of recommendations related to key themes (definition of cost, inventory adjustments, cycle counting, master data management, etc) Inventory movement tracking and accounting 3 Way Match Map and test chart of accounts Project ROI and cost management
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  • 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 6 Process Considerations Set up cross functional meeting to discuss and map end to end business processes Identify key stakeholders impacted by the project and will be responsible for implementing and communicating key business process changes Store Operations cycle counts, mark-outs, inventory processes, reporting, POS discipline, finish goods, unidentified inventory, dept rings, RTV Estimate the level of difficulty using three dimensions (time, cost, and resources) Assess overall organizational readiness for change Assess roles, responsibilities and job impact Conversion planning and the potential impacts on the organization
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  • 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 7 System Considerations ERP is often too focused on technology ERP conversion planning physical Inventories, accuracy of item files, open PO Integration with WMS systems Has your organization completed transaction testing? Are automated balancing routines established between systems? Who is responsible and are error logs worked daily? Do business owners have to sign off on all system design changes?
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  • 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 8 Reporting Considerations Complete a reporting impact analysis Importance of establishing one source of truth for reporting Assess master data clean-up and maintenance Document key current operational and financial reporting related to margin, shrink and inventory adjustments Assess shrink and waste calculations Assess inventory adjustments, cost adjustments, and other top level adjustments impacting margin, shrink and inventory adjustments How effective is your reporting related to: Inventory Adjustments PO, Receipt, Invoice & Payment ASN Exception Reporting Vendor Compliance Non-match reporting (RTV, PO Order Qty, Receipts, Wrong or missing PO)
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  • 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 9 Shrink Framework Shrink Physical Shrink Paper Shrink Stores In-transit Distribution Center Warehouse Vendor Systems Processes Accounting Transaction Processing Interfaces Conversions Global Imports DC, Cross Docks and Stores Returns Master Data Inventory Management Account Payables Inventory Accounting Inventory Control
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  • 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 10 ToolWhat is it and why?Project Benefits Process Documentation A facilitated cross functional approach to documenting and identifying key gaps, controls and risks associated with key business processes. Process, system and account mapping is a critical step in planning and executing a successful new systems implementation. This step will help identify process improvement, and alignment issues prior to implementation. It will also highlight potential areas requiring system modifications or process changes to avoid custom modules when implementing new systems. It also is a important input for the job impact analysis. Organization and Job Impact Analysis A set of tools to identify and manage specific impacts to job roles and responsibilities within the organization associated with the specific change effort. All too often organizations do not focus enough on the job roles, impacts, and related capability gap questions associated with a change that need to be proactively addressed. Company X benefits by having a disciplined approach to both defining job roles in the future state but also doing a fact-based analysis of what activities will need to start, stop and continue in the new environment. Tools
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  • 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. 11 ToolWhat is it and why?Project and Company X Benefits Stakeholder Analysis A Stakeholder Analysis identifies who the stakeholders are and evaluates their current commitment and what level of commitment is required from them in order for the project to succeed. Stakeholders ca