Your System – Not Guilty As Charged

Just another weblog

Simplifying Complex Requirements

Posted by Joel Schipper on August 12, 2015

Your system can appear “guilty” when there are complex business requirements driven by metrics from arms length parent company ownership, e.g., private equity firms, or from personal interests, e.g., sales commission calculations; and that’s in addition to these considerations producing inefficient supply chain actions.

The root cause may be volatility in the underlying data, such as rapidly changing raw material prices, or fast moving foreign exchange rates. When combined with corporate metrics to reward (or punish) behavior, this can lead to counter-productive supply chain decisions, compounded elaborate attempts by IT to manipulate how the ERP system works in order to thwart those end user actions.

A far better, and much less complex solution is more likely to stop focusing on handling minute to minute changes, and to dampen out those effects by utilizing the ERP as designed, thereby restoring the system to “not guilty.”

For example, if raw material costs are extremely volatile, consider using a weekly purchase contract price, stored in a supplier-item price file with effectivity dates, that will be automatically applied to each PO released that week. This is more controlled than changing a price on a blanket PO, or a PO release, and contains the variation to a single week.

In another example, consider using a 5 day moving average exchange rate for the following week’s effective foreign exchange rate to accomplish a similar dampening effect. And at month end, use a spot rate, taking the exchange rate gain/loss only for the final days of the month happening during the closing week.

These are just examples of how to think “outside” the box to keep your system “Not Guilty As Charged!”


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