Friday, August 29, 2014

LIFO/FIFO Who Cares?

LIFO retention and the comprehensive tax reform plan

The answer is you, unless you don't pay US taxes which is much harder then you might thinkWhile this is not strictly supply chain, it will likely affect most if not all distributors in the US. So it might be something you want to watch and be aware of. Sorry, we don't really have a software fix for the US tax system yet, but the best way to deal with them is to be informed so read on

There are two primary inventory accounting methods: LIFO and first-in, first-out (FIFO). Under the LIFO inventory accounting method it is assumed that the last item entered into the inventory is the first item sold. Accordingly, the taxpayer's ending inventory is valued at historical costs rather than the most recent costs.

Currently, taxpayers that use LIFO are required to calculate and track their LIFO reserves, which is the difference between the accounting cost of inventory calculated using the FIFO method and the same inventory using the LIFO method. The LIFO reserve is the deferred taxable income that results from using the most recent inventory costs to calculate the cost of goods sold, rather than the lower cost associated with historic inventory.

House of Representatives Ways and Means Committee Dave Camp (R – Michigan)  has drafted a proposal to repeal the last-in, first-out (LIFO) method of accounting in his proposed United States comprehensive tax reform plan. - Read More Here 

Within Camp's draft plan, the LIFO inventory accounting method would no longer be permitted from 2015. A business would include its LIFO reserve in its taxable income, which would be subject to tax at 25 percent over a four-year period, beginning with 10 percent of this reserve in its 2019 income, 15 percent in 2020, 25 percent in 2021, and the remainder in 2022.

Additionally, because the repeal of the LIFO method and the inclusion of the LIFO reserve in income could have a substantial effect on cash flow for small and family-owned businesses, the provision provides that LIFO reserves of closely held businesses (generally defined as having no more than 100 owners) would be subject to a reduced tax rate of 7 percent.

The Joint Committee on Taxation has estimated the abolition of the LIFO method would increase revenues by 79.1 billion in the ten years to 2023.

However many American industries use the LIFO accounting method as a way to free up capital to hire new employees and keep their companies running on a predictable schedule. A provision in Chairman Camp's tax reform proposal would retroactively punish companies that have legally utilized this method for years to handle their accounting.  LIFO is a widely accepted and utilized inventory accounting method that has been part of the US tax code for more than 70 years.

Many businesses are not likely to have factored into their business plans a tax bill arising from a retroactive change in the tax code.

Where ever you stand on this issue the important piece is to stay informed.

As the changes shake out the good news is we support multiple costing methods in the MDS system but the changes will likely impact you in some way.

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to
Click here and tell us how we can help you with your business solutions.

Friday, August 22, 2014

You are doing it all wrong!!

Can Micro Management help make your warehouse more efficient?

Merriam-Webster's Online Dictionary defines:Micro Management as management with excessive control or attention on details. While it is much maligned, in some instances micro management may offer a solution to help you make your warehouse operations more streamlined. 

According to industry statics, order picking costs typically account for more than 50% of total warehouse / DC operating costs. With the trend toward smaller, more frequent orders, order fulfillment costs will continue to increase. Naturally companies are concerned and searching for better management methods to combat this growing problem.
Many companies consider deploying a separate Labor Management Software (LMS) to help improve their bottom lines.  With the MDS-WMS system the Labor management suite is integrated so a separate LMS is not required. The simple result is often a labor productivity increase simply because employees know they are being tracked throughout the operation.

But, distributors should be mindful that tracking time per pick isn't a one-size-fits-all proposition. Based upon our experiences, large distributors with 15 or more order pickers often benefit most from LMS and Time tracking.
The problem is seems its that for the majority of small distributors, order pickers are multi-tasking.  These people perform multiple different tasks, not at the same time, but going from picking to a completely unrelated tasks as they work. To simply record when they start and stop would not really track the true time to pick.

Based upon that here are  some micro-management suggestions that can improve order fulfillment productivity and lower overall operating cost without tracking specific times on operations.

All of these are easy to implement using the existing MDS-WMS system or can be done manually if your system doesn't support these capabilities.

(1) Segregate Single Line Orders
Single-line orders generally can be picked in large batches. Because they don’t need to be consolidated with other items, they often can be picked directly into a shipping carton or envelope, thereby, eliminating the packing and sorting function altogether. In a parcel-shipping environment, single-line case orders could be batched to allow operators to pull a full pallet or case, and then print & apply customer specific shipping labels to the individual cases. 
(2) Slot and Assemble Sizes Of One For Customer Replenishment
For warehouses that are primarily replenishing customer stockrooms, large quantities are not always the best way to go. With barcoding software like our MDS Scanconnect Product, replenishing customer inventory on an item-for-item basis (actually units sold)
That's great for the customer, but what about the warehouse? Piece picking will likely increase warehouse order fulfillment cost. But rethinking order fulfillment processes to optimize "each-picking" tasks could yield significant productivity improvements in both the warehouse and the customer stockroom.
Start by thinking about the final destination of the inventory inside the stockroom. The small orders that are created by increased delivery frequency, for example, can be further divided to match shelves, aisles or stockroom layouts. Several of these "sub-orders" can be picked simultaneously as an efficient batch in a single pick trip at the warehouse. Loose pieces also can be bagged and labeled with the pick ticket at the warehouse. As a result, the stockroom will receive products grouped and identified.
Meanwhile, the pick path for the batch can be greatly reduced if products are slotted at the warehouse to mimic the way that orders are received from the customer. This will allow you to choose optimal picking configurations in the warehouse. Assuming your customer orders are automated and regular this can be a tremendous time saver for picking.

If you really need to push throughput the MDS-WMS system can work with hardware based product-to-person picking methods, like horizontal and vertical carousals, which increase productivity within a minimum footprint.
(3) Look For Order Patterns and Slot Items Based upon It. 
When it comes to multi-line orders, sometimes pickers are fortunate enough to pick an entire order without travelling far on the pick path. How can you make that the rule rather than just a matter of luck?

The RemoteNet system now offers the ability to created suggested items when brwosing for a product, similar to Amazon's recommendations. Applying that same logic to your picking and slotting strategy means that you can now predict which items will be on the next order and slot accordingly. 
(4) Split Bulk and LUM Item to seperate picks
Generally, if you begin picking all portions of an order at the same time, full-case items will arrive at the dock first. That's because broken-case or each picking is labor intensive and typically slower.

Consider Splitting your orders to Bulk and Piece counts, this will allow items to be pulled by size. Allow your Hi-Lo or Pallet Pulling equipment to focus on the large items,
while at the same time allowing piece pickers to pick the remaining items. 
How much better, and less expensive, would it be to pre-pick eaches into shipping containers and stage those containers in a flow rack or shelving area? When all the eaches picking has been completed, crank up the case-pick line and let the eaches containers lead the cases straight into the truck.

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to
Click here and tell us how we can help you with your business solutions.

Friday, August 15, 2014

Learning from the Ice Age...

Are we living through the single most revolutionary time in business? Or does it just feel that way?

When I think about the combined forces of the Internet, cloud computing, social tools, mobile devices and a nearly infinite amount of big data, I wonder how any business can fail to be transformed. (The alternative being to simply fail.)

Then I think of business at the dawn of the industrial era, and I'm convinced that we really are in the midst of revolution. Yet as a fan of history, I play devil's advocate with myself on all this. 

Maybe what the business world is currently experiencing is not all that unique.

I was recently reading about historical periods of business transformation and came across the fascinating history of the ice industry. Yes Sorry - not the Big Ice Age... but the ice business really. 

The 1860s were the height of competitive American ice harvesting, when thriving firms like the Knickerbocker Ice Co. distributed ice to homes and businesses throughout New York. In the early decades of the 20th century, the ice industry was powerful and profitable in the eastern U.S. Then along came refrigeration and home freezers, and the ice party melted.

 It's still a $2.5 billion industry (mostly prepackaged and direct-to-consumer), but dominant players like Knickerbocker went out of business.

What might have happened if those ice companies had asked themselves two simple 

  •  "What business am I in today?
  •  "What business do I need to be in tomorrow?"

Instead of thinking they were only in the ice business, they might have realized they were actually in the delivery business. By thinking a little differently, they might have figured out that those ice-delivery routes were a road map to delivering other goods to homes and businesses. (They could have been FedEx!)

Today's industry leaders constantly ask themselves those two questions. Amazon was a bookstore disrupter and e-book company just a few years ago; now it's the largest online retailer in the world, on its way to becoming a dominant power in cloud computing. Given the technology capabilities at our disposal and the ever-lower barriers to entry in so many markets, every industry is a target for disruption today.

Look at your core business and understand what is not changing and how you can adapt an keep ahead of the market.

Understanding your core business is made easier with a powerful ERP system, 
recognize trends and capabilities by using MDS Trend Graphs and the power of Data Analytics. You have the tools to identify and expand on the important components of your business, its up to you to take advantage. 

Will you be the next FedEx? - or The next Knickerbocker Ice Co?

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to
Click here and tell us how we can help you with your business solutions.

Friday, August 8, 2014

Social Secrets: Automating Social Media

Social media marketing is no longer solely for B2C companies. B2B marketers are recognizing the benefit of engaging with audiences via social networks. By creating an online persona for your company, you’re humanizing it, just as those in the consumer space do, creating a relationship that makes people feel like they know your brand and company personally.

91 percent of B2B companies are present on LinkedIn and more than 80 percent have Twitter and Facebook accounts. But just because they are “on” social, doesn’t mean these networks are being used efficiently or effectively.  According to research by the Content Marketing Institute, only 44 percent of B2B marketers have a documented social content strategy, meaning too many companies aren’t capitalizing on social media the way they could be.

The problem for many is content...
Who is going to write all those interesting posts and let customers and prospects know about your latest offerings as well as which products you should be selling?

Allow us to Introduce Data-Buzz
 Automate Your Social Media Using the Power of Data Analytics.

Data-Buzz's proprietary data algorithms use the power of Big Data in a simplified way, so that the technology is not the limiting factor, it's the incentive structure for your business. Big Data is a flashy buzzword tossed around in most industries today, but what does it mean for you? At the most basic level, it's about distilling meaning from an unprecedented volume of information generated by connected devices and new technologies. Big Data has the potential to help you see your customers and products in a new way.

The Systems House RemoteNet Web Platform takes advantage of the Data-Buzz analytics engine to automatically create and post content to your Company Blog, Facebook, Twitter and Linkedin accounts automatically, allowing you to have daily fresh content to share with customers, prospects and people just searching for a product or deal.

Using the Power of Data-Buzz Your Remotenet Web site now becomes a social media engine
allowing the use of hashtags, social media links all from an automated and monitored source. 

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to
Click here and tell us how we can help you with your business solutions.