ERP Functionality & Domain

[I had to edit this post on April 01, 2008. And no, it’s not April Fool’s Prank] Have you ever wondered how manufacturing scrap works? Or what it really is? It’s an interesting topic, and yet a very confusing one. It has caused so many headaches to the project team I worked on recently, because nobody really understood it.

Due to fluctuations in market prices, purchase cost of goods may vary from one purchase to another. Also, you rarely just purchase goods and immediately sell them in the same quantity. What you usually do is that you purchase the goods, then let them sit in the inventory for a while, then you may…

When you buy a sheep, how much is it worth to you, what is its value? For starters, its value is at least what you paid for it, but that’s not quite it. Say you paid a hundred dollars for it. If you want to sell it now, how do you determine your selling price? A hundred-twenty? A hundred-fifty?

Unless you are a non-profit, the point of the business is making money. It is surprising how many different ways of making money there are out there, but if you are in business, it is extremely likely that you make the money the easiest and the most common way around: by selling goods.

Running a business using only accounting data can be pretty much the same as driving a car using rear-view mirror only. The purpose of accounting is to provide accurate and reliable overview of financial situation to interested parties. What this financial overview consists of is the stuff that has happened in the past, in other words: history.

When referring to their ERP systems, it is pretty common that customers refer to it as accounting software . While it is true that every ERP system embeds some accounting functionality, there is a major difference between these two categories of software.

Today, I got an e-mail from a reader of this blog, who asked me to help them with an actual problem on a project. Their customer is a small manufacturing customer in textile vertical. Whenever they calculate consumption, quantities for certain items get rounded to full numbers.