Tip #241 – Inventory Tracking (2015 Version)

Note: This blog post was originally published over a year ago under Tip #169.
With the 2015 version, we have made some changes to the inventory module.
Some of those changes are reflected in this revised post and others will be explained in future posts.

Tip #241
Inventory Tracking (2015 Version)

Some of you like to keep inventory on everything you sell, including flowers.  Some of you want to keep inventory on all the hard goods you sell, but not flowers.
Some of you just want to keep an accurate count of how many holiday containers you have left during the holidays.
Whichever group you fall into, flowerSoft has the tools to help you.

Simple inventory tracking is…. simple.
You tell the computer how many pieces of something you have (units on hand)  and every time you sell one, the computer reduces the units on hand by one.
This works well if you are keeping track of cards, balloons, stuffed animals, etc.  But what about containers?  You are not selling containers, you are selling an item that is placed in a container.
Many times, the same container is used for several different items.  So how do you keep track of items which normally are not sold individually but are used in the production of another item and its quantity is reduced when that other item is sold?  You could try to remember to add a separate line item for those items on the order so that their units on hand is reduced, but that rarely works.  There must be an easier way, and there is.

Understanding the concept of sets and components.

I guess one of the things less understood in inventory tracking is the concept of sets and components.
Let me try to explain it in a simple way with an item we are all familiar with, a toilet.
If you were selling toilets and I wanted to buy a toilet, I could go to your store and pick a toilet in my favorite style and color.  You would enter the sale into your computer and your units on hand for that toilet would be reduced by one.
However, if a few months later I had a mishap and dropped something and broke the tank cover of that toilet, I would go back to your store and try to purchase a tank top that would fit the same style and color of the one I had originally bought.  If you run a good plumbing supply house, you should be able to accommodate me.  I should be able to buy the tank top, the tank and the bowl separately.

A set is an inventory item that is made up of several different parts (other items) called components.  In the case of a toilet, the bowl, the tank and the tank top.  A toilet does not exist without any one of those other component items.  You could say that the toilet is a “virtual” item.  It really does not exist.  The bowl, tank and tank top are “real” items that when put together form the “virtual” item we call a toilet.  That is the concept of inventory tracking using sets and components.

The toilet is the set and the bowl, tank and tank cover are the components of that set.
You should be able to go to a plumbing supply house and buy any of those 3 components individually or together as a set.
When a plumbing supply house keeps track of an inventory item such as a toilet, which is made up of other parts, they do not count or keep tally of how many toilets they have.
They keep track of how many bowls, tanks and tank tops they have on hand.   The number of toilets available for sale is the least amount of any of the components that make up that set.

Let’s say that a toilet is composed to bowl A, tank B and tank top C.

A plumbing supply store has on hand (in stock) 157 units of bowl A, 152 units of tank B and 175 units of tank top C.
How many toilets that use those items will their inventory program say they have in stock?

The answer is 152.  Why?  Because that is the least amount available of any of the components.
You would not buy a toilet without the tank, so they cannot sell more toilets than the amount of available tanks in stock.
If they were to put together as many toilets as possible using their “on hand” inventory, they could only put together 152 before they ran out of one of its parts and could no longer sell a complete toilet.
I hope that I have explained this well enough that you now understand this concept if you did not before.

Now let’s see how that concept applies to you and keeping track of containers and other hard goods that are used when making up an item you sell.

A perfect example of this is the containers you buy from the wire services during the holidays.

If you want to keep track of how many of a certain container you have before you need to order more or stop selling the items that use it, you have to keep track of each arrangement that uses that container you sell. 
To do this you need to make use of flowerSoft’s item codes feature.  In plain English, flowerSoft cannot keep track of inventory if you do not use an item code when you sell an item.

An “inventory” item is an item that needs to be kept track of. Its units on hand must be reduced when you sell them and increased when you receive them.

Not all items need to be designated as “inventory” items. In addition, not every florist wants to or needs to keep track of inventory.
Therefore, flowerSoft keeps track of items in 2 different files. The item description codes file and the inventory file.
All the items that you sell, should be in the item description codes file but not all items that you sell need to be in the inventory file.

So if you want to keep track of the containers you sell, you must make the items that use those containers, “inventory” items.  In other words, items that flowerSoft will keep a running count of when you sell them or receive them.
This will keep track of the items that use the containers but this presents another problem, since different items might use the same container, how do you keep track of the containers those different items have used?

You could, every time you sell an arrangement that uses the container, also add the container item to the order and charge $0.00, since the price of the arrangement includes the container.
This would be just marginally better that keeping track of the inventory by hand.

The way this type of inventory tracking should be done is by the use of components.
After all, what does the arrangement consist of?  Think of its recipe.  All the items in a recipe are the components of the item they are a part of.  The different flowers, the greens, the floral foam and the container they all go into.    Take the recipe below…

Each one of the items listed is a component of Teleflora’s Holiday Glow centerpiece.

If you wanted to keep track of the “on hand” quantity of each of these items needed to produce the Holiday Glow centerpiece, you would have to enter each one of them as a component of item T115-3A and each one of them would have to have their own item number.  Although some of you will want to keep track of every item used in the T115-3A, this is not what most of you want to do. Most of you will want to keep count on the 11 ½ hurricane container.
If you do not have one of the flowers, you could possibly substitute another but if you do not have the 11 ½ hurricane container or some other integral part of item T115-3A, you cannot sell that item.

So even though you could keep track of everything you sell, that is a monumental tasks that most flower shops are not equipped to do because of the manpower and attention to detail it takes. 
But you certainly can keep track of how many containers you have on hand, that is not so difficult.

So in the T115-3A item shown above, the most important components are the 11 ½ Hurricane lamp, the pillar candle and the 8″ centerpiece tray, and that is probably the only components you want to or need to keep track of.
Without one of those components, you might not be able to produce the item.

So let’s say that you order 100 units of each.  100 Hurricane lamps, 100 pillar candles and 100 8″ centerpiece trays.

You would think you could sell 100 of the T115-3A item and that would be true if the Hurricane lamp, pillar candle or 8″ centerpiece tray were not used in any other items.  But they are.
The are also used as part of items T115-3B and T115-3C.  In addition the pillar candles are also used in other items, such as T115-3A, 3B and 3C.
You also have to take into account any breakage.  That hurricane lamp looks like a good candidate for breakage.

So in order to know if you can sell any of those items, you have to know how many of each you have on hand at any time.
If when your shipment arrives, 2 of your hurricane lamps are broken and I came into the store and wanted to buy every T115-3A you can make, you can only sell 98 of them even if you have 100 pillar candles and 100 8″ centerpiece trays. 
By now I’m sure you are grasping the concept of sets and components.

So now, how do we implement this concept in flowerSoft?  Here is how…

For every item that is a “set”, such as T115-3A, you need to tell flowerSoft that this is an inventory item and that it has “components”.
So those 2 fields have to be marked with a “Y”

Inventory tracking requires some planning.  You should not go into it before having an idea of what you want to do.

For example, once you enter a “Y” in the “Inventory Item? field, flowerSoft will automatically check to make sure there is an inventory record for that item.
If there isn’t one, it will automatically create one for you with the basic information and then take you to that record to allow you to enter additional information if necessary.

Note that the “Available” quantity is zero at this time. This is because flowerSoft calculates the available quantity of a set by the available quantities of its components.
Since no components for this set have yet been added, flowerSoft makes its available quantity 0.
It is very important that you add the components of a set to the inventory file as soon as possible.
Once you add a quantity on hand for the components of set T115-3A, the available quantity will be corrected.

If additional information needs to be entered for the record created, you should hit “U” to update, enter the additional information and save the record.
Once you exit the record, you will be taken back to the item description record.

Likewise, once you enter “Y” in the “Components?” field, flowerSoft will check to see if there is a record listing the components of the item.  If there isn’t one, you will be asked if you want to add one at this time.

The reason you are asked if you want to add the components now instead of just taking you to add the components is that adding the components requires that you enter an item code for each component.  So you might not be ready to do that at the moment.  You can always come back later and either update the record and enter the components then or you can use the “Item Components” option of the inventory menu to add the components for the item code.
Please note that you do not need to make every item in the T115-3A set a component of that set. You only need to and should only make components of that set items that are necessary to make the T115-3A item.
If, for example, you make the miniature carnations a component of the T115-3A you better be ready to keep track of all the miniature carnations you use or enter a large enough quantity on hand so that you will very seldom run out of them.
Why? Because if you do make miniature carnations part (a component) of the T115-3A set, flowerSoft will tell you that you do not have enough components to build the set if it does not see at least 2 miniature carnations “on hand”.

So, make components of the T115-3A (or any other) set the items that are indispensable to make that set.

If you do choose to add the components of the item code at that time, you will be taken to a new record in the components file for you to enter the components of the item.

As you can see, you do not have to enter every component of the item, just the ones you want to keep track of.

Before saving the components record flowerSoft will give you the opportunity to change the product’s selling price, if you feel it is necessary.

After you’ve added all the components you want to keep track of for an item, flowerSoft will be able to tell you if you have enough on hand of all the component items to produce the item at the time of order entry. 
However, before flowerSoft can do that, you must enter how many units on hand you have for each component item.

The available quantity of all items is calculated buy this formula:

Quantity Available = Quantity On Hand – Quantity T.O.I.

T.O.I. stands for “Taken Off Inventory” and is used to keep track of “produced” items when they are first sold.
A “produced” item does not come off inventory until the designer marks the item as completed.
However, we still must keep track of how many have been sold because otherwise flowerSoft will keep telling you that you have more available to sell than you really have.
If you want the items to come off the inventory on hand quantity as soon as they are sold, do not mark them as a ‘produced” item.
Items that are marked as “produced” will be added to the T.O.I. count when sold and removed from the t.o.i. quantity and the on hand quantity when marked as completed by the designer.

There are 2 ways of adding (or deducting) units from the quantity on hand of an inventory item. 
One is by going to the inventory record for the item and hitting “Q” to change the quantity on hand. 
This option also lets you change the maximum and minimum quantities on hand and the re-order point.

While this is pretty simple to do, it has a disadvantage over the second one. 
That is that it does not let you add to (or deduct from) a set’s quantity on hand directly. You must do it through its components.

A better way to record additions and subtraction to the units on hand is to use the “Add to Units on Hand” option of the inventory menu.

First, that option lets you scan the UPC of items that have one.
It also allows you to indirectly add to or deduct from a set’s quantity on hand by assuming that the units on hand you add or deduct apply to all of the set’s components.
This could save you quite a bit of time if applicable. For example…

I will now add 100 units to the on hand quantity of item T115-3A, not directly but as the screen above tells you through all its components.

Of course, if you did not receive 100 units of all 3 components, you cannot use this method.

Whichever method you use, once you enter all the units on hand for the component items, the set’s available quantity can be calculated.

As you can see above, the inventory record for a set never shows quantities on hand or t.o.i. because those quantities are determined by the components of the set.

If you want to see the quantity available for each component of the set, you will have to use the C-Components option…

And then use the A-Show Available option…

when we sell item T115-3A through order entry, flowerSoft will show the quantity available for the item…

Please note one very important consideration. 
The “available” quantity is not the same as the “on hand” quantity. Remember that there is also a T.O.I. quantity that is kept on “produced” items.
If item T115-3A was marked as a “produced” item and we sold 10 from 9AM to 10AM before the designer had a chance to marked them as “completed”,

Items can be “Produced” or “Not Produced”.  A “produced” item involves the participation of a designer, while a not-produced item, such as a stuffed teddy bear does not.  If you mark an item as produced, flowerSoft waits until the designer marks the order as completed before deducting the items from inventory.
If you are not going to be using that function in flowerSoft, make sure to mark all your items as “Not Produced”.

Another thing to be aware of is that flowerSoft will not reduce the inventory of the item sold until the sale is completed.

If in the unlikely event that 2 separate sales for the T115-3A item are taking place at the same time, one of the sales might not have sufficient quantity available to be filled even though flowerSoft told you that it did.
Let’s say that the order-taking process for the 100 pieces of the T115-3A item was completed first, the second order would not know that there are no more T115-3A items available for sale.
There isn’t much that can be done about that except to keep an ample supply of hot-selling items on hand and to tell your employees to complete the order-taking process as soon as possible.
That, however, would only diminish the possibility of the above-depicted scenario from taking place. It will not prevent it.
The next order taken for the T115-3A item will show a negative quantity available, as you can see below…

flowerSoft will warn you about the quantity available not being sufficient to fill the order in this case, but on the previous 2 orders, one of the orders will not be completely fulfilled.
You will either have to provide only 99 out of the 100 pieces requested or not fill the order for 1 piece.
So please be aware of this possibility.

Again, flowerSoft will not reduced the inventory of an item being sold until the order-taking process is completed.

Be warned though that inventory tracking takes dedication.  Don’t expect the inventory quantities to be correct if you do not record breakages or other actions that might affect the inventory quantities of an item. 
For example, if you receive a container shipment for an item that you do not have any of, but do not record the units received until after you’ve sold some of them, the inventory quantities will not be correct.

Do use the inventory module if you need to keep track of hard goods.  It is a powerful tool, but know that it does require a considerable amount of extra work on you and your employees’ part.
Above all, do not always assume that flowerSoft will always tell you the correct quantity available, as was shown above.

Once an item starts going below its minimum on hand, flowerSoft will warn you.

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