Inventory management can make or break a business. Knowing how much to invest, what to stock, and understanding your inventory turnover can lead to increased profitability, improved customer satisfaction and higher productivity. All of this is particularly true for small-to-medium businesses, and for businesses that deal in custom built products, as Melbourne-based double glazed window and door manufacturer, Miglas High Performance Windows, recently learned.
Miglas is a third-generation family-owned manufacturer of quality double glazed windows and doors. Based in Melbourne, the company manufactures products to meet the often demanding specifications of high-end residential clients.
Business Development Manager, Kurt Miglas, describes the typical Miglas customer as knowledgeable and demanding in terms of quality and service, “They are often people who are building their third and final home, the one they want to live in for the rest of their life. Our products fit in as part of the overall high-spec build,” he explains.
The Problem: There is Nothing standard about this
Timing of delivery is often critical for Miglas' customers, as the fitting of windows and doors is only a small component of the overall build schedule. Therefore, it’s essential the company ensures that supplies for likely demand are always on hand, ready for a fast turn-around as soon as the order is received. The only problem is, all Miglas products are custom built.
“We don't have any off-the-shelf, standard products. Everything is made to order,” Mr Miglas says “This makes inventory tricky because there is no set recipe for our products. It's hard to keep an eye on stock when you don't know what is going to be required.”
Miglas’ strategy is to ensure the warehouse always has the components for their finished products. It stocks almost 600 SKUs but occasionally, inventory has slipped too low and the company has had to urgently order additional supplies from overseas. This has caused delays to customer deliveries and in some instances, resulted in unprofitable jobs due to volume premiums and additional freight costs.
The Solution: Bringing order to the warehouse
Twelve months ago Mr Miglas realised he needed to strengthen the company's inventory management. He decided to replace the small business accounting software that had been in use for some years with Xero, a cloud-based accounting solution. To provide additional inventory focus, Miglas also selected Unleashed, a cloud-based inventory application which integrates with Xero to provide a complete business management solution.
“We tested a few inventory applications but found with Unleashed we could create a custom bill of materials for each assembly. This was imperative for us, but it was something none of the other solutions offered. Without the custom bill of materials, stock adjustments would have been a bit of a nightmare,” he adds.
Saving time and money with the cloud: By selecting two cloud solutions, Mr Miglas was able to obtain the precise functionality he needed while avoiding the time and expense associated with maintaining and supporting on-premise software. “In the past we'd had quite a few issues with updating software, keeping backups of files and having to log into different versions of software to access old files. The cloud was a way of avoiding all these problems. It would give us back admin time,” he says.
Xero was deployed in 2013, followed by Unleashed in early 2014. “The change-over to Unleashed was done during our Christmas break. We ran it in parallel to our old system for the first month just to make sure it all worked and to give us confidence, then made a full swap-over at the end of January,” Mr Miglas explains.
The Result: Increased profitability in under six months
In less than six months, Mr Miglas has found that enhanced inventory management is contributing to greater profitability. Improved stock tracking is giving the company up-to-date, accurate inventory information, leading to better ordering practices.
“We're saving money in the sense that we haven't been caught out or needed to urgently import stock. We also haven't had to delay jobs,” says Mr Miglas.
“In the past, we would have been caught short with stock at least once per year. Each time it occurred, it would double the cost of the freight to get the stock here. Since installing Unleashed, this hasn't happened. Our freight costs have been reduced so we've actually been able to drop the price of some of the hardware we sell to other manufacturers by over 20 per cent. In turn, because we've reduced our prices, we've seen an increase in sales,” Mr Miglas smiles.
Winning the small business trifecta: By placing more focus on his company's inventory practices, Mr Miglas has managed to achieve the small business trifecta – productivity due to faster order turnaround, profitability due to reduced freight charges and happier customers.
The change from a small accounting system to dedicated inventory application was not without the occasional initial hiccup, but Mr Miglas concludes, “I'd recommend that any business in our situation take a close look at their inventory and see how they gain more control. For us, there was a smaller learning curve than expected and now we have the hang of it, the software is a lot better than any previous system we've used. It's been a pretty happy experience.”
