You can manage all common finance processes and information such as posting financial transactions, preparing financial statements, managing bank accounts, inventory costs, manufacturing costs, and fixed assets in Business Central.
Chart of Accounts
When you create a new company, you must first set up a chart of accounts and configure the posting processes. The chart of accounts in Business Central looks something like this:
Use these accounts to post transactions to the general ledger. You can setup balance sheet accounts and income statement accounts. Besides the basic setup, you can also set up advanced features related to GST.
Once G/L accounts are created, you can then use them in sales and purchase documents and in general journals to post transactions to the general ledger.
In Microsoft Dynamics 365 Business Central, you can make use of dimensions for advanced transaction analyses.
You can set up dimensions and then assign multiple dimension values to each dimension. Once dimensions are set up, you can assign default dimensions to customers, items, vendors, G/L accounts, jobs, resources and many more.
Examples: Before posting sales, you can assign a customer group dimension to a sales document. Or you can assign a department when posting expenses so that you can analyse and compare your expenses by department.
From the payment registration page, you can process customer payments with only a few clicks and mark invoices as paid to automatically reconcile accounts.
To pay your vendors, you can use the payment journal, including advanced features such as vendor priorities and paying invoices on their due dates. To do so, you can run the suggest vendor payments batch, modify the payment journal lines if necessary, and then process the payments electronically or by check.
With the payment reconciliation journal, you process and reconcile bank statement transactions in one go. Use the import function to import bank statement files and let the system apply transactions automatically using advanced application rules.
Cash Flow Forecast
To get a better grip on their cash position, companies want to know how their cash flow will evolve in time. The cash flow forecast function uses a whole range of sources to calculate the future cash flow to receivables, payables, purchase orders and sales orders.
You can use manual revenues and expenses to analyse the impact of a future loan or an unforeseen future cost. By including Cortana Intelligence, machine learning is used to calculate the cash flow forecast based on historical income and disbursements.
You can work with budgets for general ledger accounts, costs, sales and purchases.
You can set up deferral templates that automate the process of deferring revenues and expenses over a predefined schedule.
You can keep track of fixed assets and related transactions, such as acquisitions, depreciations, write-downs, appreciations, and disposals.
Microsoft Dynamics 365 Business Central automatically assigns audit trails and posting descriptions to every transaction. In addition, you can define reason codes to create complementary audit trails.
Bank Account Management
You can create, operate, and manage multiple bank accounts to cater to your diverse business needs and across different currencies.
Reconcile your bank statement data automatically to open bank account ledger entries and keep track of all your bank statements.
You can Manage multiple currencies throughout the system, including payables and receivables, general ledger reports, resource and inventory items, and bank accounts.
A campaign is any sort of activity that involves a number of contacts. It can be anything from sending out catalogue and special offers to organizing a special event.
You can record contact responses to campaigns as interactions, which means that a response to a campaign becomes an interaction in Dynamics NAV, and that interaction linked with the campaign.
Setting up Campaigns
Campaign Status Codes
Click Departments/Sales & Marketing/Marketing/Status under Campaign.
Here you can define campaign status codes or use the preconfigured ones as shown in the following example.
The purpose of these campaign status codes is to track the status of your campaign. Once you have configured these campaign statuses, you can start working with the Campaigns.
Click Departments/Sales & Marketing/Marketing/Campaigns to open campaigns.
So, if you Edit a campaign, for example Event campaign in this case, you will see that:
It has a number
It has a description
It has a status code, which you can configure.
It has a starting date and an ending date
It has a link to the salesperson
It has a status to show if the campaign is activated or not
You can find invoice details, if you have links with sales orders and so on
From the campaign, you can click on Navigate and click on Opportunities to see if there are any opportunities linked to the campaign.
In the same way you can also track the Segments, a subset of contacts that you have linked to the campaign.
Similarly, you can click on Entries, to see is there are any Interaction entries logged for the specific campaign.
If you want to do more than tracking responses for instance, you can also configure specific Sales Prices for a campaign. For instance, for a specific item or for a number of items, you can specify a minimum quantity and specific unit price during a specific starting and ending date.
Now, these will only have impacts on your quotes and orders, if you have the Sales process or Discounts. And the moment that you activate these sales prices and discounts, that is also the moment that you campaign will be activated.
Creating Interactions for Campaigns
After you have created a campaign, and maybe you have already initialized some actions like e-mail campaign which was sent out to a segment of contacts, you might expect, for instance, some reactions to that campaign.
These reactions can be recorded as interaction, and that is simply done by providing a campaign code in the interaction window.
The interaction will then be tagged by a campaign code and you can later view the recorded interaction in the campaign Entries window.
So, for example, let us assume that you activated and released a new spring campaign with new prices and so on. You send out an e-mail and Beef House is registered. You receive a phone call from Beef House showing interest.
So you select the contact Beef House and click Create Interact.
Follow the create interaction wizard to create the interaction. While following the wizard, choose the Campaign details. You can also assign opportunities to this campaign.
When all the details are specified, Finish the wizard.
Now, select the campaign, Spring offer in this example, and Navigate to Entries. You can see the campaign entries. To look more about the campaign entries, you can select the entry and click on Interaction Log Entry for more details.
This way, we can basically make interactions from reactions and then they are linked to the campaigns.
When we say Opportunity Management in Dynamics NAV, we mean sales opportunities.
Opportunity Management Setup
A sales cycle is:
The course of time between the initial contact being made with a customer the transaction that completes the sale.
A measure of the efficiency of a sales department.
A breakdown of what happens in our sales processes in our sales cycle.
We can track the lifecycle of our opportunities in Dynamics NAV by using the sales cycle functionality.
You can create as many sales cycles as you want. You should leverage it with what you really do in your sales process.
To create a new sales cycle or to view an existing one, click Departments/Sales & Marketing/Sales/Setup/Opportunity/Sales Cycles.
A sales cycle exists out of different steps, and we call them Stages. To create stages for a sales cycle or to view stages of an existing sales cycle, selected the sales cycle and click on the Stages under Navigate tab.
Each of the stages represent percentage of completion of your sales cycle, specified in Completed % field. For instance, when we have initialized the sales process, we are 2% complete, when we understand the needs, it is 35% complete, and so on. These completed percentages can be later on used to calculate the value of your sales cycle.
You can also attach Activity Code for each step of the sales cycle, which represents a corresponding task. For example, set of to-do for specific representative. You can use the to-dos in combination with date formulas, so you can really plan when a to-do needs to be executed. These date formulas also serve a purpose for the Opportunity Details Report, where it displays planned activities on certain dates.
For some of the stages quotes are required. It means that in Dynamics NAV there is a sales quote for an opportunity available. If the Quote Required field is selected for a particular stage, you will not be able to proceed to the next stage, without first making a quote and assigning it to the opportunity.
If the Allow Skip field is selected, you can immediately jump to the next stage.
We can plan these stages with Date Formula, however if we already have Date Formulas specified in activity codes, we would prefer that, else we can use it in the sales cycle stages.
NOTE: You can Block a sales cycle, which means that you will not be using it anymore.
Closed Opportunity Codes
We use closed opportunity codes when we are closing our sales cycle, and usually that happens because we have either won the deal or we have lost the deal.
Closed opportunity codes are used to identify why we are closing an opportunity. Is it because we have won or lost a deal?
These codes will help us later to track the success factors of opportunities and we can measure our sales success.
You will see a list of potential codes that we can use to close our opportunities and you can make as many as you want.
You have to divide them in either a Lost or a Won type and then you can give reasons, why we have lost or why we have won, for example, won because of a strong presales work, best price, best product, or lost because ineffective presale work or poor customer relations, and so on.
So these codes later on will give you an idea why we have won or lost specific deals.
You can also find here a calculated field with a number of opportunities that we closed because this or another reason.
Create New Opportunity
Open the contact card and click Opportunities on the Navigate tab.
Click Create Opportunity, to open a wizard.
Example: Create a New Opportunity
Use the wizard to create opportunity:
We have an opportunity not only to sell Tables but also to sell Chairs to the contact A. Gibson’s Law Firm.
Let’s say that the current data (work date) is the date for the opportunity.
The priority is normal.
The contact involved for this opportunity is specified.
We can link the salesperson involved with this opportunity, say Annette Hill.
Let’s say that this is an existing customer, a small one, so we apply the relevant sales cycle code.
You could also say that this is linked to a campaign, but in this case, we say it is not.
We can immediately activate the first stage or we can do it later on. Let’s say we activate it.
We need to give it a certain value, say 1000.
Specify the percentage of success, say 50%.
Specify an estimate closing date, say we need to close this by end of the month.
You will notice that we have two opportunities, out of which the new one is about the chairs, that we just created.
Example: Update an Opportunity
Now, let us assume that a couple of weeks later, we want to update the opportunity because we have executed new steps in the process.
So select the opportunity, and under Actions tab click Update, which will open the Update Opportunity wizard.
Here we see that we are bringing this opportunity now to the second stage. Depending whether or not you are allowed to skip, you can select other stages if applicable.
The date of this change is today for example.
We might have new information that the value of this opportunity is higher (1,250) and probably our chances of success have increases as well (65%).
The estimated closing date can be a little bit later, may be couple of weeks.
You will now notice that the opportunity is in the second stage of the sales cycle.
Linking Sales Quotes to Opportunities
In Dynamics NAV, a sales quote can be created completely driven from opportunity itself. So the link between the sales documents and the opportunity is established and guaranteed.
This means that sales quotes for opportunities can directly be created from the opportunity itself. So we can have a sales quote created in the process of updating the opportunity, and that means that we also have at the same time established a link between both.
To be able to create a sales quote for an opportunity:
This opportunity must have the in-Progress status and no other sales quote is assigned to it already.
In case that you are using contacts that are not synchronized with customers, you also need to have customer template set up.
Example: Update Sales Quote for an Opportunity
Let us check the A. Gibson”s Law Firm contact.
Navigate to the Opportunities.
In this example, we have two opportunities (from previous steps), and Chairs is the most recent one. Let’s say that we want to update this opportunity and bring it to the next stage.
Click Update on the Actions tab.
Now, in this example if we wanted to bring it to a new stage, it will be the third stage, which is dedicated to a proposal.
In this case, Dynamics NAV will warn us, saying that we need to assign a sales quote. This is because of the configuration that we have done on the sales cycle level, here we have made a quote necessary for this stage.
So what can we do? well, from the opportunity window itself, we can assign a sales quote, by clicking Assign Sales Quote action.
You will see that we get a sales quote with a certain number for this contact, A. Gibson’s Law Firm.
You also see that in this sales quote, you have a field which is called opportunity, which is automatically filled up with the opportunity number because we started this process from the opportunity window.
So now if we close the sales quote, we will be able to update a bring our opportunity to the next stage.
Let’s say our chances of success are a little better (75%)
Maybe the amount has also changed after making the sale quote (1,750.00/-)
Now you see that the update to the third stage was successful.
At any time, we can always ask and check the quote which is in the system and is related to this opportunity, by clicking on Show Sales Quote action.
Note: You can assign opportunity to sales quote manually, by going to the sales quote, however, you need to make sure that the opportunity is not already assigned to any other sales quote.
Here you can have an overview of all the opportunities in the system, instead of accessing opportunities from individual contacts.
You can select one of the opportunities and then start working with the same views & actions that you have available as if you would start from an individual opportunity.
When the negotiations are over, opportunities can be closed. While closing an opportunity, you need to specify the reason for closing it and to be able to specify this reason, you must first of course set up the closed opportunity codes.
You can also delete closed opportunities, for example, after you have concluded a deal or when the opportunity list window is overloaded with closed opportunities.
So, basically, we have two actions:
Action: Close Opportunity
Batch Job: Delete Closed Opportunities
Example: Close Opportunity
Open the contact A. Gibson”s Law Firm and Navigate to the Opportunities.
On the Opportunity List, select the opportunity (Chairs in this case), and click Close under Actions tab.
This will open a wizard, where you can specify why you want to close the opportunity? Let’s say we Lost.
Now specify the reason for closing the opportunity. Let’s say we have done ineffective presales (Choose PRES_L code from the list).
You have the option to cancel any of the existing open to-dos that might still exist.
Note that the opportunity is now closed and the status is Lost.
If you now go to the overview of all opportunities, you will see the closed opportunity here as well. You can sort and filter on this.
Also, when you open the opportunity card, you can see all the details, such as:
The last action that was carried out.
The opportunity is closed.
The opportunity is Lost.
Percentage complete is now 100%.
Calculated Current Value has become Zero.
In your organization, opportunities will be closed all the time, which means that at a certain point in time you will have a lot of closed opportunities in your overview, and it is possible to think that you want to get rid of these closed opportunities.
So you need to do some data deletion or data clean-up. In Dynamics NAV you have a Delete Closed Opportunities batch job for this purpose.
Click Departments/Administration/IT Administration/Data Deletion/Marketing Activities/Delete Closed Opportunities (or search for Delete Closed Opportunities and select the relevant link).
You can bring in a number of filtering, for example you might not want to close all opportunities, but maybe opportunities from a certain date range, etc.
When you click Ok, the opportunity will be deleted.
You can view opportunity statistics from various places in Dynamics NAV:
On the Contacts list, select the contact and click Statistics.
On the Salespeople/Purchasers list, select the Salesperson and click Statistics.
On the Campaigns list, select the campaign and click Statistics.
Sales Cycle Statistics
On the Sales Cycles list, select the sales cycle and click Statistics to view opportunity related statistics.
Sales Cycle Stage Statistics
On the Sales Cycle Stages, select a stage and click Statistics to view opportunity related statistics.
Segments are subset of contacts, based on certain criteria. In Microsoft Dynamics NAV we can make subgroups of targeted contacts by making use of the Segmentation functionality. But before we can create such segmentation, we need to check if we have sufficient information and parameters to base our segmentation on!
So, the question is what information can we use to make segments? Well, the good news is that in Dynamics NAV you can use nearly all the contact information to make your segments and some information holders are specifically designed to fulfil this function.
Contact – Segmentation Fast Tab
On the Segmentation fast tab of a Contact we can see:
Typical criteria that we us for segmentation of our company:
No. of Mailing Groups
No. of Business Relations
No. Industry Groups
Typical criteria specific to contact of type person:
No. of Job Responsibilities
Organisational Level Code
Exclude from Segment should be selected when you do not want the contact to be part of any segment.
Click Departments/Sales & Marketing/Marketing/Segments (or search for Segments and select the relevant link).
Let us check out an existing Segment “Increase Sale”. You will see that a number of contacts are part of this subset. Click Criteria to check the segment criteria.
Here you can see for instance, the Contact Business Relation is filtered on CUST and the list is further refined/reduced by adding another criterion.
On the Segments page, click New to create a new segment.
Tab out of No. field to generate a new segment number automatically.
Enter a description, say “Learning Centers”.
Now, we can add contacts manually, however, that may take a lot of time. A faster way would be to use the Add Contacts batch job.
We would like to add contacts who have a specific Business Relation Code, say “Learning Center”. On the Add Contacts batch job, go to Contact Business Relation fast tab and specify the Business Relation Code, say “LC”. Click OK.
You will notice that one contact is added in the Lines. Why? because this is the only contact with Business Relation Code as “LC”.
Create a new segment for “Marketing Responsible People”.
Click Add Contacts. This time go to Contact Job Responsibility fast tab and specify Job Responsibility Code as “MARKETING”.
Click OK. All the contacts with specific job responsibility are added.
You can also combine criteria.
Let us say we would like to create a subset of contacts with country code as Canadian.
Create a New Segment named “Canada Customers”.
Click Add Contacts and specify the following criteria:
On the Contact Business Relation fast tab, specify Business Relation Code = CUST
On the Contact fast tab, specify Country/Region Code = CA
Click OK. Only those contacts are listed that align to this combination of criteria.
Once you have created a sub set of contacts, you may also want to remove certain contacts or refine the list of contacts. You can do this is the following ways:
Manually by removing from segment lines.
Refine Contacts by specifying which contacts to keep.
Reduce Contacts by specifying which contacts to remove.
Select the line that you want to remove, right-click on it and select Delete Line (Ctrl+Del).
Click Ok, on the confirmation dialog that appears:
With this function, you can specify which contacts you want to keep.
Let us open a Segment, which is based on a criterion where the Business Relation Code is “PRESS”.
We would like to further refine the contacts, by including Country Code, say “GB”. On the Segment card, click Contacts, Refine Contacts.
Specify the required filter and click OK.
The list is further refined as per the criteria.
Let us say that we have a segment which contains a subset of contacts where the Business Relation Code is “CUST” (Customers), but what we initially wanted was that we only have those contacts who have salesperson code as “JR” (John Roberts).
As you can see, we have 84 contacts here with various sales person:
Click Contacts, Reduce Contacts.
Specify the relevant filter and click OK.
The result is that all those contacts who do not have the Sales Person Code as “JR” are removed, therefore giving us a reduced segment.
Reuse Segmentation Criteria
To speed up the process of creating Segments in Dynamics NAV, you can make use of the functions such as Save Criteria, Reuse Criteria and Reuse Segment.
Save Segmentation Criteria
To save an existing Segment Criteria, open the Segment Card and click Segment, Save Criteria.
Specify a Code and a Description to save the segment criteria.
Create a New Segment and provide a Description.
Click Segment, Reuse Segment.
Select an existing saved criteria and click OK.
This will generate the segment based on the selected criteria.
Reuse Logged Segments
We can reuse logged segments as well. We usually log segments, when we are finished with the actions and we want to keep historical data for the segments.
Create a New segment.
Click Segment, Reuse Segment.
Select a logged segment and click OK.
This will generate the segment based on the selected logged segment.
Find essential information about contact, things like name, address, phone, e-mail, etc. You can also check if this contact is a company or a person.
Find more defining information for a company (such as company size, the ownership, sector information, etc.) and for a person (such as role of the person, etc.).
In the following sections we are using the Sales Manager user profile.
Contacts – Overview
On the role center the Contacts are located centrally and when you click on it:
You get an overview of all the contacts registered in Microsoft Dynamics NAV.
You will notice that some records are in bold and a number of records that are not in bold. What is the difference? Well, the contacts that are listed in bold are Companies and the contacts that are not listed in bold are Persons.
Some contacts are sorted on top of the list. These are contacts where the Type is Person and have no relationship with any company. This means that we can track and record people, without necessarily recording to which company they belong.
Some contacts are sorted in the list, just under bold records. These are people that are linked to the company.
Contact of Type Company
Let us open a contact card for a company, say for A. Gibson’s Law Firm in this example.
How would you really know if it is a company? Well, by checking the Type field.
On the contact card, you will see that you can enter a name, address and all the normal information. There are number of fast tabs:
In the General fast tab you will find the essential information.
In Lines fast tab you will find more qualifying information.
In the communications fast tab, you can find the normal communication information.
The Segmentation fast tab is very important for Relationship Management. Why? Well, because here is our first and most important step for segmentation of contacts. In this fast tab, you can link your companies or people to a number of qualifying segmenting categories such as business relations or industry groups.
If you want to add a VAT number, you can do it under Foreign Trade tab.
Contact of Type Person
Let us open a contact card for a person, say for Alan Brewer in this example. How would you really know if it is a person? Well, by checking the Type field.
Again you see a number of fast tabs:
On the General fast tab, you can see that the Type is Person and this person is linked to a company, so Alan Brewer is linked to A. Gibson’s Law Firm.
When you open up the lines you will notice that you have more qualifying information which is quite different from the company. For example, here we can see that Alan Brewer is skilled, is married and he likes golf.
It would also be interesting for you to know what other contacts are related to the company to which Alan Brewer is associated to.
You can of course close the contact card and view the information from the contact list or you can just click on the Related Contacts under Navigate tab form the card itself.
In this example, when you click on the Related Contacts, you see all people related to A. Gibson’s Law Firm. So it’s not only Alan Brewer, but also David Oliver Lawrence and Lori Kane who are related to the same company.
Setting up Contact Information
Open Departments/Sales & Marketing/Setup/Marketing Setup.
Inheritance Fast Tab
Let’s say, first you setup a contact of type company and then you link a contact of type person to that company. In this situation you would like the person to inherit various values of the company automatically.
You can configure inheritance between contact of type company and contact of type person in Marketing Setup, under the Inheritance fast tab.
So you can configure to inherit: Salesperson Code, Territory Code, Country/Region Code, Language Code, Address Details and Communication Details.
Particularly the last two, i.e. Address Details and Communication Details are very interesting to configure because it means that you do not have to re-type the address and communication information all over again when you link a contact person to a company, which makes the registration a little bit faster.
Default Fast Tab
While creating contacts, you may like to specify some default values. You can configure in Marketing Setup, under the Default fast tab.
For instance, majority of your contacts are English speaking, so you can specify a default value in the Language Code field. This way you only have to specify language for those contacts who have different language.
Numbering Fast Tab
If you are working with contacts, you need to make sure that a numbering range is configured for contacts.
Creating Contact Companies
Create a New contact.
On the contact card tab out from No. field. A contact number is generated automatically.
The Type is automatically set to Company. Specify the Name of the contact. You can also specify other information like Address, Post Code, City, Phone Number, Salesperson.
You can also specify Segmentation information.
In this way a new contact of type company is created.
Creating Contact Persons
While creating a contact as a person, you need to take care of the following aspects:
Type should be Person.
We can link this contact to an existing company or register this contact as an independent contact. Both scenarios are possible.
If linked, then the company number on the card will represent the link to the company.
If we do not link the to the company, then this contact person will be sorted on the top of the contact list.
If you have configured inheritance in the Marketing Setup, and if you link the contact to a company you will automatically get the specific fields values for the person. There is also an automatic inheritance and that is Segmentation.
Create a New contact of Type Person.
Link this person to a company by specifying the Company No. (use the example created earlier).
You will notice that since you linked the person to the company, immediately the address information, the sales person information and the communication information is inherited from the company because of the Marketing Setup.
The Segmentation information is also inherited from company by design:
The only this remaining is to specify the Name.
Search for Duplicates
Keeping your database clean is key for marketeers.
What does this mean in terms of Relationship Management? Well, it means that we need to avoid duplicate contacts.
For many of you this might be recognizable, for example: you do have a database, you want to send out an email campaign, but you have a number of contacts which are duplicate in the database, a real nightmare! Because if you have to clean it manually, you will lose a lot of time.
Microsoft Dynamics NAV includes Duplicate Search functionality which can help you in maintaining a clean database.
In Marketing Setup, you will notice that there is a dedicated tab for Duplicates.
You must select Maintain Dupl. Search Strings and Autosearch for Duplicates and also you must specify Search Hit % field, which will determine when something is considered as duplicate, for example: 60% details should be identical to be considered as duplicate entry.
Let us assume you are a colleague in marketing department and you want to enter a new contact that you have identified i.e. “Learning Center” and you are unaware that another colleague of yours has already entered that information.
So let us create a new contact with the name “Learning Center”. You will notice that you do not get any error message or any identification that a similar contact is already available. Why Not? Well, because there might be a Learning Center that is not located in the same location (the one entered before is in Surfers Paradise, Gold Coast).
So let us say you are still unaware and you continue to fill in the information, such as the post code. So you specify 4217, Surfers Paradise, Gold Coast and then click OK.
You will notice that you receive a warning that there are duplicate entries available.
The system asks you if you would like to process these. Let us say you decide to process these entries, so you click Yes.
The here you will notice that the system lists the duplicate entries. So in this example you are trying to create a new contact CT000145 and the system suggests that a duplicate contact CT000143 already exists. Both are called Learning Center, so the question is what do you want to do?
You can find some additional information (such as address, post code, city, phone number, etc.) bottom of the page where you can compare the original entry and the new entry. This will help you to check if they are unique or the same.
Remember that this page is just a warning page and you cannot carry out actions such as delete from here.
So in case this is the same, you can delete or rename the duplicate entry manually.
In case the entries are unique, you can select the Separate Contacts field on the warning page. So next time when you run the Duplicate Contacts batch, the system will treat these entries as unique and will not show as duplicate entries.
This is of course done during the creating of new contacts, but you can also check for duplicates in the system at any time by running the Duplicate Contacts batch.
Click Departments/Sales & Marketing/Marketing/Periodic Activities/ Duplicate Contacts (or simply type Duplicate Contacts in search and select related link).
Here you will get a complete overview of how many duplicate contacts you have in your database. You can choose to say that these are separate entries or one by one go to the entry and delete them.
Also if you are maintaining duplicate search strings (in Marketing Setup), you can use the Generate Duplicate Search String. This periodic activity generates search strings for your contact companies, not contact persons. The program uses search strings when searching for duplicate entries.
Synchronizing Contacts with Customers and Vendors
If you want to check if the contact has a link to a customer, you can check the Business Relations in the Segmentation tab.
Link With Existing
You can use the Link with existing action to link the contact to an existing customer or vendor.
Let us say you choose to link it to a customer.
In this case we see that the contact is already linked. So there is no need to link it anymore.
In case there is no link, you can select a Customer No. to link it to the contact.
You can indicate which entity will be the master (in this case either contact or customer). Suppose if you say that the master is Contact then at any point if you change information in Contact then the Customer will be updated.
You can create contacts as customers or vendors using the Create as action.
For example, if a contact is not linked to a customer and you choose to create as customer, a new customer will be created based on the customer template and linked to the contact.
Create Contact Automatically
Open Marketing Setup and check the Synchronization fast tab.
Here the Business Relation codes for Customers, vendors and Bank Accounts are important. For example, if you specify a value in this fields and you create a new customer, a contact will be created automatically and this contact will have Business Relations Code CUST.
Let us assume that the organization that we are working for has a new customer and this customer is called Microsoft (create a new customer):
You will notice that just by creating a new customer, a corresponding contact is also created automatically. Also, in the Business Relations of the contact, you will find the link to the customer.
NOTE: You need to be careful about what is the process in your organization, i.e. do you create contact first or do you create customer first. This process should be clear and well defined to avoid duplicate entries.
Using Batch Jobs
Click Departments/Administration/IT Administration/Contact Creation (or search for Contact Creation and select the relevant link).
Here you can choose various batch jobs to automatically:
Create contacts from existing customers
Create contacts from existing vendors or
Create contacts from existing bank accounts
You can apply necessary filters while running the batch jobs.
Is it the same as Customer Relationship Management?
So, it is an important to first position what is Relationship Management in NAV.
Relationship Management in NAV is more than just relations with customers:
You can track companies and persons, but they do not necessarily need to be customers already.
You can track process that precedes the activities of customers.
You can track information about vendors as well. So it is not only about customers but also about prospects and vendors.
Relationship Management is integrated in the ERP environment, and that has a number of benefits:
First of all, you have fast access to:
Much more transactional information which is of course embedded in our ERP.
So the big advantage is that you do not have to write any integration at all to have access to all that information.
Key Aspects in Relationship Management
So, you will work with NAV Contacts and these contacts will be the base entity for the Relationship module:
Contacts can be companies or they might be person. Relationship Management gives us the opportunity to enter a Contact Type and that type can be Person or Company. Of course, this is relevant because for persons you want to record other information than you do for companies.
Segmentation, Profiling and Classification
In Relationship Management Segmentation, Profiling and Classification is very important, because later on you would like to communication with your contacts, however not all the contacts, maybe a sub section, for example you would like to filter on person with certain language, person with certain interest, and so on.
These activities are very important in Relationship Management, Marketing and Communication Management.
Interactions and Document Management
In NAV it is also possible to record Interactions. It might be things like E-Mails or Documents (quotes, invoices, reminders, etc.). So in Relationship Management you will be able to record all the interactions with your prospects, customers and vendors.
Another important feature in Relationship Management is to track and follow up on Opportunities. It is important because opportunities will fill your sales pipeline, later on you will be able to make orders and will be able to invoice.
You can track entire opportunity process in Relationship Management. As a consequence of opportunities, later on NAV Contacts will be transferred into Customers. You can also record all these transactions and interactions for vendors.
Native Integration with Microsoft Dynamics CRM
Last but not the least, you have a native integration between the Relationship Management module of NAV and Microsoft Dynamics CRM.
The Contacts in NAV is related to Accounts & Contacts in CRM.
NAV CRM vs Microsoft Dynamics CRM
The following table compares NAV CRM and Microsoft Dynamics CRM:
NAV Relationship Management
Customer and Vendor Contact Management
Accounts, Contacts and Leads
Marketing Campaigns / Many Third Party Options
Limited Outlook Integration
Dashboards Limited to Role Centres
Robust Dashboard Functionality
Inside NAV, No Integration Required
Integration Required, Effort varies with NAV Version
By default, Cash Receipt Journals are used to post incoming payments from customers and Payment Journals are used to post outgoing payments to vendors.
Working with Cash Receipt Journals
Open the Cash Receipt Journals. Here you can see various journals created with balancing accounts.
Select one (BANK in this example) and Edit Journal. Here you can simply enter the payment, for example in this case you have received a bank statement on which you see that a customer has paid an invoice. Fill in the following details:
Document Type (which is Payment)
Account Type (which is Customer)
Account No. (which is a Customer No.)
Click Apply Entries. The concept here is to link the payment entry to one of more open customer entries. When you click on the Apply Entries, the system will list down all the open entries for the customer. You can then make an application.
You can now make an application, for example, you can specify that the customer here paid the invoice number 00-11 and then click Set Applies-to ID action. Note that system will enter the Balance.
You can also change the Amount to Apply, which will be reflected in the Balance. So let us say in this case the customer paid an advance of 25,000. Click Ok.
You will see that the Amount is applied and now you can post the cash receipt journal.
What is the result?
The payment will create ledger entries. Open the Customer Ledger Entries (for which the cash receipt journal was posted) and note the following result:
Here you can see the payment of 25,000. The Remaining Amount depicts if the ledger entry is closed or not. In this case the remaining amount is 0.00, which means that it not open anymore. The Open field is also not selected and the entry is closed.
However, as you just saw that the customer has paid an advance to a specific invoice, which you can see here. So this was an invoice of 185,039.38 (Amount field) and based on the advanced payment of 25,000 (see point 1), there is a remaining amount of 160,039.38(Remaining Amount field). This of course means that the invoice is not closed completely. The Open field is still selected.
It is interesting to see how the system processes these entries. You can say that Ok, the previous remaining amount is REPLACED by the new one, but what you will see that the system will NEVER replace, it will just add entries. You can see the details in the Detailed Customer Ledger Entry. This is explained in the following picture:
A Customer can have multiple Customer Ledger Entries.
Each Customer Ledger Entry can have one or more Detailed Customer Ledger Entries. So you can see the detailed customer ledger entry as the history of the customer ledger entry.
Working with Payment Journals
If we have paid a vendor, we can open the payment journal and make the payment.
Fill in the details in the payment journal such as:
Document Type (which is Payment)
Account Type (which is Vendor)
Account No. (which is Vendor No.)
Click Apply Entries. You can apply the payment to the invoices that you have paid, for example invoice 200 in this case, by using Set Applies-to ID action.
The system will calculate the balance. You can click OK. You will see that the amount is now added in the journal line.
You can go ahead and post the payment journal.
What is the result?
You can check the result in the Vendor Ledger Entries. Also you can use the Applied Entries action to see on what documents the payment was applied to.
The flow of money or funds goes upstream from customer to producer and from producer to supplier as intermediate or final products or service are paid for.
This funds flow is not linear since some upstream payments may occur long before the final good or service is even purchased.
Why is it critical to improve the flow of funds within a supply chain? There are several advantages to better flows:
It reduces cash-to-cash cycle time.
(Definition) Cash-to-cash cycle time is an indicator of how efficiently a company manages its assets to improve the speed or turnover of cash flows.
What is considered a normal duration for cash-to-cash cycle time will differ by supply chain, industry and organizational strategy.
It is not necessarily possible to compare cycle times without understanding the relevant strategies for each business. However, an organization’s cycle time is a bench mark for its own continuous improvement.
The improved turnover of funds improves customer-supplier relationships through lower perceptions of risk, improved reliability and better communications which in turn tend to further improve relationships, yielding a win-win situation throughout the supply chain.
Improved cash flow tend to reduce imbalances between the layer and smaller players in the supply chain. Consistent rules for integrated cash flows across the supply chain help avoid the situation in which sizable retailers request more liberal payables terms from manufacturers and large manufacturers do the same with their smaller suppliers.
The initial efforts in supply chain management focused primarily on cutting costs because the supply chain constituted one long cost center. It was all about removal of waste, time, unnecessary motion, defects and extra costs.
(Definition) Spend Management is managing purchases of goods and services in a supply chain, including outsourcing and procurement activities.
Spend management often deal with consolidating internal demand across business functions, divisions or extended partners and/ or consolidating suppliers to find areas of purchasing and transportation quantity rate discounts.
Relative to financial performance, spend management involves managing the outflow of funds in order to buy goods and services. Spend management may also need to coordinate closely with accounts payable because payment timing is vital to spend management execution.
While spend management is used by supply chain managers to control external costs, many organizations use a system such as standard costing to control internal costs related to the goods or service being produced.
(Definition) Standard Costs are the target costs of an operation, process or product, including direct material, direct labor and overhead charges.
(Definition) Standard Costing or Standard Cost Accounting System is a cost accounting system that uses cost units determined before production for estimating the cost of an order or products. For management control purposes, the standards are compared to actual costs and variances are computed.
Standards are targets that the organization sets to show the expected or desired outcome of an activity. These are periodically reviewed and changed as needed.
Some additional terms in standard costing:
Cost of Goods Sold (COGS)
An accounting classification used for determining the amount of direct materials, direct labor and allocated overhead associated with the products sold during a given period of time.
The price currently being paid as opposed to standard cost. A related term is marked price, which is going price for an item on the open market.
Deviation of the actual consumption of materials as compared to the standard.
In cost accounting, the difference between what has been budgeted for an activity and what it actually costs.
Each cost has two components that are set as standards: Volume and Rate.
Direct Material Costs
= Qty. Purchased
X Unit Cost
Direct Materials Used
= Qty. Used
X Unit Cost
Direct Labor Cost
= Standard Hours
X Hourly Rate
= Cost Driver
X Total Overhead
Total Cost Driver
Volume: It is how many units of resource is purchased or used.
Rate: It is the cost per unit of that resource.
When volume has variances from the standard, it is a usage variance.
When the rate has variances, it is a cost variance.
Both variances are tracked separately and their sum should equal the total variance. Variances can be positive or negative. Negative variances occur when costs are greater than expected; positive variances occur when costs are less than expected.
Overhead costs are allocated costs based on a cost driver. A cost driver is simply a measurable aspect of an operation that is used to approximate how much of the overhead should be associated with the units produced.
A frequently used cost driver is direct labor hours.
Uses of Standard Costing
Standard costing is used to estimate the cost of goods sold before all costs are known with certainty. It also provides benchmark targets for use during production. Thus it is a method of controlling a process during production rather than only being applied by documenting after production is complete.
Inventory can be valued using standard costing, although other methods also exist.
If standard costing is used at an organization, efficiency can be calculated using a formula:
Efficiency = (Standard Hours of Work / Hours Actually Worked) X 100%
Financial statements help managers and investors track the financial results of an organization’s activities.
(Definition) A financial statement showing the resources owned, the debts owned and the owner’s share of a company at a given point in time.
The balance sheet is often called “snapshot” of the company’s financial position, because it is a static view of financial value or net worth at a point in time, usually the last day of the fiscal year, though it could also be for the end of any reporting period, such as month or quarter. It gets its name from the fact that it has two major sections that have to be in balance – assets on the one hand and liabilities and owner’s equity on the other.
Assets = Liabilities + Owner’s Equity
The balance sheet sections are always in balance because owner’s equity is simply the difference between assets and liabilities.
The balance sheet shows the increase or decrease in assets, liabilities and owner’s equity from year to year.
(Definition) Accounts Receivable are the value of goods shipped or services rendered to a custom on which payment has not yet been received and usually includes an allowance for bad debts.
(Definition) Accounts Payable are the value of goods and services acquired for which payment has not yet been made.
These two balance sheet amounts are used to calculate the cash-to-cash cycle time, which measures how many days the organization’s working capital is invested in managing the supply chain.
(Definition) Working Capital is the current assets of a firm minus its current liabilities.
Working capital is important to the supply chain because these are the funds the organizations has readily available to invest in normal operations.
(Definition) A financial statement showing the net income over a given period of time.
Income statement is cumulative and dynamic, meaning that the statement covers business results over a period of time, such as a quarter or a year, rather than being a static snapshot.
The income statement shows managers, investors and creditors whether the company has made or lost money during the given period of time.
Income = Revenues – Expenses
These are the key terms to be familiar with:
It is money remaining from revenues after deduction of certain expenses.
It is the difference between the sales and cost of goods sold…sometimes expressed as percentage of sales.
This measures the degree of financial success for a business.
Gross Profit Margin
It is the difference between total revenue and the cost of the goods sold.
It is figured by deducting all expenses, not only the cost of goods sold, from revenues.
Supply chain managers can use an income statement to determine the effect of supply chain expenses on net income.
Operating expenses such as sales bonuses or general and administrative expenses (all cost that cannot be linked to specific unit sold) are called period costs because they must be expensed in the period in which they are incurred.
COGS are called product costs. Product costs are accounted for in the period in which the units are sold even though many of these costs may be incurred in earlier periods.
Matching refers to reporting related revenues and expenses together in the period in which they were incurred. For example, sales expenses incurred to make a sales should fall in the period the sales was made. When they do not, accountants use adjustments called “accruals” to account for the period differences.
Statement of Cash Flows (Funds Flow Statement)
(Definition) A financial statement showing the flow of cash and its timing into and out of an organization or project (over a given period of time).
(Definition) Cash Flow is the net flow of money into or out of the proposed project organization. It is the algebraic sum, in any time period, of all cash receipts, expenses and investments.
There are three factors that determine cash flows:
After-tax operating profit margin
The purpose of a statement of cash flows is to show lenders, investors and creditors whether the organization has sufficient cash to pay debts, bills and dividends to owners because cash, not net income, is needed to make these payments. The after-tax net income on the income statement is not the same as cash flow, but it is the starting point for the statement of cash flows.
Being able to read and understand a cash flow statement is important because it enables you to assess if the firm is:
Generating enough cash to fulfill its minimum obligations to lenders, investors and governments (taxes).
Generating extra cash that can be used to repay debt, purchase additional assets for growth or invest in new products.
This information is particularly helpful for financial managers, who use it along with a cash budget when forecasting their organization’s cash positions.
Depreciation is a predetermined incremental reduction in the value of fixed assets, such as property, plant and equipment on the income statement to account for their deterioration over time. This provides organizations a tax benefit to offset the investment in fixed assets.
Since depreciation reduces net income on the income statement but doesn’t reduce actual cash levels, depreciation is added back on the statement of cash flows to determine the actual cash flow.
Tax Savings and the Supply Chain
Paying less in taxes around the world translates into increased earnings per share.
Procurement and Taxes
Multinational corporations may decide to set up a central, global procurement and sourcing center.
In this way the supply chain benefits from various efficiencies created by consolidation of staff and equipment. If, in addition, the company locates the global facility in a low-tax region, the tax savings will magnify the savings from efficiencies of scale. This works because tax authorities generally levy taxes on separate streams of corporate income depending upon where they are earned. The global procurement center thus becomes subject to the tax policies of its country of residence.
Taxes & Logistics Networks
Organizations can also realize tax savings by combining tax planning with logistics reengineering projects.
While they are cutting lead times, reducing manufacturing costs and shaving transportation outlays they can also reduce their global tax liability by closing facilities in high-tax jurisdiction and moving them to countries with lower tax rates.
Taxes & Information Technology
A particularly intriguing tax-saving strategy is the purchase of supply chain software to improve planning and responsiveness. The cloud be an enterprise resource planning (ERP) system or a system with more limited application.
Whenever you are discussing supply chain financials, remember that each department in an organization has its own particular priorities based on its activities and those priorities may compete with each other.
For instance, the primary objective of marketing is to maintain and boost revenue and it strives toward that by providing great customer service.
Although the finance function is also interested in increasing revenues its primary focus is on keeping costs and investment expense low.
Production wants the lowest operating cost it can achieve. Those conflicting viewpoints may spill over into how each function views financial departments and metrics.
The numerous benefits of marketing supply chain management practices, systems and technologies include:
Improved market knowledge.
The three Vs – Increase velocity, increased visibility, and reduced variability in the flows of goods and services, funds and information.
Improved management of risk.
Improved Market Knowledge
With supply chain management in place, partners in the supply chain begin to share their knowledge about the market place and in particular about their customers.
Although, market intelligence can be purchase from outside sources, it’s most advantageous (and less expensive) to gather it from your partners.
There are a myriad of sources and documents containing valuable customer information that can be shared between supply chain partners, including transaction records, customer survey results, sales and service representative knowledge and information from distribution points such as retailers, internet sites or kiosks.
Purchased data may be more useful in acquiring new customers than in managing relationships with existing customers.
The Three Vs
Following are the key elements of a successful supply chain strategy:
(Definition) Visibility is the ability to view important information throughout a facility or supply chain no matter where in the facility or supply chain the information is located.
With better visibility, a supply chain manager or employee can see the results of activities occurring in the chain and is made aware of minor, incremental changes via technological processes.
Better visibility has resulted in greater velocity.
There are four types of flows in a supply chain:
Physical materials and services
Returns (or reverse flow) of products for repair, recycling or disposal
Supply chain management impacts the velocity of these four flows in a positive manner.
(Definition) Velocity is a term used to indicate the relative speed of all transactions, collectively, within a supply chain community. A maximum velocity is most desirable because it indicates a higher asset turnover for stock holders and faster order-to-delivery response for customers.
Methods of increasing the velocity of transactions along the supply chain include the following:
Relying on more rapid modes of transportation (if there is a net benefit after the increase in transportation costs).
Reducing the time in which inventory is not moving by using Just-in-Time delivery and lean manufacturing (the less time inventory spends at rest, the less likely it is to suffer damage or spoilage. Increased velocity reduces the expenses involved in warehousing inventory).
Eliminating activities that do not add value, thus reducing the time required to accomplish supply chain activities.
Speeding up the flow of demand and cash as well as the velocity of inventory (the more rapidly payments are received from customers, the sooner the money can be put to work in the business or deposited at interest. Information about demand changes is crucial when the competitive strategy is responsiveness).
(Definition) Variability is the natural tendency of the results of all business activities to fluctuate above and below an average value, such as fluctuations around average time to completion, average number of defects, average daily sales, or average production yields.
Variability decreases with good supply chain management.
Supply chain management works to reduce variability in both supply and demands much as possible.
The traditional offset against variability is safety stock. If greater visibility along the chain results in greater velocity, supply chain managers should also be able to reduce the amounts of safety stock required to match supply to spikes in demand.
Supply chain management serves to reduce both demand and supply variability. Demand variability has many sources, but a primary source that can be controlled is bullwhip effects.
The bullwhip effect is an extreme change in the supply position upstream that is generated by a small change in demand downstream in the supply chain.
Supply variability typically increases in waves down the chain starting with small amounts at the resource extraction sites and culminating in the largest amounts at the retail end of the chain.
Two Additional Vs
Variety refers to the mix of products and services in a portfolio that must alter to meet changes in customer demand.
Volume is the amount of product being produced in a given time.
A supply chain must be flexible enough to expand and contract volume to meet changes in demand for mass customized products and services.
Supply chain management fosters integrated operations by requiring everyone in the supply chain to form partnerships with suppliers or customers.
Integrated networks, like intranets, extranets, and the internet, play an important role in forming these partnerships.
Supply chain management uses networks to tie together the various software applications associated with specific activities within supply chain processes.
Enterprise resources planning software packages enable companies around the globe to not only manage their operations in one plant but to facilitate enterprise wide integration and even cross-company functionality.
Improved Management of Risk
(Definition) Supply Chain Risk is based on decisions and activities that have outcomes that could negativity affect information or goods within a supply chain.
(Definition) Risk Management is the process of identifying risk, analyzing exposures to risk, and determining how to best handle those exposures.
An organization’s strategy to address supply chain risk includes a risk response plan and risk response planning.
(Definition) A Risk Response plan is a written document defining known risks, including description, cause, likelihood, costs, and proposed responses that also identifies the current status of each risk. This is also called a Business Continuity Planning.
(Definition) Risk Response Planning is the process of developing a plan to avoid risks and to mitigate the effect of those that cannot be avoided.
This type of proactive risk planning benefits the organization in a number of ways:
It helps keep the supply chain flexible so that it can continue functioning despite disruptive events, which in turn helps balance the costs of contingency planning against the potential economic, facility, resources, and inventory losses.
Risks are shared among supply chain partners who will be prepared to work in concert and play their parts responsibly.
It prepares the employee workforce and chain partners with valuable, actionable information and confidence to handle nearly any situation with a well-thought-out strategy based on substantiated risk data.
Sustainability and Green are often used as synonyms in discussions of corporate obligations that go beyond the traditional emphasis on bottom-line profits. Both terms refer to the need for economic activity to operate within limits imposed by natural resources.
Supply chain is more accurately viewed as a set of linked processes that take place in the extraction of materials for transformation into products or perhaps services for distribution to customers.
(Definition) Supply Chain Management is the design, planning, execution, control and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply chain demand, and measuring performance globally.
Supply chain management is about creating net value.
There should be value creating activities in the supply chain that transcends the activities of particular entities in the chain.
Managing supply chain requires a balancing act among competing interests.
Value Chain and Mapping
A value chain is a string of collaborating players who work together to satisfy market demands for specific products or services.
(Definition) The value chain is made up of the functions within a company that add value to the goods or services that the organization sells to customers and for which it receives payment.
The intent of a value chain it to increase the value of a product or service as it passes through stages of development and distribution before reaching the end user.
Not all value chain activities are technically part of the supply chain. Those activities might include:
(Definition) It is the process of creating, producing and delivering a good or service to the market. For a good, the value stream encompasses the raw material supplier, the manufacture and assembly of good, and the distribution network.
For a service, the value stream consists of supplier, support personnel and technology, the service “producer”, and the distribution channel.
The value stream may be controlled by a single business or a network of several businesses.
A value stream encompasses all the primary actions required to bring a product or service from concept to placing it in the hands of the end user. It also includes timing.
Value Stream Mapping (Definition) Value stream mapping is drawing the current production process/flow and then attempting to draw the most effective production process/flow.
Mapping the stream aids in process improvement.
There are five primary objectives that supply chain management can help a company or organization accomplish:
Objective 1: Add Value for Customers and Stakeholders
Supply chain management aims to create value through financial benefits, match the values of its various customers, and appeal to social value of its customers, stakeholders and community.
(Definition) Value is the worth of an item, good or service.
Adding value to a good or service is the responsibility of each entity and process in the supply chain.
(Definition) Value Added is the actual increase of utility from the view point of the customer as a part is transformed from raw material to finished inventory. It is the contribution made by an operation or a plant to the final usefulness and value of a product as seen by the customer.
The goal is to add value at each step in a service oriented value chain as well as in manufacturing oriented supply chain.
Utility may not be the only value, or worth, of a good or service from a customer’s point of view. Price, availability, and attractiveness are also values to consider.
Financial Benefits: Profit and Profit Margin
Adding value that customers desires promotes increased sales, which improves the bottom line.
In order to be successful and have longevity, any organization must have a positive cash flow.
* Triple Bottom Line (TBL):
Term coined by John Elkington 1994.
This refers to the concept that corporate success should also be measured in 3 dimensions:
Measuring Value One Stakeholder at a Time
When planning any new supply chain activity or monitoring continuing practices, it is important to identify all the stakeholder groups and determine the impact the activity will have on each one.
The primary stakeholder in any business is the business itself. A business must be profitable to survive and create value for any other stakeholder group.
Customers are also significant stakeholders in supply chain. Each business must create value for its customers as well as profits for itself. Moreover, the end result of each partner’s activities must optimize value for the supply chain as a whole.
There are also stakeholders that are external to the supply chain’s business partners and end customers. These include public or private investors, lenders, and communities and governments. To investors and lenders, supply chain value may be defined as capital growth, dividend income, or interest payments and eventual return on invested capital. Value as defined by these external partners must be considered when making business decisions.
Communities and local governments may also feel the impact of supply chain operations because they affect community members and their environment, both built and natural. The location of a retail outlet, warehouse, or other supply chain facility will have impact on the community where it is built and maintained. The community, and its political leadership, may judge this impact to be a positive value or a detriment.
Balancing Varied Stakeholder Values
Supply Chain Stakeholders
Firms in supply chain
Profit margin, market share, revenues, expenses, image and reputation.
Return on Investment (Capital growth, dividend income), comprehensive and comprehensible communications.
Interest rate, long-term stability, return of principal.
Communities / Environment
Tax based enhancement, sustainable manufacturing practices, environmental impact (safety, ethics, convenience, and natural resources), and growth of attractive jobs.
Legality, regulation, overall impact on community members and environment.
Job security, wages and benefits, opportunity, good working conditions, sustainable and safe manufacturing process.
Green, Sustainable Supply Chain Management
One value that is important to most of these groups is sustainable manufacturing process and practices, because it impacts so many around the globe.
Green Supply Chain Management (GSCM) has been brought to the forefront of most companies’ strategic goals in response to the demands from customers and stakeholders.
The objective of supply chain sustainability is to create, protect and grow long term environmental, social, and economic value for all stakeholders involved in bringing products and services to market.
Today GSCM requires supply chain managers to integrate environmental thinking into each step within the supply chain. That means that they must employ innovative environmental technologies to provide practical solutions to the environmental problems facing the global community.
(Definition) Green Supply Chain is a supply is a supply chain that considers environmental impacts on its operations and takes action along the supply chain to comply with environmental safety regulations and communicate this to customers and partners.
Sustainability figures significantly in supply chain management decisions for the following reasons:
Government and regulatory pressures.
Good environmental management and sustainability concerns.
Public opinion and power of consumer choice.
Potential for competitive advantage.
In addition to adding value, sustainable supply chain management can make good business sense, which can:
Without forward looking environmental and social policies and supply chain practices, and organization’s reputation may suffer among investment analysts.
Supply chains must create three types of values:
One method of increasing the financial value is to reduce costs.
Cut cost to yield net gain at the bottom line:
Cost cutting needs to aim for net gains at the bottom line.
(Definition) Inventory optimization software is a computer application having the capability of finding optimal inventory strategies and policies related to customer service and return on investment over several echelons of a supply chain.
Changes at any one point in the system will create changes elsewhere, therefore changes have to be viewed historically. Supply chain management necessitates cross-functional team work for the lateral chain. If a leaner supply chain can deliver the same customer satisfaction with a great profit, then cost cutting is justified.
It takes money to make money:
The end result should be net gain.
If an improvement in the supply chain brings in more revenue than the cost of investment, then it is justified.
Purchasing automated machinery to improve warehousing, upgrading hardware and software, training managers in team building and other investments may be necessary to build and maintain a competitive supply chain.
The ultimate aim must always be for creation of value at the customer’s end of the chain with sufficient profits to satisfy the needs of other stakeholders.
Typical measures of success in the use of invested money and assets more generally are:
Return on Investment (ROI)
Return on Assets (ROA)
(Definition) Return on Investment (ROI) is a relative measure if financial performance that provides a means for comparing various investments by calculating the profits returned during a specified time period.
(Definition) Return on Assets (ROA) is defined as net income for the previous 12 months divided by total assets.
Gains should be equally distributed:
Possibly the most common mistake in this regard is to send all cost savings all the way to the consumer’s end of the chain. If all efficiencies are plowed into retail price reductions, the supply chain itself will suffer from lack of financial sustenance.
Investors require a competitive return on loans and equity. The maintenance and upgrade to the chain’s infrastructure requires virtually continuous investment.
Employees have to be compensated at a competitive arte, trained in new processes and products, and more fundamentally, recognized for their contributions.
Teamwork among supply chain entities can create improved value for customers for a net financial gain that is equitably shared by all stake holders.
(Definition) Market Driven is responding to customer needs.
The ultimate goal of market-driven supply chain management must always be to deliver products and services that the customer values and of course will pay for.
Depending up the market being served, a supply chain may be managed so that it delivers one or more of these values to its end customers:
Quality of product or service
Generally a supply chain’s contribution to the society come from three factors:
Creating a positive good by delivering socially desirable and useful products or services.
Avoiding or reducing negative environmental side effects from extraction, processing and construction. (Definition) The Reverse Supply Chain moves items from the consumer back to the producer for repair or disposal.
Integrating sustainability into the supply chain.
The SCOR model has applicability in sustainable chain management.
Objective 2: Improve Customer Service
(Definition) Customer Service is the ability of a company to address the needs, inquiries and requests from customers.
(Definition) Customer Service is a measure of the delivery of a product to the customer at the time specified.
Fundamental attributes of basic customer service:
Availability is the ability to have the product when it is wanted by a customer.
Operational Performance deals with the time needed to deliver a customer order.
Customer Satisfaction takes into account customer perception, expectations and opinions based on the customer’s experience and knowledge.
Objective 3: Effectively Use System Wide Resources
Resources can be in form of employees, raw materials, equipment, etc.
Being effective means that supply chain gets the right product and the right amount to the right customer at the right time.
Objective 4: Efficiently Use System Wide Resources
(Definition) Efficiency is a measurement (usually expressed in percentage) of the actual output compared to the standard output expected. It measures how well something is performing relative to existing standards. Efficiency is inward-focused, in that a company looks internally to determine how a supply chain process can be done less expensively, in less time, and with fewer resources.
Efficiency is one of the measures of capacity in a supply chain environment.
Capacity is all about what can be accomplished by employing all the resources in the supply chain network that includes work centers, storage sites, people and equipment.
(Definition) Capacity has few meanings:
The ability of a system to perform its expected function.
The ability of a worker, machine, work center, plant or organization to produce output per time period.
Required mental ability to enter into a contract.
When a supply chain is operating at high efficiency, it means that its utilizing its resources well to produce the level of output in a production plan within the time allowed.
Objective 5: Leverage Partner Strengths
(Definition) A Partnership in a supply chain is a relationship based on trust, shared risk and rewards aimed towards achieving a competitive advantage.
Well-chosen partners will benefit from a high level of mutual trust, respect of each other’s expertise and contributions and shared vision.
A strong and useful partnership will yield a combination of the following as it performs the functions needed by your organization:
Adding value to products, such as shorter time to market.
Improving market access, such as providing new market channels.
Building financial strength through increased income and shared costs.
Adding technological strength if there is internal expertise in use of more advanced software and systems.
Strengthening operations by lowering systems costs and cycle times.
Enhancing strategic growth to break through barriers to new industry and opportunities.
Improving organizational skills that facilitate shared learning and insights of both firms’ management and employees.
Supply chain management technologies and practices can help a company select the appropriate sales partners and support them by:
Providing timely and accurate information.
Helping them deal successfully with channel customers.
Aiding them in leveraging their strengths such as innovation, speed, high quality, low costs, etc.