LF Illumination

Inventory Management and Valuation Issues Resolved

SAP Business One Illuminates the Way Forward for Innovative Architectural Lighting Company

Inventory Management and Valuation Issues Resolved

Founded in 2013, LF Illumination LLC is an internationally acclaimed designer and manufacturer of architectural lighting for commercial, hospitality, retail and high-end residential applications. The company received an industry award for its EF600 Linear Cove Lighting System in the Indoor Cove and Wall Wash category at the 2016 Indoor and Outdoor NGL SSL Design Competition. LF Illumination’s executives are comprised of seasoned veterans with decades of experience in architectural lighting. CEO Jack Zukerman, who was honored with a Lifetime Achievement Award from EdisonReport, is widely regarded as a leading visionary in the industry. He is probably best-known for his innovation of miniaturizing halogen accent and recessed lighting and offering it as a lighting platform for a broad array of industries and applications. Zukerman was also well ahead of his time as he embraced energy-saving technologies well before it was fashionable.

“Without the ability to track items across multiple bin locations, it was often a challenge to keep the warehouse tidy and well-organized. In my view, it was a bit of a mess.”

– Eileen Cheng, CFO



Inadequate MRP, Production and Inventory Management Systems Obscure Visibility into Vital Business Processes

When LF Illumination commenced operations in 2013, the company employed a well-known entry- to mid-level software package that offered limited utility beyond its core accounting functionality. As they were soon to discover, this product lacked the functionality to address the inventory management and production requirements typical in a manufacturing environment, forcing management and staff to go to great lengths to compensate for the system’s shortcomings.

For example, the program could not accommodate assignment of more than one bin location per item. Thus, when a bin ran out of space, inventory parts were piled up adjacent to it. This inflexibility created unnecessary challenges that compromised the company’s ability to effectively manage its inventory.

As LF Illumination CFO Eileen Cheng noted, “Without the ability to track items across multiple bin locations, it was often a challenge to keep the warehouse tidy and well-organized. In my view, it was a bit of a mess.”

Inefficiencies adversely affected productivity. The software didn’t allow a new item number to be changed after it was first created, which meant that every time a new item number was changed, staff had to re-type the part number as well as an accompanying description in the applicable document. This necessitated a lot of unnecessary duplication and wasted time, coupled with higher chances of mistakes. Additionally, the old system didn’t allow for copying quote information directly to a sales order, which led to more time-intensive manual typing and proofreading.

The steps required to complete each work order (to track the production process) were quite cumbersome and time-consuming. The risk of input errors was always present, which created a host of other issues that compromised production. In addition, they had little visibility into their production process and, even worse, they couldn’t effectively track costs.

Realizing that its MRP system had only limited utility, the company at first tried to bridge the gap by hiring an outside consultant to perform numerous modifications, such as changing the BOM setup from a multi-level to a flat, single-level structure. These modifications were only minimally effective at addressing certain existing procurement issues and inadvertently created other inventory management issues. Thus, it became abundantly clear that a robust ERP solution with built-in MRP and extensive inventory management capabilities was required.

“It Was a No-brainer” — SAP Business One Offers Comprehensive, Flexible and Affordable Solution. Softengine Oversees Smooth Conversion.

It didn’t take long to identify a solution to their problems. Jack Zukerman and others on the management team had previously worked with SAP ERP systems at other lighting companies and they were unanimous in their confidence in the software. They contacted SAP to find a business partner who had considerable experience with manufacturers and who could expertly perform the implementation. SAP recommended Softengine, www.softengine.com, an SAP Business One Gold Partner.

During their initial meeting, the Softengine sales team informed them about SAP Business One — a powerful and cost-effective option that could resolve their issues.

“After Softengine’s proposal, it was clear that SAP Business One was the system we had envisioned at an affordable price,” said Cheng. “The decision was a no-brainer.”

Built-in MRP Provides Top-flight Inventory Management and Reliable Forecasting

SAP Business One contains sophisticated MRP functionality that enables LF Illumination to create reliable forecasts and bills of materials (BOMs) and dramatically improve inventory tracking. Sources of data for the MRP function include BOMs, inventory data, input from scheduled production and purchase orders, and demand derived from sales orders. The MRP module offers three options (tabs): Forecasts, MRP Wizard and Order Recommendation. When you select the MRP Wizard, you can quickly create a new “scenario” or edit an existing one for planning and production purposes. Once you have completed all the steps, the wizard generates a list of recommendations for purchase orders and production orders.

“Some of our vendors have pretty lengthy lead times and hefty freight charges,” said Cheng. “SAP Business One’s MRP functionality enables us to more efficiently forecast and optimize our inventory levels in the warehouse.”

We can look at consumption over a particular time frame and factor that information into future orders. The system provides historical usage and sales order-driven demand data, which helps us determine the best time to place an order and how much to procure. Furthermore, it also helps us make better logistics decisions by maximizing container space or by consolidating certain purchase orders as production demand changes.”

Inventory Management and Valuation Issues Resolved

The days of hunting around for items in the warehouse are over with SAP Business One. The system enables staff to track components from receipt all the way to finished product.

“The ability to use multiple bins for items has helped us clean up and better organize our warehouse,” claimed Cheng.

“We can quickly locate inventory in the warehouse and resolve any discrepancies due to the software’s built-in, real-time inventory tracking. This has been a huge relief for our warehouse staff who frequently had to search for items before we installed our new system.”

SAP Business One offers powerful inventory valuation capabilities and the software automatically values each goods movement and cost and price change, reducing the need for manual interaction and the associated human errors. LF Illumination employs the FIFO method and the system generates several Inventory Control reports, which staff can use to calculate the value of the entire warehouse inventory on a specific reporting date, as well as identify and assess slow-moving items.

Production Processes Fully Automated and Humming

With SAP Business One on-board, LF Illumination staff no longer waste time and energy manually creating sales orders, purchase orders or production orders or redoing these documents once a sales quote has been completed. The system makes it a breeze to update a sales quote with a customer’s PO (after acceptance of the quote) and then convert the quote into a sales order. The sales order information can also be copied onto an invoice when shipped.

“When we produce quotes, they can be instantly converted into sales orders, which saves us so much time versus the old system,” said Cheng. “Now, we can just convert the quote, make a few edits, if needed, and update. Moreover, SAP Business One’s production reports give us better visibility into our production process — we can see every step and know where we are at any given time.”

Visibility Restored. SAP Business One and Softengine Shine a Bright Light on LF Illumination’s Future.

Eileen Cheng and her associates are moving ahead with confidence now that SAP Business One is helping them with their production and inventory management. And with Softengine always ready to respond at a moment’s notice, the future looks very bright for LF Illumination.

“SAP Business One has turned out to be a very cost-effective solution that gives us the transparency we were seeking into all of our business processes,” asserted Cheng.

“Plus, it’s easy to customize so that it adapts to the way we do business. Unlike its predecessor, we no longer need a bunch of third-party add-ons to make the system work. In the next phase of the implementation, we plan to add Softengine’s Warehouse Management System (WMS) extension for SAP Business One, which will further automate our inventory and warehouse management.”

“The system has helped all of us become more accountable,” added Cheng. “For example, if someone makes a transaction error, we can track it down and provide additional training, if necessary, to prevent the same mistake from reoccurring.”

Another virtue of the system appears at month-end. According to Cheng,

“Month-end closing is much cleaner and faster than it used to be. Before SAP Business One, we used to have to stay until late at night to complete month-end and now we can actually get home in time for dinner.”

When the subject shifts to Softengine, Cheng offers glowing praise.

“Right from the outset, Softengine employed a very systematic and organized approach,” said Cheng. “They developed a schedule of deliverables that was very clear and well-conceived and they leaned on us a bit to adhere to that schedule. We needed lots of hand-holding, especially as we got closer to the conversion, and they were always there for us. In the week prior to the conversion, they worked around the clock to make sure that we were able to ‘go live’ on time and without major issues. Plus, they stayed on for many days past the conversion to make sure everything was proceeding smoothly. And what’s even more impressive — they completed the project on schedule. We’re happy to say that Softengine has become a true partner with us as we move into the future. What more can you wish for?”