Executive Summary
Luminalt is a San Francisco-based solar design and installation company. The 9-year-old business has been rapidly growing, and now the company is at the transitional juncture where they need to streamline their project management and information flow in order to adjust to their growth. We, Team Glow, are proposing to optimize their purchasing, inventory, and tracking processes by identifying the problems in the current processes and finding ways to improve efficiency.
Corporate Strategy
Luminalt is committed to the highest standard of quality and customer-satisfaction. Luminalt’s growth has been driven by client referrals. Unlike many solar installers that use satellite imagery to design a system, Luminalt conducts a free comprehensive on-site solar site analysis before providing a turnkey solar solution. Luminat also promotes local sustainable economic growth. They believe that buying local is a simple and effective choice to benefit the local economy. They value:
1. Installing superior quality solar systems that optimize efficiency and aesthetics
2. Offering the best customer service in the industry
3. Care and respect for our planet, our customers, and ourselves
4. Improving our community and our environment through local, sustainable economic growth and innovative energy solutions
Operational Strategy
Luminalt focuses on building community with their customers while keeping a good relationship with their suppliers. Like many small cash-based companies, Luminalt does not possess assets to improve process technology or to be vertically integrated. Although they expect the net profit would double in the near future, they use very simple and inefficient tools to manage their inventory. Their capacity and facilities are limited as well, since they have fewer employees and smaller warehouse than most of their competitors.
For inventory quality, Luminalt focuses on high-quality solar panels that come with at least a 20-year warranty. If a panel turns out to be flawed, Luminalt would be responsible for the replacement cost due to the warranty. Since their inventory level is not high, many parts are purchased once they receive an order from clients.
After two meetings and emailing back and forth, we were able to explore Luminalt’s process flow more deeply. By referring to the pain points they provided, we were able to identify the source of many of their operational flow challenges. We think most of the issues are relative to work-efficiency. Luminalt needs to take advantage of information technology to better streamline communications and information flow. There are many software and applications that can help improve the overall efficiency such as receipt tracking apps, Google drive shared functions, and ERP system, which we mentioned earlier. Since Luminalt is currently in a fast growing phase, they must try to adapt the change of work process even if they need to spend extra time and resources.
Team Glow helps Luminalt to clarify their pain points in the process and provide them both short term and long term recommendations.
In optimizing the inventory level, there are several challenges that Luminalt needs to address. First, they do not have a formal inventory management too. Excel spreadsheets are used to track project details but the likelihood for error increases due to the manual data entry process. Luminalt also has Salesforce Precisio but it is rarely used. Secondly, their inventory tracking method is unclear. The current method is called “two bin system”: there are two bins in which they store certain parts and anyone can take and use them as needed. Once someone notices that one bin is empty, they place an order for purchase. In other words, they do not keep track of the exact number of parts in the inventory. When they need to know the number, they usually manually count then.
Purchases are usually initiated by the Engineering and Analysis team that identify what they need and inform the operation team to order. Luminalt directly orders from suppliers as well as through a solar panel purchasing co-op (Amekus) in order to increase buying power. CEO, COO and CTO all need to keep a close relationship with their suppliers in order to get the information of inventory as fast and accurate as possible. We recommend that Luminalt increase the percentage of purchasing from the co-op increase further buying power.
To address the issue of inventory tracking and job costing, we recommend that Luminalt:
• Track not only “big” items but every item in inventory
• Create a Project ID system to assist the tracking of all items used in each project
• Use shared Google spreadsheets to track and record inventory and share with everyone involved in the process
• Record expected delivery date in the shared spreadsheet
• Have standard operating procedures
This will ensure that information is easily accessible to everyone involved in the process and enable them to keep a record of mass project, resulting in improved job costing, saving time on counting and repurchasing, and easy transition between employees.
To address the issue of purchasing control, we recommend that Luminalt:
• Use receipt tracking tools to keep track of what is being
purchased and by whom
• Commit to better purchase planning
• Create and include employee ID number on invoices and receipts
We believe this will increase purchasing process efficiency and reduce the accountant’s workload. For receipt tracking tools, we recommend Expensify. This tool will enable on-site crews or other employees to scan their receipts anywhere using the mobile app without manual entry and easily get reimbursed for their purchases via ACH Direct Deposit, PayPal or payroll. So instead of the crews collecting and submitting a stack of paper receipts at the end of the month and the accountant spending a considerable amount of time and energy entering the information from the receipts and processing the reimbursement manually, both the crews and the accountant can easily keep track of the purchases made real-time. The tool also integrates with QuickBooks and Salesforce, which Luminal is already using to a certain extent, so it will ensure that the information gets seamlessly entered into the existing system. The free mobile app is available for Android, BlackBerry, iPhone, iPad and Windows Phone so this is a solution that can be quickly adopted by all the employees. Lastly, it is a very affordable option with two free users per business account with only $6 fee per additional user per month.
For a long-term solution, we would recommend that Luminalt adopt an ERP solution, as mentioned above. An ERP system will improved inventory turns and provide better purchasing and the ability to drive manufacturing processes more efficiently. Nevertheless, we also emphasize the fact that implementing an ERP system will require significant input from accounting (Gina) and that implement an ERP system will not help unless there is already a system established with Luminalt. So we recommend that Luminal begin with our basic recommendations first, such as using QuickBooks to import inventory reports from the shared Google spreadsheet.
However, as Luminalt is facing a rapid growth, the company will eventually need a more powerful solution. Our recommended ERP solution is Sage 100 ERP (formerly Sage ERP MAS 90 & 200). It is a comprehensive entry-level management suite for mid-sized and smaller distributors and manufacturers, combining financial operations and accounting, business intelligence, human resources, CRM, eBusiness, manufacturing and distribution. We believe this is a great option for Luminalt for their first ERP solution because of its flexibility: Luminalt can choose between on-premises and online deployment options and add different modules according to their needs. It is also possible to try out the solution for a few months using the monthly subscription plan ($35-150 per user depending on additional modules) and then purchase the license by paying one-time license fee of $1,500+ per user if they decide to adopt the system.
Organizational Structure
There are several challenges with Luminalt’s current organizational structure. First of all, there are many employees with overlapping duties. The accountant and the director of operation both do purchasing, since there is no one person responsible for purchasing. There is a similar issue with inventory tracking, with no one person fully responsible for inventory tracking. The warehouse manager keeps an eye on the inventory separately from those who make purchases and keep records on Quickbooks, so the numbers remain unsynchronized. In order to address this issue, the organizational structure will have to be restructured to create positions to follow through each process from the beginning to the end. We met Luminalt just as they were implementing a new org structure, so we were reluctant to make recommendations while they were adjusting to new roles and responsibilities.
We provided an organizational structure recommendation to improve their purchase control and efficiency. We believe it is necessary to clearly define the responsibility for each person in the organization. Luminalt can categorize all their inventory and assign one single person to take the major charge in each category, including quotes requirement, purchase order placement, supplier management and developing standard operating procedures for purchasing (SOP). Another person can be the secondary person for that category. Therefore, if the major person is on vacation, there is always someone else to take over. SOP also helps Luminalt to expand their scale in the future by reducing the training time. If someone leave his or her job, the established SOP can help the new employee to get on board much more quickly.
