- 27 July 2016
The effective control, management, and measurement of inventory helps distribution and manufacturing companies reduce investments, understand demand, and monitor their supplies. Although inventory management sounds as simple as keeping items in stock, it can be much more complex in practice. Different company segments may have inconsistent aims and differing opinions in regards to how to handle current and future stock and vendors (for example, sales may push optimistic numbers, and purchasing departments may manage costs through seeking bulk discounts while senior management would prefer not to tie up cash in inventory). Pair this with the ebbing and flowing of supply and demand, and inventory management becomes a process that is dicey at best.
Without good visibility and shared initiatives, the challenging management of suppliers, supply chain disruptions, material availability, perishable products, and customer demand can cause large losses and unused and ill-purchased inventory. Let’s take a look at how an ERP system can help an organization maintain and retain optimum inventory levels.
Optimize Inventory Stock Levels
An ERP system can help organizations maximize their inventory investments by offering a clear overview of records and data, and how they connect to every department, company-wide. Organizations can monitor inventory performance and measure results by:
- Creating trackable records through assigning SKUs, expiry dates, units of measure, serial numbers, lot numbers, and attributes
- Adding notable attributes to products by providing information on the location of items within the warehouse, storage requirements, sales rates, special handling, and other important particulars
- Keeping tabs on stock that is sluggish or about to expire
- Keeping an inventory of items that are not historically profitable
- Keeping tabs on available and inbound stock to ensure customers receive up-to-date and accurate information on availability
- Tracking items by buyer to identify top-tier customers
- Linking multiple suppliers to each item to eliminate gaps in availability
- Breaking down costs by overhead, materials, shipping, and more to get the true cost to value
An ERP system can help an organization avoid having too little or too much stock on hand and allow for better management and optimization of inventory by avoiding bottlenecks, making accurate predictions, setting reliable lead times, and accurately pricing suppliers, ultimately resulting in better bids. By understanding costs and margins, a business can have a clearer picture of profitable pricing and take that back to suppliers during negotiations. And with historical sales volumes in tow, inventory managers can bring projections to suppliers and leverage better pricing by backing it with indisputable data. Businesses can also identify items that can be sold by special ordering or drop-ship vs. holding on-site, and integrate purchasing and sales information into product data. By knowing exactly how much stock to keep and when, businesses can manage and optimize warehouse space, lowering the overhead of their inventory operations.
An ERP system can help an organization gain visibility into the reward rates and margins of every item kept in stock, keep an eye on expiring and slow-moving items, anticipate future needs by reviewing accurate data on historical demands, and reduce costs by comparing bids and effectively negotiating with suppliers.
One of the biggest highlights of an ERP system is its ability to amass and produce easily digestible data across an organization. This allows stakeholders to harness the power of that data to assess key performance indicators, provide cost to benefit analyses, improve productivity, and share information with stakeholders, suppliers, customers, and staff members. This data access can help the entire operation run more smoothly and gel competing initiatives into an overall cohesive strategy that provides optimal inventory supplies at an optimal cost.