As a manufacturer, inventory management is undoubtedly one of the most vital functions in your company, particularly if client satisfaction is an emphasis. Improper inventory control could seriously harm your organization; ERP systems without adequate functionality or storing key information outside their systems make fulfilling delivery and inventory obligations difficult.
Human error may arise in spreadsheet-driven inventory management when data inputs aren't connected correctly, leading to supply chain, delivery and inventory control issues. Maintaining stock in various warehouses and manufacturing locations can become increasingly challenging as your business expands and grows.
What Is ERP Inventory Management?
Manufacturing, distribution, and supply chain companies can manage all aspects of their inventory in real-time using an ERP system. This includes cost control, order processing, stock levels of products and materials, and supplier data - everything needed for full visibility across your company. Reduced holding costs, stockouts, and quicker order fulfillment are the results.
How Does ERP Help Improve Inventory Management?
Automating inventory management with an ERP system offers many advantages for companies of any size and industry. A well-crafted ERP can significantly increase profitability by streamlining inventory operations, improving forecasting capabilities and cutting carrying/transport expenses; additionally, you will complete orders more accurately and faster, thereby satisfying clientele more readily than before.
1. Real-Time Inventory Tracking System
Real-time inventory tracking can be achieved using an ERP inventory management system, enabling your current inventory data to reflect actual stock levels automatically. Your staff may postpone uploading inventory data until later or batch load it if real-time tracking is unavailable; until this process has taken place, stock numbers don't accurately reflect reality, and any issues only become compounded when multiple inventory sites exist.
2. Process Automation
Eradicating tedious manual chores from staff is vital to increasing accuracy and efficiency within an organization, especially for stockouts, obsolescence and excess inventory management. Employing an automated ERP for inventory control may reduce these factors within your firm and can ensure greater accuracy for inventory purposes overall.
3. Increased Demand Forecast Accuracy
Manufacturing businesses depend on precise forecasting to estimate inventory needs accurately. To gauge historical demand and project future needs, a thorough understanding must first be gained of your previous orders, promotional activity, the economy, historical growth rate and political climate trends, among others, which are usually included as indicators in any forecasting indicator list. Accurate demand projections help businesses lower expenses while improving inventory management practices with this tool.
4. Facilitates SKU Management Effectively
SKUs (stock keeping units) allow you and others to easily search and identify stock from orders, invoices or lists and identify products using product codes known as stock keeping units (SKU). SKUs enable tracking inventory loss, profitability, sell rates, margins, product types, and product identification differentiation of inventory from orders invoices or lists.
Are You Still Managing SKUs Manually with Excel Spreadsheets or Outdated Software Applications? Managing complex SKU naming conventions Can Be Complicated. If so, an updated Inventory Management ERP Software system offers an effective uniform naming system that consistently reduces human tasks to maintain SKU names and eliminates manual processes.
Best Practices For Improved Inventory Management In ERP
To help you manage inventory more effectively, below are some best practices for ERP inventory management.
Bundling Products Together Is One Way To Increase The Average Order Value
Product bundles - collections or packaging of several items sold as one unit - offer several benefits; every time a bundled item is sold, it automatically links back to each sale of its constituent items in modern inventory management systems.
- Improve stock monitoring.
- Dump outdated inventory to reduce deadstock costs.
- Raise order values on average.
- lower shipping and holding expenses.
- Provide customers with convenience and flexibility.
Product bundles work by selecting which products to include in the bundle, setting the pack size or sizes (if appropriate), and finally, using real-time tracking to ensure enough stock is kept for each bundle variant.
Establish KPIs For Inventory
Your team should devise key performance indicators (KPIs) for inventory to measure its progress over a set period, providing concrete goals each week, month or year. By creating KPIs related to inventory performance, you can develop and monitor their growth over time.
Key Performance Indicators (KPIs) used for inventory include:
- Carrying costs of inventory.
- Turnover rate.
- Write down and write off the inventory.
- Cycle Time of Cycle.
- Order Tracking Statuses.
Effective inventory performance analysis requires using an efficient ERP with intuitive charts and graphs that display key performance indicators (KPIs).
Sort Your Stock With ABC Analysis
As a manufacturer, your inventory must be prioritized to maximize turnover. Inventory management teams use ABC analysis (or ABC categorization), which helps identify critical products and prioritize them over less important ones. ABC categorization divides your inventory into three groups (A, B and C), providing insight into relevance levels.
ABC categories of goods can be divided into:
A: Expensive but scarce items.
B: Moderately valued and moderately numbered products.
C: Large volumes of little but valuable objects.
Your business strategies should drive your decision on whether or not to utilize ABC inventory analysis. However, should you choose this route, remember that many modern Cloud ERP systems include ABC analysis as an option for classifying inventory.
Cycle Counting Can Help Increase Inventory Accuracy
Cycle counting should become a regular component of your ERP inventory best practices as it provides insight into the accuracy between inventory records and actual inventories. Cycle counts also allow for reduced manual stocktake requirements by permitting small amount counts on any given day; conducting regular cycle counts helps ensure all items listed within an inventory system are available for sale.
Cycle counting offers several advantages for inventory management:
- It involves using less safety stock.
- As opposed to conducting a complete inventory check-up, this approach is quicker and cheaper;
- You don't have to interrupt business operations to conduct it.
- It reduces inventory maintenance costs.
- It could even serve as an effective theft protection strategy.
Also Read: Mastering Inventory Management: A Quick Guide to Boost Your Business Efficiency
Keep Safety Stock On Hand
It is wise to maintain safety stock as insurance against unexpected fluctuations in demand or lead times that might cause stockouts known as safety stock. Keeping safety stock provides several advantages. For example:
- It protects against unanticipated surges in demand.
- Stockouts can be avoided.
- It can make up for incorrect projections.
- It provides an extra cushion in case lead times lengthen more than expected.
As soon as a producer runs out of goods, their responsibility is to apologize to their customers for failing to keep enough safety stock inventories on hand in case their goods run out. Otherwise, they risk losing customers, revenue and market share.
Increase Inventory Turnover
Inventory turnover refers to the total number of times your stock is purchased or used within a set period and indicates sales performance; the higher its turnover rate, the better it performs. Your inventory management system can give you insight into the demand for items in inventory storage and ways to move more products. By computing your turnover rate accurately, you may gain extra insight into the demand for your items or outdated stock that needs selling/stocking more inventory efficiently.
Here are four strategies to increase inventory turnover:
- Consider various price points.
- Clean out obsolete inventory.
- Increase demand projections.
- Transfer inventory between areas.
Strengthen Relationships With Suppliers And Vendors By Engaging In Cooperation
Your suppliers and vendors are vital partners in your inventory management system, so you must maintain good working relationships with them. Inadequate supplier communication often results in missed dates and incorrect parts being shipped, resulting in shortages, missed goals and damaged relationships.
Following these recommendations will assist in getting your supplier and vendor relationships back on track:
- Set clear expectations regarding reporting and communication. Once these have been determined, offer a uniform platform for all communications.
- Gather as much information, such as component numbers, about the parts you wish to discuss with your supplier: having this data on hand reduces emails and expedites resolution.
- Create and monitor essential metrics: This should include cost performance, quality performance, on-time delivery performance, and short and sweet communication to get to the point. Intending to achieve best practices.
- Communicate quickly but directly.
Keep Your Products Under Constant Watch
Manufacturing businesses should be able to closely track their products from their inception through completion, especially in highly regulated sectors like medical device production. You can do this using lot and serial number tracking and monitoring suppliers, raw materials, purchase orders and customer data.
Lot numbers make it possible to accurately track every batch produced quantity, cost and expiration date. You can select which serial-numbered items will be delivered directly into orders using serial number tracking.
Tracking lot and serial numbers helps businesses devise fulfilling plans that maximize inventory utilization for optimal business use, reducing waste while optimizing utilization rates of your inventory.
Considerations For An ERP Inventory Management System's Features
Above all else, an effective ERP inventory system must meet your company's changing demands. Businesses may benefit from switching to modern cloud-based solutions that offer similar functions instead of relying on traditional on-premise ERPs for inventory management and cost-cutting purposes. Look out for characteristics in inventory systems best suited to your business that match up.
- Accurate Inventory Management: Your ERP system should provide instantaneous access to all inventory details, including customizable cycle counts, ABC category analysis, transactions and accurate digital records.
- Real-Time Inventory Tracking While On The Go: To ensure real-time inventory tracking on the go, find a solution that enables you to use a smartphone or tablet for real-time inventory monitoring at multiple locations remotely using real-time inventory tracking technology.
- Supply Chain Management: Modern inventory management systems should include capabilities for supply chain management. This feature allows you to conduct an online analysis of supply and demand requirements to make more informed decisions that improve forecasting capabilities and inventory turns.
- Automated Inventory Management: Automation makes it easier to quickly adjust to organizational changes, including those caused by personnel turnover or new projects. An inventory management ERP should allow you to design custom workflows that meet all your business requirements.
- Complete Traceability, Lot and Serial Number Tracking: Modern inventory ERPs should provide complete traceability, lot and serial number tracking capabilities with comprehensive audit trail inquiries for full traceability and lot/serial number tracking.
- Customer Relationship Management: Integrating CRMs with inventory management systems can enhance customer interactions and expedite order fulfillment, among other advantages. Salesforce CRM and an ERP can work seamlessly together, giving your business access to one data source for all aspects of operation - including sales.
Conclusion
Knowing what kind of inventory best suits that particular sector is paramount for optimal ERP inventory management practices to be utilized effectively in any sector. When employed correctly, each of these elements contributes to meeting desired outcomes from ERP systems; ultimately, determining an ideal method for classifying SKUs while decreasing data input done manually can reduce maintenance times and ultimately help increase profit margins.
