Inventory management is a critical skill that allows businesses to maximize profits while satisfying customers with the least stock. Inventory management, as we can see, is all about data. Customers' satisfaction, loss prevention, stock turnover, transportation costs, warehousing, storage, and other aspects are all taken into account.
Many inventory management systems contain this information. Companies with enterprise resource planning (ERP) and inventory management functionality have a competitive advantage. However, the main competitive advantage is the ability to share information in real time across different business units.
What Precisely is ERP Inventory Management?
Inventory management, which is a component of Enterprise Resource Planning (ERP), enables companies to oversee every facet of their operations from a single platform. Inventory, finance, and logistics are all included. ERP inventory management systems provide real-time inventory data to the entire organization. This is a critical capability for businesses that want to expand, have complex workflows or supply chains, require advanced automation, operate in "just-in-time" mode, sell multiple products, or simply want to maximize inventory investments.
Inventory Management Modules in ERP
ERP enables businesses to manage manual processes across multiple departments and functions using a single system. Depending on your needs, you can combine the following modules to create an ERP system tailored to your company.
Human Resources Module
The HR modules are in charge of managing and tracking employee information. Performance reviews, job descriptions, skill matrices, time and attendance tracking, job descriptions, and job designations are all part of this. The Payroll System submodule of the HR module is critical for managing salaries, payments reports, and other information.
Sales Module
The sales module is in charge of sales queries, order acceptance, quotation drafting, sales order receipt, sales invoice drafting, dispatch/shipment of material or service, and tracking pending orders.
Inventory Module
It tracks the inventory costs. You can identify items using unique serial numbers. This allows you to track the current location of each item within your organization.
Customer Relationship Management Module
CRM modules allow you to manage and track customer information, such as communications history, calls, meetings, and details of customer purchases. To increase sales opportunities, this module can be integrated with Sales.
Financing Module
The finance module manages capital inflows and outflows. This module keeps track of all account-related transactions, such as expenses, balances, ledgers, and budgeting. It also keeps track of payment receipts and tax management. The Finance module provides access to all financial data required for business operations with a single click.
Production Module
The production module helps the manufacturing department deliver products. This module discusses production planning, machine scheduling, and raw materials. It also keeps track of daily production progress, forecasting, and reporting.
Do You Need Inventory Management?
Businesses can use these questions to assess their inventory management processes and systems.
Can My Current System Help Me Plan?
Is your current system capable of providing information on inventory turnover rates, lead times, sales (to whom and when), stock levels, and replenishment?
Do I Have Strategic Insight From My Current System?
With today's supply chain challenges, you need a system to help you plan for growth and inform you about market changes. Customers may abandon your business as a result of stock-outs.
Are My Customer Service and Sales Teams Equipped With the Right Insights to Deliver a Great Customer Experience?
All team members should have access to inventory information with modern technology. Not just what is in stock but also where it is, when it will arrive, and how fast it can be delivered to a customer.
What Impact Does ERP Have on Inventory Management
ERP systems rely on various data sources to provide insight into past performance and other information. Organizations use this data to make better ordering decisions and forecast future demand. Inventory management powered by ERP improves supply chain management efficiency. It can eliminate double-handling and automate mundane tasks such as reordering. Other advantages of incorporating ERP into inventory management include the following:
- Transparency in Supply Chain Management: When a company can effectively integrate back-end systems and communicate directly with its suppliers, it reduces disruptions such as critical components not being delivered on time or product prices that are too high. Order and shipping information can be synchronized using integrated ERP systems.
- Better Reporting: Accurate inventory data enables decision-makers to fully exploit data-driven insight, such as understanding top-performing SKUs, landed cost per goods sold (COGS), and sales by channel and location. ERPs enable the creation of customized reports that contain accurate and useful data.
- More Precise Counts: ERP system tracks and reports excess inventory, shortages, and planned replenishment. It also provides metrics such as the average turnover rate. The warehouse management system records and reports product transfers from shipping to receiving.
- End-to-end Inventory Analysis: ERPs provide information for each stage of the inventory flow, such as the cost of goods sold and turnover rates. By analyzing key inventory metrics, businesses can improve their inventory efficiency.
- Quality Checks: Most ERP systems allow you to define inventory quality checks using logic. You can specify whether products must meet safety or environmental regulations. The system will then validate the product safety data. If the system detects an item is out of compliance, it will notify staff to make any necessary changes.
- Inventory Planning: In the ERP, each product has an inventory status. This enables employees, customers, and partners to check availability, numbers and place orders. Your inventory history and metrics are easily accessible, facilitating planning and increasing customer satisfaction.
- A system for Counting Cycles: An ERP system guides employees through a well-planned cycle count process. Regular cycle counting is an important tool for inventory management and checks and balances.
What are the Major Functions of an ERP Inventory Management System?
Consider a new system's long-term potential: A system that touches so many aspects of your business processes and requires so much time and effort to implement must be capable of meeting your current and future needs. Avoid systems with limited functionality that will be obsolete in three to five years. Here are steps to help you find the best system for your company.
Step 1: Identify the Desired Outcomes
Make sure you consider the goals of your stakeholders and develop a business case. Strategic demand planning involves analyzing business trends, core competencies, and external opportunities.
How does the purchase of the proposed item align with long-term goals, both previously established and newly revised? What insights will it provide that are unavailable today to help us plan our inventory strategy?
Step 2: Identify the Project
Which data sources are required for key metric integration into ERP inventory management software? Which suppliers and partners can use the ERP inventory management solution? List all the capabilities and features needed to achieve the desired outcome.
Step 3: Perform an ROI Analysis
Don't just focus on cost-cutting. Instead, consider how the investment will increase your company's profitability, efficiency, and customer expectations. Explain how technology will allow your business to grow by better managing its inventory.
Step 4: Create a List of Vendors
Examine case studies from similar businesses to determine which systems best suit your company. To narrow down your options, consider the following:
- Are the systems flexible, scalable, and easy to integrate?
- Are there any testimonials from other companies in the industry?
- What type of training is required? Is the company able to support training?
- Is there a free or paid trial version that can be used for testing purposes?
- How much does the software cost upfront? Or monthly for cloud-based applications? How about maintenance?
- How long will it take before we are up and running again?
Step 5: Plan Ahead
Examine the product goals of potential system vendors and determine if they align with your business. Use the checklist below to determine whether an ERP inventory management system is right for you.
ERP Inventory Advantages
An inventory management system should be included in your ERP. This is critical to achieving the desired results. Your ERP inventory management system should make organizing your stock and products simple. Many businesses prioritize ERP inventory management. ERP inventory management functions can be used to manage stock, process tracking, and smart stocking locations.
Read More: Why is Inventory Management Important?
Through accurate inventory data, ERP enables businesses to make better business decisions. ERP inventory management systems enable companies to manage their logistics, operations, finances, and inventory from a single platform, reducing errors and increasing efficiency. When comparing ERP systems, most businesses will prioritize inventory features and capabilities.
Orders for Replenishment Are Being Planned
Inventory management allows you to plan your replenishment orders. It would help if you had accurate inventory quantities so that when the signal to buy or make more is given, you can be confident that you will act. ERP inventory management software makes it simple to categorize parts and makes ordering the correct quantity easier. Order only one item when there is a demand for the exact quantity needed to meet the demand. An item can be ordered if it is less expensive and easier to obtain. You want to order fewer items to meet your needs over the next three months. Optimizing replenishments results in fewer transactions, which leads to better inventory accuracy.
Management of Surplus Inventory
It is simple to identify and respond to excess inventory. Your ERP inventory management software will immediately highlight the surplus, whether due to a decrease in demand or if you discover that the economy was not as economical for a long time. Is it necessary for you to return the item? You may contact the customer and request another order. There are numerous options if the surplus can be quickly identified and acted upon. You may have to dispose of the surplus, which could result in a financial loss.
Turnover in Inventory Tracking
Inventory turnover can be tracked by segment as well as overall. ERP inventory management systems can be used to categorize inventory in various ways and analyze whether or not your inventory assumptions are correct.
Are your A parts rotating faster than your C parts? Do you have parts from a single customer piling up on your shelves? Maybe it's time to rethink your relationship with this customer. Is your shelf-life product deteriorating before it becomes obsolete? Can you buy them in smaller quantities? Can you extend your products' shelf life by storing them in a more favorable environment? According to your accountant, your inventory rotates ten times per year. Some items may move daily, while others may not.
Savings for Businesses
You will save time and money with your ERP inventory management software. Customer satisfaction will rise as organizations improve. Moving the items with the most transactions to the front of your stock room or close together could be an example of organization. This could also imply combining the parts required for a specific order in adjacent bins. ERP can help with inventory organization. The result can be much higher efficiency and productivity in your stockroom. Employee satisfaction will improve, and profits will rise.
Inventory Management is a Benefit for Retailers
Retail ERP systems are different from other ERP systems that can manage merchandise. Merchandise refers to the inventory a business currently has available for customers interested in those products. Any retail business should strive to have the exact color and size a customer needs immediately. It arrives minutes before the customer and can be priced at a price that encourages customers to buy right away and makes a profit. This is possible. It is possible and can be done with the right ERP system for retail.
Retail is now more than just a physical storefront. Today, e-commerce is a significant component of retail. The same logic applies to inventory management. You must have the right product on hand and be able to sell it to customers, whether they are in-store or online. If your retail business sells online, your central inventory module must fully integrate with your online e-commerce system.
Management of Cost and Prices
The retail ERP supply chain component is directly related to the cost of each SKU. Successful retailers collaborate closely with their suppliers to stock the merchandise that their customers want at the lowest possible total cost. The supply chain system also enables you to connect with new suppliers who may offer even lower prices. The first objective is to have a low initial investment. The total cost of the return to the supplier includes the ability to make a payment quickly and easily with little or no penalty.
Cost can include other financial terms, such as the payment due after sales. An inventory module enables suppliers to monitor sales and inventory levels, allowing them to replenish quickly-selling items without needing a physical replenishment. Price management may also allow suppliers to offer promotional or seasonal merchandise at lower prices. This price and cost management tool should be included in every retail ERP.
Retail Stock Register
Retail ERP is essential for ensuring accurate inventory counts and separating items by size, color, or other criteria. This stock ledger should be automatically updated as customers leave the store and pay for their purchases. It is critical to immediately add any returned merchandise that is still available to the stock ledger. Retail shrinkage and other unexplained inventory losses are a sad reality. To adjust the ledger, each SKU should be assigned a reasonable rate.
Read More: Why Is Inventory Management Significant
A detailed ledger can help determine when replenishment orders should be replaced. A ledger is also useful for tracking items that are not selling so they can be returned to the store that is more likely to sell. A detailed ledger is essential for determining expenses, profit, or loss over time.
Planning and Forecasting
Because retail is highly seasonal, accurate forecasting activities are critical. ERP can be a useful tool for increasing profits in any season. How many footballs were sold in the week preceding the game's start? What was the weather like last season, and what can we expect this year? ERP does not save all of this information. However, in retail, ERP can combine its data with other data to determine how much to order and when to take delivery. A supplier may make these footballs over several months to match your needs with their production capabilities. These early-delivery footballs are part of the stock. Still, they can also be a liability because payment will not arrive until after the season starts.
These are the key features of any good central inventory module. These are your business's most important features, so ensure you have the right ERP.
ERP Inventory Management: How to Get Started
An implementation roadmap is required to reap the full benefits of an ERP inventory management software system. The roadmap is divided into three steps:
- Create the Record: InUnify all data and functions into a single ERP system or connect data from legacy systems to your ERP system for real-time integration.
- Lift the Record: Other functions, such as payroll, procurement, and advanced analytics, can be added as a layer. All of these tasks can be completed in a single record system for maximum efficiency.
- Upgrade to Advanced ERP Features: ERPs provide sophisticated functions such as planning, analysis, quality management, and analytics, allowing your business to innovate and adapt to changing market conditions.
ERP systems can handle a wide range of functions and areas and many aspects of a business. The roadmap can assist your business in moving from where it is now to where you want it to be.
An Erp System is Used to Control Inventory
An inventory management ERP system automates the functions required to ensure that stock buying, organizing, and transferring go smoothly. It also integrates the inventory requirements of customers, suppliers, and staff to maintain optimal stock levels, their respective systems, and your central database. The ERP serves as a central "brain" for inventory operations.
Diagram of ERP Inventory
Each group of the diagram has different tasks and requires different systems. Suppliers use inventory, financial and prediction applications. All of these systems must be working together. Each specialized software system must be able to communicate with the ERP system.
Assume a business to manage its inventory from conception to production. This will help you understand how ERP interacts with other systems, ERP work in tandem. ERP is in charge of production resource planning. They would work in a logical order, used to retrieve the initial product data. When a product reaches a point in its development where resources are required, the ERP integrates production with the rest of the process.
To properly manage inventory, you must have a network of people, systems, and processes. Inventory control requires more than "one system and done" when your business grows. Inventory control requires a centralized approach. Begin implementing an inventory control system as soon as possible. It would be best to put together an internal team of experts to assist you.
- Keep current inventory records.
- Be realistic about your budget.
- Establish milestone goals.
- Facilitate user acceptance testing, training, and other implementation checks.
Companies that use disparate, disconnected systems miss out on critical inventory insights that could help them run their business more efficiently. A robust ERP system with strong capabilities can turn inventory management into a competitive advantage. Keep an eye out for integrated business intelligence, which combines visual analytics and data to help managers make better decisions. You can adapt your design to grow your business by adding resources and features as needed.
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Conclusion
An ERP system's capacity to precisely track inventory, save stocking expenses, and increase working capital is its main advantage. This significantly reduces operational and administrative costs while maintaining functionality. Modern ERP systems are essential for organizations looking to improve inventory planning and increase competitiveness. Modern ERP systems can save you money and provide better inventory control. This will make customers happier and more flexible.
The deep insights and automated processes of ERP simplify inventory management and boost productivity. ERP inventory management is ideal for expanding E-Commerce businesses with multiple online shops and channels. This lowers errors and boosts efficiency.
