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5 Ways ERP Inventory Management Levels Up Your Business

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Lose control of your inventory and you’ll feel as if your business were skidding on an icy road.

Growing fast? Your business is guaranteed to hit black ice.

Your business may already be sliding due to ineffective inventory control. For example, you may:

Lose sales and productivity

If your inventory underestimates your raw materials on hand, your production may have to slow down or shut down. You won’t be able to fulfill your customer orders on time or at all.

If you’re part of a supply chain of interdependent businesses contributing to a final product, your inventory shortage impacts all the companies counting on you. You may pay penalties, tarnish your reputation, and lose vital partnerships.

On the other hand, you don’t want to be carrying a surplus of raw materials in your inventory. That excess will tie up working capital, which only a sale can release.

Produce inaccurate financial reports

Think of all the financial reports you produce in which inventory numbers have a material impact. How would your financial lender perceive your account if they couldn’t rely on your inventory reports? What would happen to your potential for a sale of your business? How accurate would your tax returns be?

Shackle your growth

When you grow, your inventory will grow with you, and so will the challenge of managing it. To grow cost-efficiently, you’ll need to have total visibility in real time into what stock you have, where it is, and when you’ll need more.

Handicap your decision-making

Your inventory data may be “dirty.” When your stock is stored in multiple locations, numerous members of your team, inconsistently trained, will input and store that data in different systems, e.g., inventory-tracking modules for basic accounting software, or even in Microsoft Excel.

The result?

Data that’s polluted with inaccuracies, duplications, and incompletions — to name only a few issues — residing in silos that don’t communicate with each other.

When you need to make an inventory-based decision, how quickly will you be able to retrieve this data? When you have it, how reliable will it be? Basing your decisions on this unreliable data, you may feel as if you’re driving blind.

But there’s no need to run your business this way. You can run your company with 360-degree visibility into your inventory and your entire business.

Manage your inventory with ERP system.


What is the role of an ERP system in inventory management?

An Enterprise Resource Planning (ERP) system has a module for each of your business functions, from inventory to financial management, and from human resources to customer management. By connecting all these modules, and thus your operations, an ERP system centralizes and organizes the data you standardized for all these functions.

For example, when an order is entered into your ERP system, your inventory in all locations updates automatically in real time, shipping gets notified, and you invoice in a few seconds, with little human intervention and a much lower rate of error.

By eliminating and automating processes, an ERP system saves you money and time. Above all, it offers you real-time visibility into all your operations.

What benefits of an ERP inventory management system can I expect?

ERP software comes in hundreds of different variations, but working with a first-tier ERP inventory management module you can expect the following features:

  • Stock tracking, management, and analysis
  • Lot/batch and traceability management
  • B2B e-commerce functions
  • Integrated Warehouse Management Systems (WMS) and inventory transactions
  • Order validations
  • Data integration with finance and accounting, sales, CRM and production modules
  • Intelligence reports and analytics

Together, these features generate the five major business-enhancing benefits of an ERP inventory management system, as follows.

1/ Gain full visibility into your stock, in real time

Before your ERP system implementation, you may have assessed your inventory quantities visually or with occasional physical counts. These methods could lead to inventory:

  1. Overstocking. If your business works with seasonal or perishable goods, overstocking leads to unsold goods and costly waste.
  2. Understocking. Running out of components can slow or stop your production and lead to lost sales.

But once your ERP system is in place, everyone from your salespeople on the road to your staff in the warehouse will have access to the same inventory information in real time.

Because your ERP system updates in real time, the ten units you may have had in stock in the morning, may have become seven after lunch due to sales in your web store. When your salesperson Susan meets in the afternoon with a customer who wants five units, Susan can accept the order with peace of mind, knowing she can fulfill the order.


2/ Stay on top of your entire production chain

With full visibility into your inventory, sales, and production, you know in real time what components you have on hand, what your customers have already committed to, and what is in production.

In addition to this full visibility, your ERP’s inventory management module allows you to trace the history of any SKU in your organization. Thus, should you need to provide audit support to comply with the highest quality standards of your industry (e.g., the food and beverage sector), you can do so with a few mouse clicks.

Guided by your ERP system, your purchasing team’s replenishment of inventory becomes much easier. For example, your ERP system keeps a history of price requests, purchase orders, prices, and forecasts. That history makes future planning simpler and faster.

Furthermore, your ERP system can notify your purchasing team when quantities of unit X drop below specific thresholds, or even order unit X automatically so your production and sales can roll on uninterrupted.

This forecasting capability enables you to reduce the huge cost of rush deliveries for components at the last minute. It also supports your just-in-time inventory goals, so you can reduce storage costs while eliminating inventory shortages and backorders.


3/ Analyze sales trends with greater insight

Customer demand for the components of your inventory will vary. In fact, if your company is like many others, 80% of your sales will come from 20% of your products. 

To keep your inventory mix aligned with customer demand, your ERP system's inventory management offers advanced features that allow you to automatically determine what the optimal inventory mix should be, and what minimum and maximum quantities to maintain by season.

For example, the analytics supporting this feature allow you to identify the goods that have:

  1. the highest annual consumption value
  2. average consumption value
  3. the lowest consumption value.

This advanced feature enables you to optimize your production, reduce your inventory-carrying costs, and make decisions that support your growth.


4/ Unite all your inventory into a single system

When your business sells goods in multiple locations and channels (i.e., e-commerce, distributors, physical stores) and operates in different territories, manually tracking your inventory can easily become a paperwork nightmare that produces questionable data.

An ERP inventory management system allows you to:

  • See your stock movement and ensure its availability
  • Reduce your costs through improved inventory control
  • Distill key data and relay it in a dashboard.


5/ Improve customer experience and increase sales

As a result of your ERP system implementation, you’ll find your business transforming into a more efficient and agile organization. The reduction of manual labour and errors, the automating and streamlining of processes, and the greater visibility into your inventory and all operations means your teams will have more time to:

  • Support, and sell to, customers
  • Finetune and innovate products and processes
  • Develop new business opportunities
  • Make better decisions faster.

Consequently, your business will produce more, save more, ship more, and set itself up for healthy growth.

A costly manual inventory management process may have been initially one of the factors driving you to look into an ERP system. But in the end, the benefits of an ERP inventory management system led you to level up your entire business.