How ERP Systems Improve Inventory Management

27 Jul

How ERP Systems Improve Inventory Management

The right tools for the task at hand can make the work go more smoothly. Sure, you can drive a nail into the wall using the end of a screwdriver, but it makes more sense to use an actual hammer for the task. The right tool makes all the difference, whether it’s carpentry or inventory management.

But which tool is the best one for inventory management? Let’s take a look at the tasks necessary for effective inventory management and then discuss the tools that can make the job easier and more efficient.

The Art and Science of Inventory Management

Inventory management is both an art and a science. You’re balancing the needs of customers against the needs of your company to reduce costs. You’re also taking into consideration the availability of raw materials, production times, and shipping.

As you review these factors, one thing becomes clear: The more information you have about the supply chain, the better you can manage your inventory. And the better you can manage inventory, the more you can control costs, fulfill orders quickly, and satisfy customer demand.

That’s where having the right tools comes into play.

What Tools Are You Using Now?

If you’re like most inventory managers, you’re going by gut instinct much of the time when it comes to maintaining stock levels. Sure, you have some data. You can take a count of the merchandise in the warehouse and review upcoming orders. You may know the costs of inventory like the back of your hand. But it can be difficult to keep all those numbers and facts in your head.

Many people create their own systems and tools using the materials at hand. Spreadsheets, documents emailed to other parts of the company; all of these tools have their place. But today’s inventory managers know that there’s a better solution. ERP systems can help you manage your inventory more effectively while keeping abreast of other areas of the company that can influence how you manage existing inventory.

ERP: The Right Tool for Forecasting Inventory

ERP Systems such as Sage EM (formerly known as Sage X3) and Sage 300cloud (formerly known as Sage 300) aggregate data from multiple sources: sales, finance, accounting, operations, production, and shipping. Because they collect data from many parts of the company, the reports they produce can provide you with the data you need to form accurate forecasts.

For example, with ERP systems you can run reports that show you sales and shipping patterns over time. These patterns may indicate when large orders are placed by your best customers. Using this data, you can make sure you have plenty of products in the warehouse to fulfill a typical large order.

The same goes for slow periods. Every industry has them. The trick is not to overstock inventory just before a slow period, but to ramp up when the slow period ends. Using data from an ERP system, you can more accurately predict such slow times and avoid over-production and its associated warehousing costs.