There was a time when the task of keeping track of the inventory was done with pen and paper. Companies used to have gigantic file cabinets with thousands of compartments all over their premises. The filing process was complex and time-consuming as the employees had to organize the files according to various categories (Issue date, department, managers, priority status, etc). There was another headache as well. When the cabinets exceed the capacity, some of the files are needed to be relocated or dumped to make a place for new ones. This is when you need to know how to manage inventory effectively.
This inefficiency has ridden and error-prone business processes finally came to a halt. The credit goes to ERP and automation solutions that started to solve both regular and critical business problems. These solutions not only resolved the issues but also provided accuracy and mobility to the organizations.
The features and specifications of different ERP solutions can vary. But a good ERP solution for inventory ensures some minimum benefit for your organization. In this write-up, we will cover those aspects and give you some valuable tips on how to better manage your inventory.
What is Inventory Management
Inventory management is a practice which helps companies to know what, when and how much stock they will have during that time. This system tracks all the information on inventory from economy shopping, order management until they are fulfilled.
The practice also helps you in identifying trends so that you do not face any back orders or excess inventory as it will cost your company money so you should be fully aware of things that happen.
Importance and Benefits of Inventory Management
There are many reasons why inventory management is important. Perhaps the most important reason is that it can help prevent stock-outs. When inventory levels are low, businesses may run into the issue of stock-outs, which can lead to lost sales and unhappy customers. Additionally, effective inventory management can help businesses save money by reducing excess inventory and preventing inventory shrinkage.
So when there is effective inventory management then businesses can avoid stock outs, which can lead to gain in sales and happy customers. This is why when you have a business that deals with products and customers, proper inventory management becomes a imperative part in their business set up.
Inventory Management Key Benefits Include:
- Businesses being able to keep track of inventory levels in advance leading them to avoid stock-outs and loss.
- Improve in cash flow due to regular sales from inventory, as cash is always moving in business.
- Customer satisfaction due to not needing to wait for the products that they are wanting to order.
The Ins And Outs of Managing Inventory Effectively with ERP Solutions
As we know by now, inventory management is important for businesses because it helps to ensure that inventory levels are maintained at a level that meets customer demand. But in any business, this management process of inventory can be conducted more effectively with ERP Solutions, and here are reasons how:
Eliminate Repeated and Inaccurate Data Entry
An ERP system eliminates the requirement of giving data entry at every single point of the business chain. Let’s break it down for you. If you are doing everything manually, your employee at the stockpile has to count the products and note it down.
Then it will be handed over to the data team to input these numbers in an office suite. In case the managers are using a dedicated solution to analyze the data pattern, they will have to upload the dataset again from their point.
In this cumbersome process, a high chance of data inaccuracy exists. An ERP solution can provide you a way out of this problem. You do not have to input inventory data manually at every point because it will provide multi-layer integrated software to support your operation.
Track Your Products Effortlessly
Product tracking constitutes a major part of inventory management challenges. Business owners and inventory managers are accountable for every single movement in the stockpile. In many businesses, stock-keeping units exceed hundreds in number.
Understandably, these products are of different sizes, shapes, and exchange styles. Some of them can be products in bottles where others can be solid bakery items. The module of distribution will most definitely change according to these properties.
Given the situation, an ERP can save you from loads of trouble. It can allow you to track their movements of all your products in a dashboard.
Better Forecasting with Historical Data
The store of data in the system continuously is one of the greatest business assets. It helps you to find out useful trends and patterns of your product inventory.
Based on that, you can take a major data-driven decision for each product SKUs that are stored across your inventories. For example, you can study the historical data of a product to understand its seasonal demands and design future strategies accordingly.
Some of the premium ERP solutions provide an analytics dashboard with forecasting features. Or you can export the data to .csv format and create your own forecasting model using Microsoft Excel or other statistical solutions.
Ensure Coordination Between Sourcing and Sales
One major challenge of inventory management is making decisions related to goods sourcing and sales. There has to be a balance between these two otherwise it will affect the profitability greatly. For example, you need to know at which point of the day you can afford to have a certain number of products in the inventory.
If there is a mismatch, either you might lose sales or it might result in obsolete inventory. None of these is any favorable scenario for a businessperson.
Integrate your Accounting Module in Real-time
A solid ERP solution should let you integrate the inventory system with the accounting module. The major benefit is whenever there is a movement in the stockpile, it reflects directly in your account book as well. This way you can have a better grip on your value chain and take decisions based on the total picture of your business.
With the increasing speed of the internet and data transfer, tech companies are more into real-time solutions. It adds mobility within an organization thus allowing the employees to perform some of the tasks remotely.
Manage Your Inventory Efficiently With the Right ERP Solutions
These are some of the broad areas that an ERP solution will help you to perform. But you, as a business owner-manager should be tactful about making a decision. There are certain factors that will influence how you approach ERP adaption in your company.
Financial budget, human resource, organizational culture, business process, infrastructure – are to name a few of these factors. It varies across organizations, true. But here are some smart questions that you should ask (regardless of your company) to assess how efficiently you are managing your inventory.
- What type of reporting system is used in your inventory? Does it provide actionable data in real-time?
- How the order management is handled by your provider/vendor?
- What is your daily average obsolete stock and how much is it costing you?
- What is your process of eliminating the obsolete/bad inventory?
- Do you have a systematic approach to forecast the demand/inventory requirement at a particular time?
- How do you adjust your stock quantity with the storage capacity?
- Is there a structured process to maintain the security of the inventory management process and data?
So, take your time to answer these questions. After that, take your decisions based on the finding. It will pave way for profitability and operational excellence in your organization.