Is your inventory management out of control?
Being a custom manufacturer means that you need a lot of different parts and pieces to build your products. And as a small business you might not have the capital — or space — to buy large amounts of raw goods in advance. Managing inventory is one of the biggest challenges small and mid-sized custom manufacturers face, and getting it right can be make it or break it for your business.
Investing in a good inventory management system and adopting best practices can help you get your inventory under control, and will ensure you have the right parts, and the right amount of parts, on-hand to avoid production bottlenecks, and to complete jobs and get orders out the door on time, to ultimately keep your customers happy.
What is Inventory Management?
Let’s go back to basics for a minute and define what inventory management is. In a nutshell, inventory management is the management of inventory and stock. It includes elements such as controlling and overseeing the ordering of inventory, storage of inventory, and stocking the right amount of inventory to minimize holding costs and associated waste.
If you don’t have a good inventory management system in place you may be dealing with stock emergencies way too often — leaving you with a lack of raw materials to meet production demands, which can cost you time and money, lose you customers, and damage your reputation. Getting a handle on your inventory management will help you avoid such situations and keep your shop up and running smoothly.
How ERP Systems Help Inventory Management
As a custom manufacturer, using an ERP system for inventory management is one of the smartest decisions that you can make. Not only will you avoid the pitfalls of using a spreadsheet, and all the human error that can be associated with that, for example, missing or wrong information, but it can also save you the time wasted in manually updating and balancing inventory. By using an ERP system your inventory will automatically be integrated with all aspects of your operation from planning through operations, production, and accounting. You will be able to manage your entire operation from one system, and make your organization more organized, streamlined, and efficient.
No two ERPs are alike, but the inventory management module within an ERP will typically include the following features:
- Stock tracking and management
- Sales and purchase order management
- Multi-channel order fulfillment
- Storage management and stock transfers
- Payment gateway functionality
- Integrations with eCommerce, accounting, shipping and other operational tools
- Intelligence reports and analytics
Benefits of ERP Inventory Management
1. Inventory Tracking
Inventory management is all about knowing what stock you have on-hand, sitting on the shelf. However, unless your inventory management system is integrated with the rest of your organization, an inventory management system alone can’t effectively optimize your inventory.
An ERP integrates your inventory management with the rest of your operation, making tracking inventory throughout your organization easy. An ERP system gives your staff instant access to a centralized inventory database that’s updated in real-time. This let’s you know exactly what you can or can’t fulfill, what raw materials you actually have on-hand, as well as gives you the confidence that what is recorded in the database actually matches what is sitting on your shelf, making not only production more efficient, but financial reporting easier as well.
An ERP system can save you time and money by eliminating the daunting task of manually processing inventory management. Say goodbye to painstakingly updating spreadsheets, and hello to real-time inventory updates, which means you spend less time doing the time consuming task of manual input and more time focusing on other parts of your manufacturing business.
An automated inventory management system eliminates human error and avoids the potential issues that come with it. You will also have a complete picture of your inventory in your dashboards, giving you better visibility into your operations. And with an ERP system almost everything is automated – even your suppliers’ contacts are kept up to date, giving you more confidence and more time to get the job done right.
3. Streamline Business Processes
Accurate inventory management can help increase a manufacturer’s overall efficiency. Employees can spend their time on other tasks instead of for example trying to locate one particular piece of stock. With an ERP system you can automatically keep track of the inventory you use on each job, which for example, will let you do proper production planning as you know exactly the amount of raw materials you have on-hand, and what you need to order to complete a job.
4. Forecasting, Restocking, & Managing Excess Inventory
An ERP system keeps track of sales, purchasing, and logistics for you so that you can have the right inventory levels to match your business needs. With an ERP you can take advantage of an inventory management system that is in sync with the rest of your operation, which makes it easier for you to manage things like long lead-items, as you can know about these items during the design-phase of a project, and have more lead time to order the item and ensure you have it in time.
Knowing real-time stock levels also make it easier to replenish inventory — an ERP can either automatically reorder materials for you, or send your purchasing manager a timely reminder letting her know that items need to be reordered. Without an ERP telling you that it’s time to replenish inventory, manufacturers can face enormous costs to expedite freight when they are desperately in need of stock.
And having insight into surplus inventory in real time means you might have the opportunity to return stock instead of taking up shelf space that something more important could be using.
5. ERP Systems Save you Money
Every business owner knows that efficiency equals cost savings. Rather than paying for separate systems to handle different parts of your business, using an ERP for inventory management handles many different aspects of your business, reducing overall workload and minimizing expenses. Better managed inventory also equals more jobs out the door. With an
ERP inventory management systems are designed to reduce manual labor, by automating and streamlining processes — all of which goes hand-in-hand with growing a business. And ERP systems let you collect better quality data, which give you insights into your business to help you track your business performance and plan for growth.
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