Inventory management used to be paper-based and consisted of numerous files stored in filing cabinets that might stretch as far as the eye could see. Every once in awhile these files had to be cleaned out and trashed to make room for more files. Accurate counts of quantities took time and were not always immediately available. Inventory was also based more on guesswork than data.
ERP inventory management takes control of a business’ inventory such as purchasing, shipping, and selling. ERP management enables a business to have instant and accurate access to their inventory at any time in order to meet customer demand. But what is ERP inventory management? What does ERP stand for? Here is an overview of the management system that has been adopted by numerous companies across the globe.
What is ERP?
ERP, or enterprise resource planning, is a computer network system that uses a database of information that is company-wide accessible. ERP is designed to replace paper-based systems by analyzing data from all areas of a company’s resources. ERP covers all functions of a business such as purchasing, manufacturing, distribution, and inventory management.
By using an ERP management system, a company’s inventory is stored on a database that is comprised of physical stock, costs, vendor accounts, and lead-times for re-ordering stock. ERP management systems can improve costs, productivity, reduce time lag, reduce waste, and improve overall efficiency. To fully use an ERP inventory management system, a business needs to understand the relationship of their company compared to the rest of the supply chain. By understanding where they fit in, a company can improve delivery of products and services.
What Does ERP Inventory Management Do?
ERP management uses bar codes to keep up with inventory items. This makes tracking stock much easier. As the bar-coded items leave inventory, they get scanned and their product information is entered into the ERP inventory management system. Placing bar code labels on stock helps companies save money because it keeps the list of stock updated. Employees can easily see when certain quantities are low and need to be re-stocked. Customer service also benefits from this because businesses and customers can see what products are immediately available.
Installing ERP Inventory Management
ERP inventory management systems are often complicated to install using in-house IT. Most companies hire a third party contractor to come in and install the software and hardware. These inventory management firms offer not just installation but also offer consultation and can customize the system to a company’s needs. Hiring a third party is definitely more cost effective as opposed to a company doing all the work themselves.
There are numerous consulting firms that install ERP inventory management software and systems. Once the system is installed, these firms can help train a company’s employees in how to use the software. They also act as tech support as a company learns their new system.
Installing an ERP inventory management system is not a quick and easy task. The length of time to install the system depends on the size of the company, customization needed, and size of the job. Since ERP systems are divided in modules, it is easy to divide the installation process into several stages. On average, the amount of time to install a typical ERP system takes several months to install. Large projects can take up to a year.
Advantages of ERP Inventory Management
ERP inventory management has many advantages. The main advantage for a company is that the ERP system is company-wide and involves only one software system. Companies that do not use ERP management will sometimes have several different software applications that are not compatible with one another.
Some other advantages include:
- Proper communication between different areas.
- Tracking of orders from the time the order was received to its delivery.
- Keeping up with the revenue cycle from when the invoice is issue through when the payment is received.
- No longer have to keep up with changes in different software systems. The one system is tied together.
- Provides a ‘top down’ overview of the workings of a company.
- Reduces the risk of loss of information
- Sets up a form of security to protect against theft from outside or within a company.
Disadvantage of ERP Inventory Management
Despite the advantages businesses receive from using ERP inventory management, there are also some problems with it. Most of these disadvantages stem from inadequately trained employees as well as compromised data. But there are other concerns that can arise from this type of system.
- Customization of the ERP inventory management system is limited.
- Reformatting a business to make it more compatible with an ERP system and thus conform it to industry standards may cause a loss of advantage over the competition.
- ERP inventory management systems are not cheap.
- ERPs are not compatible with every type of business. They have been known to impede delivery of goods and productivity as the company tries to adapt.
- By creating a company-wide system that connects all areas, it makes it hard to figure out accountability. Problems that may arise in one area could mistakenly be blamed on a different area.
- Not all departments in a company are willing to share information. This withholding of sensitive data can interrupt the workflow.
- ERP inventory management systems may to too comlex for the needs of a company.
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