Inventory Management in ERP
With the advancement of enterprise resource planning (ERP) in manufacturing, the turn was made by software developers to build a better way of maintaining inventory. In the past, inventory control was less “control” and more “guessing” as a result of delays in data entry. Before coordination through ERP methods, inventory clerks were ensconced in a paper-based systems that depended very much upon the completion and filing of paper-based inventory forms. Inventory dispositions were often not completely known for 24 hours or so—if ever.
When poor inventory control is combined with poor management in other aspects of manufacturing (selling, purchasing, scheduling, production, shipping, etc.), the results can be disastrous. Indeed, for any defined trading period, it is vital that a manufacturer (or job shop) know what stock levels must be maintained to fully, quickly, and efficiently service their customers. Without such planning, lead times can be underestimated and supply delays may exceed delivery due dates, causing missed on-time deliveries.
A robust manufacturing ERP system software is designed to overcome the paper-based inventory management by combining and analyzing real-time data from all parts of the operation. It begins by building an electronic database of the inventory. This database is not merely a “piece-count” of on-hand stock; rather, it is a multivariate approach that takes into account such notions as existing stock, vendor, costs, reoccurring sales, and average lead times for unique stock or one-off parts. Any changes in inventory are reflected in minutes, if not immediately, by the company’s ERP system, so that a worker taking an order can immediately see if the necessary raw materials are in stock.
Tracking inventory stock can also be made much easier in ERP via bar code labeling systems. Here, inventoried parts/pieces are tagged with bar code labels—each having a unique product code. When parts/pieces are removed from or added to inventory, they are scanned with hand-held devices and their stock information is input into the ERP system. Not only is the computerization of the inventory data important for purchasing (especially automated purchasing), but it also stands available at any moment to let customers know what stock is on-hand and available for immediate use in production or for shipping/delivery. Often, bar code systems are tied into graphical user interface terminals (GUI), making the inventory management process even easier.
All in all, a powerful ERP system software will provide the modern manufacturer, job shop, and make-to-stock manufacturer the means by which they can improve cost savings, productivity, reduction of waste, and greater efficiencies throughout the operation. Successful inventory management today requires that manufacturers understand their place in the supply chain, and the reliance upon others in the chain is the basis for maximized on-time delivery.