It is safe to say that inventory management is the lifeline of any distribution business. Whether you’re storing your inventory in a warehouse that you own or partnering with a 3PL, managing optimal stock levels must be maintained at all times to accurately represent demand. Inventory Management is the act of implementing processes to avoid understocking and/or overstocking which can harm your business more than you might think.
What is ERP Software?
Over the past couple of decades, technology and software have come a long way with how they can help a small business scale. Enterprise Resource Planning (ERP) Software is designed to help a business manage inventory along with a long list of additional functionalities including accounting, warehousing, contact management, commission processing, sales analysis, and more. ERP software is important for businesses looking to grow, wanting to automate manual processes, or simply wanting to invest in their business efficiencies.
Do You Need Inventory Management Software?
The short answer here is that any business with any kind of inventory can benefit from an inventory management software system. When businesses grow it can get overwhelming to track sales and purchases manually in addition to keeping up with your accounting books, sales commissions, and maintaining customer and partner relationships. The software comes into play to help manage these internal operations.
Many small businesses start off with introductory software such as QuickBooks which doesn’t have robust inventory functionality like an ERP system, requiring a software change once the business is ready to grow. Knowing what software you really need and which ones you can get rid of depends on the functionality you require and how seamless you want data to be transferred.
Below are 6 benefits of ERP software worth noting when deciding if your business is ready for the next step.
Benefits of ERP for Inventory Management
- Full and Seamless Integration
- Better Identification of Products
- Data Security
- Improved Decision Making
- Enhanced Customer Service
- Increased Automation
Full and Seamless Integration in Real-Time
ERP software is completely interconnected with all areas of the business in real-time. That means if a shipment of 1,000 red t-shirts arrives Wednesday morning and by Wednesday afternoon someone purchases 100 red t-shirts, the system will automatically calculate the remaining inventory as soon as it recognizes these changes.
Better Identification of Products
Depending on the goods you sell, identifying products with numbers or codes helps to optimize your inventory organization. Retailers often use SKU numbers to help identify a product and track its movement. For example, you might see a Medium Fall Green T-Shirt labeled as MFALLGR-SHIRT.
Serial Numbers and Lot Numbers are often used in the Food & Beverage or Pharmaceutical industries because it is important to understand the movement of these products. These identification codes help to avoid expiration and to help catch illegitimate products. Lots/Batches can also be extremely helpful during product recalls since you will know exactly what supplier the product came from and which customers they were sold to.
When researching ERP software, you could be presented with two types of deployment: On-Premises and The Cloud. In more recent years, Cloud-Based Software has taken the reign because of the security it provides your data and its budget-friendly factor. Manual methods of inventory management may include the use of programs such as excel saved on a computer’s local hard drive which does not offer the security and flexibility an ERP system with a backup in the Cloud can provide.
Improved Decision Making
Having access to accurate historical data such as the number of footballs sold last summer can help you determine forecasting measures. Buying stock too early can actually harm your inventory management as it takes up space other products that are in season could be placed. ERP software gives you the information you need to make the best decision for your inventory management flow of goods. A cool report is the Inventory “Hits” Report which highlights the number of times a product appeared on an invoice during the specified reporting period.
Enhanced Customer Service
In addition to seeing sales trends and other base application reports, ERP software is designed to produce any report you build. You can gain insight into purchasing trends and behavior however you want using SQL Server Reporting Services or Power BI. This kind of reporting gives you insight into what customers like and can allow your salespeople to deliver more efficient customer service because the information is easy to find and accurate.
There are quite a few inventory management tasks that can be easily automated including automatically updating pricing among all your selling channels or automating purchase orders. When purchasing commodities from a supplier, pricing might change requiring your employees to cross-reference pricing and quantities to ensure the numbers match in the back end. Automating purchasing orders doesn’t only speed up the process for your employees but always reduces mistakes prone to human error.