The Role of ERP in Inventory Management: 9 Benefits

In your quest to simplify and streamline your manufacturing operations, have you considered how well your current inventory management system is working? An inefficient or outdated platform can slow production times, frustrate customers, and impact your bottom line.

In contrast, a modern enterprise resource planning (ERP) system can give you the visibility you need to control inventory levels and manage your stock. The result? Happier customers, quicker turnaround times, and higher profits.

Today, we’re looking at the role of ERP in inventory management. Here’s everything you need to know. 

How Can ERP Optimize Inventory Management?

Put simply, the inventory data that an ERP system provides can help business leaders make more accurate and timely decisions. With the right platform, authorized users can access a centralized dashboard to quickly analyze the following functions:

• Logistics
• Finance
• Operations
• Stock

With all this valuable information in one place, there’s no need to access various, disparate systems. This reduces the risk of user error and improves overall efficiency. 

Integrating ERP With Inventory Functionality

Many end-to-end ERP systems and manufacturing ERP systems contain the advanced inventory management functionality that complex, global organizations need.

However, other ERP solutions contain only basic inventory management functionality. Fortunately, organizations can expand these capabilities by integrating the system with a dedicated inventory management system. 

With this integrated solution, they can enjoy centralized access to a variety of data-driven, real-time insights, including:

• Purchase updates
• Reorder statuses
• Shipping timelines
• Storage capacities
• Warehousing logistics
• Receiving data
• Customer satisfaction 
• Loss prevention strategies
• Stock turnover

The ability to access this information in just a few clicks can deliver a major competitive advantage. With this data, companies can make more informed purchasing decisions and develop more accurate forecasts.

As a result, they can meet sudden spikes in demand without keeping excess inventory in stock. 

The Role of ERP in Inventory Management: 9 Benefits

Whether you plan to expand your business or simply want to standardize complex workflows, there are many advantages to inventory management ERP functionality:

1. Simplify Replenishment Orders

When it’s time to restock inventory, organizations must ensure they’re replenishing their stock at an appropriate rate. An integrated ERP system can categorize parts for easy reordering, which lowers the total number of transactions and improves inventory accuracy.

2. Achieve Supply Chain Transparency

There are many issues and unwelcome surprises that can occur in a supply chain. Something as seemingly minor as a component missing its delivery timeline can have major consequences. 

ERP software integrates business functions and allows organizations to communicate directly with suppliers and other partners. This way, there’s visibility and transparency at every turn, allowing early issue detection and quick remediation. 

3. Spot Surplus Inventory

Surplus inventory drains a business of potential profits. It’s critical to spot it as soon as it occurs and take action immediately.

Sometimes, the issue relates to a dip in buyer demand. Other times, a company may stock up on extra inventory thinking it’s a smart buy, only to find it’s costing them more than it’s worth.

ERP software identifies surplus inventory early enough that organizations can remedy the problem. This might involve salvaging a surplus by returning the items or swapping them for a different order.

If too much time passes, remediation options might not be available, and the organization may be forced to dispose of the material. 

4. Track Inventory Turnover

While most inventory management systems allow organizations to track overall turnover rates, an ERP system can deliver this data on a more granular level, allowing companies to see specific numbers by segments. This way, they can analyze inventory predictions and make changes as required.

5. Create Better Reports and Forecasts

A robust ERP platform can provide timely information on a variety of inventory-related factors, including:

• Top-performing SKUs
• Sales segmented by location
• Sales segmented by channel
• Landed cost of goods sold (COGS)

Organizations can use this data to create custom reports that enable better-informed decisions, and they can do so in a fraction of the time it would have taken them using legacy technology. 

6. Automate Quality Checks

In many industries, products must meet certain industry specifications for quality, safety, or environmental control.

With an ERP system, companies can set parameters around these checks and ensure they’re carried out. Once they define the standards, the system will look for the required information on each product. If it identifies any instance of non-compliance, it will notify the right employees. 

7. Manage Product Cost and Price

To turn a profit, retailers must work closely with suppliers to stock in-demand merchandise at the lowest total cost possible. This means that not only is the initial cost low, but returns are easy and inexpensive to perform. 

Suppliers can use an ERP system to monitor sales and inventory levels so they can replenish their fastest-selling items and ensure they’re always in stock.

They can also use this data to optimize their pricing during times of high demand, offering discounts or promotions in response to seasonal fluctuations. 

8. Optimize Cycle Counting

It’s no secret that cycle counting can be one of the most time-consuming and laborious parts of inventory management. Using an ERP solution to simplify the process can improve inventory records and ensure successful checks and balances. 

9. Improve Customer Satisfaction

When an in-demand product is out-of-stock, most customers have no problem buying from competitors. This is why it’s critical to use an ERP system for inventory planning. 

With ERP, organizations can easily see the inventory status of each item. They know exactly how many of each product they have on hand and can check availability within seconds.

With this data, organizations can plan ahead to avoid stockouts and improve customer satisfaction. 

Learn More About ERP in Inventory Management

If you’re thinking about an ERP implementation at your organization, it’s important to ensure that the software you select will include the depth of functionality you need. This is especially the case with inventory management functionality.

While we’ve outlined fairly basic functionality in this post, there are many technological advancements that the top ERP providers are incorporating into their systems. You can learn more in our 2022 Top 10 Manufacturing ERP Systems Report.

You can also learn more about the role of ERP in inventory management by contacting our ERP consulting team below. Your free consultation awaits.