Effective Inventory Management with ERP software
The first question of effective inventory management is not, “how much inventory should we have?” Nor is it, “when should we make or buy something?” The most important question to ask in today’s manufacturing environment is, “given our system and environment, where should we place inventory to have the best protection?”
Once you have established and replenished your inventory positions, the actual levels of your inventory have to be initially set. Over the course of time, group and individual traits can and will change as new suppliers and materials are used, new markets are opened and/or old markets deteriorate and manufacturing capacities and methods change.
Inventory controls within an MRP system will allow your company to adapt to group and individual part changes over time through the use of several types of adjustments. So as more or less variability is encountered or as a company’s strategy changes, so will your MRP system. It will allow you to adapt and change it to fit the environment of the time.
What could happen without an ERP & Production Control Software solution?
It is imperative that companies control the types and quantities of material they purchase, plan which products are to be produced and in what quantities to ensure that they are able to meet current and future customer demand, all at the lowest possible cost for both you and your customer.
Making a bad decision in any of these areas will make the company lose money.
- If a company purchases insufficient quantities of an item used in manufacturing (or the wrong item) it may be unable to meet contract obligations to supply products on time.
- If a company purchases excessive quantities of an item, money is wasted – the excess quantity ties up cash while it remains as stock that might never be used at all.
- Beginning production of an order at the wrong time can cause customer deadlines to be missed.
This is where an ERP tool can deal with these problems. It provides answers to several questions:
- What items are required?
- How many are required?
- When are they required?
ERP can be applied both to items that are purchased from outside suppliers and to sub-assemblies, produced internally, that are components of more complex items.