Inventory management: 6 reasons why an ERP solution is not enough
Do I really need special inventory management software if I already have an ERP system in use? Many purchasing and supply chain managers still mistakenly believe that an ERP system and Excel are enough – saving on the wrong end. The question of the need for inventory management software is quite simple to answer: Do you value efficient and modern scheduling? If the answer is yes, it is important to rely on intelligent inventory management software. We explain this in our blog post.
Before you rush to turn off your ERP, first of all: Our goal is not to deny ERP systems in general the benefits. They are the standard when it comes to supporting and organizing all business processes of companies across functions, but not in inventory management. The systematic planning, control and monitoring of all stocks is much more than just an appendage to the ERP system. Many system houses have already recognized this and offer software solutions for inventory optimization by third parties directly. Instead of just a basic ERP, you should therefore also integrate a special solution that helps you optimize your processes and thus save costs.
The following 6 points show the disadvantages of using an ERP system for inventory management and why a special solution is the right choice:
1. High process costs
If you rely solely on your ERP or Excel system in disposition, this usually means an enormous manual effort. This is because the apparently saved costs reappear elsewhere: several employees are busy controlling the data. This is coined with high personnel costs and unnecessary time.
At the same time, the Excel method is error-prone. You can never be sure that the determined stock numbers have been recorded correctly. In addition, parallel editing by multiple dispatchers in Excel is not possible. This runs the risk of being forgotten by changes that are not immediately registered. A digital inventory management tool, on the other hand, significantly reduces manual effort and ensures fast, automated processes.
2. Overstocks
A major shortcoming of the ERP system and Excel tables is the lack of transparency and forecasting possibilities. For you as a dispatcher, it is not clear which items are currently and in the future in demand. For fear of being unable to deliver, more goods are ordered than is actually needed. These fears result in a high level of capital commitment. By reducing over-security stocks, you are releasing capital. This, in turn, is available elsewhere – for example, for the acquisition of new storage technology or other investments.
3. No forecasts
ERP systems are basically purely static booking applications – and are therefore overwhelmed with dynamic calculations. Minimum and maximum values are entered, which the system is oriented towards. In practice, this means that if the defined quantity is less than x, quantity y is reordered – regardless of seasonal fluctuations or trends. ERP systems only work with historical data. In other words, they only know which items have been in good or bad demand in the past.
However, ERP systems cannot predict how demand will develop in the future. Inventory planners then often place orders out of their stomachs. However, this only works if the employee has decades of experience – and even that does not guarantee that the ordered goods meet the actual demand. Inventory management based on an ERP system is out of date and does not meet modern requirements.
4. Poor delivery capability
Market-standard ERP systems follow rigid structures and often only reflect the stock situation. Therefore, it is almost impossible for buyers to anticipate seasonal fluctuations or trends and to take them into account in the ordering process. You cannot accurately calculate high increases in demand with your ERP system. In the worst case, therefore, out-of-stock situations and dissatisfied customers are at risk. In contrast, dynamic IT solutions incorporate trends and forecasts together with the existing data into their calculations.
5. Inflexibility
The more complex your enterprise infrastructures are, the more unsuitable an ERP system is. This is not designed for use in multiple stores or warehouse locations. If the store business plays an important role for you, you should choose a software solution that has a multisite capability. Programs specially designed for inventory management can virtually map several warehouses. This gives each site access to all relevant data. Such tools can also identify shortages in various sours.
6. Negative life cycle assessment
The inability to predict an ERP leads to serious problems, especially in the food trade: Incorrectly assessed needs and safety stocks determined from the guts can lead to spoiled food. With an intelligent inventory management tool that includes external factors such as weather conditions or holiday periods in the forecast calculation, food waste can be effectively avoided.
In addition, special inventory management solutions enable optimum utilization of trucks and shipping containers. The software has a truck and container optimization function as standard. This automatically replenishes orders in such a way that only fully loaded trucks or containers go on the journey. In this way, users save delivery costs and at the same time protect the environment by reducing CO2.
Conclusion
Modern inventory management is not feasible with a standard ERP system. Companies should therefore rely on specialized and powerful inventory management software that produces up-to-date forecasts and takes seasonal characteristics and trends into account when calculating future orders. This provides companies with an important basis for smart logistics processes in trade, industry and production.
Are you looking for a suitable solution to optimize your stocks? Please contact us!
Here you will find our guide to the introduction of digital inventory management.
