When to consider implementing an inventory management system and what to look out for…
Your supply chain business may be at the stage on the inventory maturity curve where you want to consider extending your enterprise resource planning (ERP) functionality to provide better demand planning and forecasting functionality. You won’t be starved for choice as there are many solutions available today. They all have their strengths and weaknesses, and it is essential that you identify these by conducting thorough research.
Identify your need
First and foremost, identify whether you need an inventory management system. You are most likely running an ERP solution that has an inventory control module, and you’re using the built-in min/ max re-order feature. Take a deeper look into the functionality and results that you are getting from your current solution. Looking at the questions below, see if any of these areas are a problem and check if your current system is able to give you the necessary information and relevant recommendations to solve them.
Calculate your existing investment costs
Avoid looking too hard at your ERP costs as you will still have these no matter what. However, if you are using Excel to manage your inventory, it may only cost you a minimal annual license fee, but calculate the number of hours it takes for your staff to take in and manage this static data on an ongoing basis. Look at previous errors that have occurred by using Excel, such as incorrect formulas or macros, and what this costs you. Look at additional costs associated with not having the right information at your fingertips – for example, perhaps there was an urgent order that you had to air freight in because you stocked out of an item and didn’t want to lose a customer.
If you have identified the need for an inventory management solution, and have a clearer idea as to what it costs you by not having one, you can start your research into the many available solutions.
Integrability and deployment
Even if your ERP solution is an on-premise installation, consider an inventory management tool that is cloud-based. Cloud-based technologies are where we are all heading and when you update your legacy on-premise ERP, you will most certainly update it to the cloud. Cloud systems not only cut down on your IT expenses, but they give your staff 24/7 access to your operations and are real-time, so your data is always up to date.
You will also want your inventory management solution to integrate into your ERP. This is where the magic happens. Your data pulls through automatically and the calculations begin, providing you with order recommendations and dashboards of critical information to help you avoid stock outs and reduce your excess.
Your next step is to delve deeper into the companies behind the products.
Product functionality and pricing
Your list should now be small enough to drill down into the products and their features and capabilities. Most vendors will have online demos but consider getting them to give you a personal demo either online or physically if time and location permits. Keep your requirements-gathering simple at this stage and delve into the detail later. A full-blown set of system specifications takes a significant amount of time, effort and skill to put together. Such detail is overkill when initiating a vendor selection exercise. Rate them according to these questions:
The way the demonstration is handled pre, during and post will be a direct representation of what you can expect if you were to select them and their offering. Besides these somewhat obvious points on vendor selection, it helps if your chosen vendor has the same outlook towards running a business that you do. If your business objectives align with theirs, it will be a far more successful partnership.
Make sure that your full set of system specifications are identified and agreed on together and that the vendor can deliver on promises. Elect a dedicated employee to manage the project from implementation to sign-off and keep it going from a maintenance aspect.
Inventory is the foundation of any supply chain business, so it makes sense that inventory management be your number one goal. Inventory should be run and managed with care and precision, using tools designed to give you optimal results – results that directly show an impact on your operations and your bottom line. This is not an area of the business that takes a back seat.
Written by Barry Kukkuk, Chief Technical Officer, NETSTOCK
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