What is erp inventory?
ERP inventory system is a streamlined method of conducting business. Businesses may manage all of their business activities from a single platform with the use of ERP inventory management solutions. The administration of inventory, finances, operations, planning, & logistics is typically included.
Businesses may manage all facets of their operations, including inventory, finance, planning, logistics, and planning, on a single platform thanks to inventory management systems. The entire organization receives real-time inventory information from an ERP inventory management system. For businesses who want to expand, have complex supply chains or processes, need advanced automation, sell a lot of products, operate on a “just in time” basis, or just want to maximize the return on their inventory investments, this is a critical ability.
ERP is the process of centralizing and integrating a number of essential corporate tools and activities. A comprehensive approach to business is intended to be provided by this integration and centralization, where only one workflow informs another. For instance, businesses that combine their forecasting with ordering processes can more efficiently manage their inventory levels.
The name also refers to the kinds of technologies that streamline this procedure by fusing the workflows and resources used by companies to conduct their operations. ERP inventory management solutions serve as a hub that houses all the resources required by organizations to manage their inventory. One platform that houses each of the tools makes everything more accessible and saves managers time.
Types of Inventory
Raw materials supply chain
The inventory of raw materials includes components used to create final goods. Commodities or parts that companies purchase or remove themselves can be considered raw materials. They are all the stock that has not yet been put to use in production, to put it simply. With such a debit towards raw materials and a credit to accounts payable, raw materials are treated as an inventory asset in your accounting. Direct and indirect raw materials fall into two distinct groups.
Inventory of work-in-progress
Work-in-progress inventory includes all raw materials necessary to make a final product. Each of the unfinished bicycles in your store, if you make bicycles, may be regarded as WIP inventory.
All of the materials being used on a production floor can also be thought of as WIP inventory. Raw materials on the shelf and finished goods that are ready to be sold do not belong in the WIP inventory category since they are in the middle.
Inventory for maintenance, repair, and operation (MRO)
MRO inventory consists of supplies needed to maintain a manufacturing company’s efficiency. Your MRO inventory can contain whatever you need to maintain or repair manufacturing equipment, including employee uniforms, industrial equipment, cleaning, and operating supplies, safety equipment, and uniforms for your employees. Due to their importance in sustaining operations, MRO goods make up a large number of manufacturing purchases.
Goods-in-hand inventory
Items that are finished are those that are suitable for display. They are made from raw materials obtained from a supplier, and then they are prepared for sale to customers. Retailers categorize finished things for sale as merchandise after they buy them. Because it is anticipated that finished goods would be sold as quickly as feasible during a specific accounting period, they are considered short-term assets.
Separating the stock
Any extra parts or raw materials which allow a manufacturer to carry on with production even in the event of unanticipated supply stockouts are included in the decoupling inventory. Typically, inventory consists of a number of components that must come together before the finished item can be sold. A manufacturer can lessen any bottlenecks and lower the likelihood that production will stop entirely by decoupling, or breaking down, their inventory. The biggest winners from decoupling inventories are the bigger producers of goods who can produce stuff in bulk.
Petroleum stock
Any inventory that is currently being transported between producers, distributors, retailers, or other destinations is referred to as pipeline inventory (also known as in-transit stock and transit inventory). In most circumstances, a firm has to manage more pipeline stock the larger its operations are.
Material inventory for packaging
Any things that your company utilized to package the goods you sell are included in your inventory of packing materials. The tube that toothpaste is stored in when being made could be categorized as packing material. Packing materials could include any boxes and packaging that are used to send or store your goods.
What is the function of inventory?
The goal of the inventory management system desired the quantities of a given product or item in stock. The required level depends on the expense of investing in inventory and the standards for customer service. The problem is deciding what amount to order, when and how to order, as well as how to manage continuing activities after the parameters have been established. The goal is to discuss the procedures and methods for managing inventories. The qualities of each item must be taken into account when determining the necessary inventory levels.
The main goal of inventory is to ensure that there is always a consistent supply of products available for use. In order to effectively perform this responsibility, your organization should seek the ideal balance between having too much and not enough stock, without ever running out. Your business will continue to run smoothly as a result of this effective balance, which will increase cash flow and profitability.
Benefits of inventory
Enhanced reporting
Decision-makers may fully benefit from data-driven insights by having accurate inventory data, which helps them to identify top-performing SKUs, landed cost of sales (COGS), and sales by location as well as the channel. ERPs provide customized reporting, which results in accurate and useful data without taking much time.
Transparency in the supply chain
A company’s ability to successfully integrate back-end systems & interact with its partners reduces the likelihood of upsetting surprises, such as a crucial component not arriving when expected or even being priced higher than is reasonable for the product. Linked ERP systems also enable the synchronization of order and shipment data.
More precise counts
ERP systems monitor and report parameters including average turnover rate & COGS as well as excessive stock, shortages, planned replacement, obsolete inventory, and surplus inventory. The system measures and controls product transfers via shipping and receiving at the warehouse.
Analyzing the entire inventory
ERPs offer analytics, such as cost of sales, turnover rates, and shrinkage, at each stage of the inventory movement. Businesses can increase inventory efficiency by looking at important inventory data.
Quality controls
You may specify inventory quality checks using logic in the majority of ERP systems. You can indicate, for instance, that products must adhere to environmental or safety regulations, and the system will then look up the products’ safety information. The system will alert workers to amend the item if it thinks it might not be in compliance.
Planning for inventory
Each product’s inventory status is documented in the ERP, allowing employees, partners, & customers to check the availability and the number of items in stock and those on order. Planning is made simpler and customer satisfaction is raised by having company inventory history & KPIs readily available.
Counting cycles
An ERP system aids in directing staff members via a thorough and well-thought-out cycle count process. Cycle counting on a regular basis enhances inventory records and serves as a crucial check and balance in your warehouse operations.
What effect does inventory have on businesses?
For any manufacturing and trading company, inventory is a crucial asset, thus it’s critical for business leaders to comprehend what it truly means. In addition to the general definition, some sectors of the economy, such as manufacturing and services, employ specialized definitions that take into account all of the assets specific to those sectors. Business owners can better understand whether their inventory is serving them by understanding the many forms of inventory, including those that aren’t directly used in accounting.
Conclusion
Businesses lose out on important inventory information that may help them manage their operations more successfully when they have disconnected, heterogeneous systems. Inventory management can be changed from a routine activity to a competitive differentiator by a good ERP system with excellent inventory management features. To assist managers in making smarter decisions, keep an eye out for built-in business analytics that blends data with visual analytics. A design that is adaptable will expand your company, allowing you to add resources & features as you require them.
Frequently Asked Questions
ERP inventory management sometimes referred to as enterprise resource planning inventory management, helps companies run their operations more effectively and efficiently.
The ERP & MRP legacy software which records the most basic information on inventory would have to be included in the broadest definition of the phrase “inventory management software.
All team members ought to have access to data on stock levels thanks to modern technologies.
Businesses need a system that really can assist them in planning for development and give them a heads-up on impending changes in demand, particularly in light of today’s supply-chain difficulties.
