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The Inventory Mentor

Sep 20, 2016

Does your ERP handle inventory planning?


When talking inventory planning, we often get some version of this basic question:

“Doesn’t my ERP handle my inventory?”

Since it’s a common concern, let’s take a look a typical ERP set up for a business that manages inventory. You’ll see why your ERP wasn’t built for optimal inventory replenishment tasks, but you’ll also find out that your ERP can be the key to helping you unlock a better inventory management process that saves you time, money, and headaches.

How you use your ERP

First, let’s identify why you’re using an ERP solution in the first place. You implemented your ERP to make sure the accounting aspects of your business are addressed properly and accurately.

Your software system requires a whole range of checks and balances, and it needs to cater for all sorts of unique scenarios that you have in your company. That’s a lot for an application to handle, and most ERP systems do just fine in that space.

Add-on ERP functionality

After that’s all accounted for, many businesses look to sort out HR, CRM, and a whole lot of other areas with similar-sounding acronyms within their ERP. When you add all of that up, what do you have? A rather complex ERP solution that takes more and more time to implement and a little tougher to work on. You add more training and more advanced users to the team to do the day-to-day work with some extra controls and checks.

Given that, shouldn’t your ERP have inventory planning and control functions, too? In fact, many ERP solutions tout their MRP and production features, which are certainly necessary to help with the accurate calculation of finished good products and execution of the assembly process. It must be pointed out, however, that your ERP doesn’t quite manage the future planning aspect as well as the way you’ll need it to.

This is often the key aspect we highlight: your ERP is all about control and execution. Some ERP systems add a couple basic tools for planning, but they seem to all approach it with the same checks and controls used for execution type functions. And what’s the result? A very complicated setup that will never work properly, unless you have a team of data scientists running it.

It should be noted that this may work for some businesses because they throw so many resources at it or because their inventory process is quite simple to begin with. Frankly, neither of those scenarios is likely, based on the hundreds of SMBs we’ve helped over the years. These smaller businesses simply don’t have the time or patience to incorporate such a convoluted solution. They need something easier to use, and that’s where an Inventory Management System – also known as an IMS – becomes necessary.

Connecting ERP with IMS

Inventory planners and C-level executives looking to improve their inventory process and make a positive impact on their company’s bottom line must look closely at add-on solutions. Ideally, that would be an app that can connect to their ERP system, which can read the data to produce data-based forecasts, item classifications, and optimized replenishment orders. An inventory management tool then allows your ERP and warehouse management systems to do what they do best, without making things unnecessarily complicated. That is the best way to get the best return on your software investment.

When assessing the various IMS options on the market today, there are a number of factors to look at, including forecasts, order recommendations, and overall inventory visibility. But here’s a critical factor that’s often overlooked: how a specific IMS connects with your ERP. This connection is critical to making sure your data is properly synched, day in and day out. Your inventory manager will thank you, and so will your bottom line.