5 Reasons Why Your ERP System is Costing Too Much Capital, Time and Resources

3 min read

Tags: Blog, Demand forecasting, Industry news, Inventory management, Purchasing & replenishment, Technology, Tips & Tricks

Daniel Fritsch   October 28 2015


Why ERP System is Cost Too Much ?

Index

  1. 1 Unforeseen Time & Labor Costs
  2. 2 Lack of Inventory Analytics and Data Visibility
  3. 3 On-Premise Solutions Compound Costs Over Time
  4. 4 Poor Inventory Seasonality & Redistribution Capabilities
  5. 5 Inventory Data Becomes Siloed As Distribution Grows
  6. Optimize Inventory, Don't Just Manage It

With the heavy investments companies make in their enterprise resource planning (ERP) systems, many companies make the mistake in assuming that their inventory management and optimization is being taken care of by their ERP system. However, companies that forego investing into more progressive inventory optimization solutions may actually be incurring costs that can be more than the projected investment for a specialized inventory management solution.

1. Unforeseen Time & Labor Costs

Relying solely on an ERP for inventory management still necessitates manual processes and multiple reviewers during the planning and order procurement processes. This results in time and capital being tied to managing the ERP system that could be otherwise allocated to worthwhile cost saving projects, other IT initiatives or even a more optimal inventory management solution.

To minimize manual efforts and ensure faster, more automated processes, replenishment planning, provided by inventory optimization solutions, uses global demand plans to create a more intelligent replenishment process where the system actually advises the user on what they should be buying based on real-time customer demand. The process takes into account existing inventory levels, local and global planned movements, variable supplier lead-times and replenishment planning policies across all warehouse locations.

2. Lack of Inventory Analytics and Data Visibility

ERP systems lack the necessary analytical tools to predict the impact of changing service level, stock levels and invested capital targets. Balancing inventory level analysis for every unique item against global targeted service levels can pose a big risk with significant cost implications as many of these functions in ERPs are still managed manually in Excel. Inventory analysis and simulation, provided by an inventory solution, can help improve your decision making and produce “what-if” scenarios before implementing policy changes.

Companies face higher customer expectations regarding availability of parts. To maintain customer loyalty and elevate the overall integrity of the brand, parts must be delivered immediately. ERP systems can leave companies in the dark about the relationship between inventory policy and customer service. Inventory solutions can help companies increase margins along with service.

3. On-Premise Solutions Compound Costs Over Time

Most ERP systems are not cloud-based. Cloud computing makes a company’s IT hardware, infrastructure and software available to end users over the Internet. By utilizing a Software as a Service (SaaS) inventory management solution, companies can have a smaller up-front investment and total cost of ownership, rapidly deploy their system and make upgrades more easily.

4. Poor Inventory Seasonality & Redistribution Capabilities

ERP systems are not designed for global multi-location distribution networks. Inventory optimization solutions are designed specifically for multi-echelon inventory management, producing an accurate forecast at all points in the supply chain and planning across the entire supply chain to optimize it and right-size inventory models for each unique item carried by the business.

In addition, inventory optimization solutions that can extend seasonality metrics for volatile supply chains and redistribution capabilities can be leveraged to break down silos across multiple locations carrying the same inventory items. This lessens the reliance on external supplier networks and frees up working capital.

5. Inventory Data Becomes Siloed As Distribution Grows

Many companies have locations that operate independent ERP systems that often times do not speak to each other and are managed by different operations teams. This makes global planning and cost containment a nightmare for executive management as they try to keep customer satisfaction high without incurring crushing carrying costs to hold inventory. Inventory optimization solutions, like EazyStock, seamlessly integrate with ERP systems to create a push and pull style integration to lift some of the weight and pressure off the planning and procurement execution.

Optimize Inventory, Don’t Just Manage It

Accurately planning everything from HVAC service supplies to Hardware Fasteners in now easier to manage on a global scale due to increased supply chain visibility. Inventory performance and profitably can be more easily monitored and maximized through increased supply chain planning and procurement automation.

Automated inventory management systems provide best-fit forecasting algorithms and advanced optimization for all distribution companies that carry large quantities of spare parts or unique items. Optimization software can be added to ERPs to support dynamic inventory policy management to help planners align purchasing practices to real-time demand predictions.

In addition, inventory optimization systems manage scenarios that take into account the variable supplier lead-times, inventory seasonality, and redistribution between warehouse locations.

Conclusion

Now you have seen the 5 main reasons why your ERP system isn’t working economically advantageous. However, it doesn’t have to come to this point! There exist several signs you can monitor, to detect whether your ERP and inventory optimization runs smoothly or is on the downgrade. The following white paper explains the top 8 signs in this regard:




8 Signs you need Inventory Planning & Replenishment Automation