Mark Chapman 28 August 2019 5 min read What's in this article? How inventory management ERP add-ons can save time and moneyEnhanced inventory management functionality with ERP add-on software How inventory management ERP add-ons can save time and money Enterprise Resource Planning (ERPs) systems are excellent for improving efficiency right across your organisation. From collecting and analysing data, to processing orders and managing finances. Whilst warehouse management systems (WMS) play an important role in controlling stock and warehouse operations. Both, however, have their limitations when it comes to specialist functionality, such as automated document signing, online payments or inventory optimisation. This is where ERP add-on software plays a major role, as it can significantly enhance your business system’s functionality. And because most ERP add-ons are cloud-based, they are easy to implement, so you can begin to see the benefits straight away. In this post we’re going to focus on the benefits of inventory optimisation ERP add-on software, in terms of the cost and resource savings it can bring to your business. Inventory optimisation is the art of balancing inventory investment against ensuring high levels of fulfilment and stock availability. It allows you to automate your inventory planning and replenishment activities and optimise your stock levels to make each stage of your supply chain more cost-efficient. Read our blog post ‘what is inventory optimisation’ for more on this concept. There are many warning signs that you need to automate your inventory planning and replenishment activities, such as experiencing a high number of stockouts, holding too much excess stock or using spreadsheets to carry out replenishment calculations. If you currently experience any of these issues, read on and find out how an ERP add-on can help… 1. Save time & labour costs Using spreadsheets for demand forecasting and inventory classification processes is no fun. Manually entered data is prone to errors and, as your business grows and the number of SKUs you manage increases, you’ll find that spreadsheets slow down and calculations get more complicated. Improving forecasting with demand planning automation will free-up time for more strategic decision making and planning. In addition, automating your stocking policies will ensure they’re always based on the latest demand data, without the need for constant manual recalculations. Finally, time and resource can be saved by automating your replenishment practices. You can waste a lot of time working out what, when and how much stock to replenish. A system like EazyStock automatically calculates these for you, considering demand forecasts, inventory policies, safety stock, supplier lead times and stock on the move. It’s then your call whether you want to approve every replenishment order, or simply manage by exception and only review those bigger ticket items. 2. Reduce stock investment Many ERP inventory management systems excel at inventory control and providing reports on your warehouse stock levels. Many will track items on their journey from goods-in to dispatch, providing detailed real-time stock location data. However, ERPs lack the necessary analytical tools to recommend what and how much stock you should actually carry. If you consider your current stock levels, can you be sure you have availability to meet customer demand? And how do you know you’ve not invested too much capital in goods sat on warehouse shelves? Optimising your stock levels can lead to increased profitability. If you can lower your inventory levels and improve inventory turnover, you’ll free-up working capital (or opportunity costs) and reduce your carrying costs. But you don’t want to do so at the expense of causing stockouts. So the key is to prioritise the SKUs you hold, based on their demand and their cost to your business. ERP add-on software, such as EazyStock, will classify each SKU in your warehouse and recommend its ideal stock level, so you can meet fulfilment targets without holding surplus stock. In addition, if you’re looking to improve your stock availability across certain lines, but are unsure of the cost implications, EazyStock will simulate the scenario, removing any cost risk and helping inform your decisions before making policy changes. 3. Redistribute stock across multiple locations, instead of buying more Businesses with more than one warehouse can take stock optimisation to the next level by optimising inventory levels across all locations. For example, if demand for woollen sweaters is high in one region, but low in others, then it makes sense to move the sweaters to the warehouse serving the ‘high demand’ area. This prevents surplus stock adding up in the other locations. It also lessens the reliance on external supplier networks and frees-up working capital. 4. Take full advantage of all sales opportunities Many ERP inventory management modules will use basic rolling average calculations to forecast demand. Often such demand forecasting methods cannot take into account seasonality or trends. And if you fail to spot upcoming sales opportunities, you may not have adequate stock to capitalise on customer demand. By utilising statistical demand forecasting techniques (provided by inventory optimisation software) you can improve the accuracy of your forecasts and plan for demand peaks. EazyStock’s algorithms are designed to recognise both seasonality and trend patterns, adjusting forecasts on a daily basis, which in turn updates your replenishment recommendations. As a consequence, you’ll always be able to make the most of demand surges and prevent costly stockouts and backorders. 5. Prevent money wasted on excess and obsolete stock Accurate demand forecasting will also stop a build-up of surplus stock. By tracking the demand of every inventory item in your portfolio, EazyStock calculates their current position in their product life cycle. The risk of excess and obsolete stock is highest as products leave the maturity stage and hit decline. EazyStock will spot these demand changes and adjust reordering parameters accordingly, thus reducing the risk of costly excess and obsolete stock. 6. Reduce the bullwhip effect in supply chain management The bullwhip effect is when a small fluctuation in demand at the top of the supply chain has an augmented effect on the demand forecasts further down. For example, if a bike shop sells more of a specific SKU than normal, it may increase its demand forecast and place a larger order from its regional distribution centre (RDC). The RDC may then increase its demand forecast based on the retailer’s new order quantity, not the actual demand. The central warehouse may then do the same, based on the RDC’s new forecast. The result is over-inflated demand forecasts and consequential surpluses in stock at each stage of the supply chain. Like the cracking of a whip, the increase in the demand starts small but grows down the line. EazyStock stops this happening by producing forecasts based on actual point of sale data. The scenario of over-inflated stock levels at each stage of the supply chain is removed and this prevents money being tied up in unnecessary stock. 7. Reduce ordering costs Many suppliers place contractual constraints around order quantities which can inhibit cost-effective purchasing. Automated replenishment software can help by taking these factors into consideration when recommending your daily replenishment needs. For example, if you have a minimum order quantity to hit, or simply want to fill up a shipping container, EazyStock will identify the items that are most cost-effective to add to the order, based on upcoming demand requirements. Advanced ‘price break’ functionality can also help you determine whether ordering larger quantities at a lower ‘price per unit’ will offset the costs of carrying more inventory and the risk of it being surplus to demand. Enhanced inventory management functionality with ERP add-on software The EazyStock ERP add-on offers businesses a wealth of cost-saving benefits. It’s not meant as a replacement for your ERP – on the contrary – it’s there to enhance existing inventory management software functionality. EazyStock is easy to set up and works in conjunction with your ERP, offering additional inventory optimisation features that will save your business time and money. For more information call our team on 0121 312 2992 or contact us here to discuss your needs and how we can support. Originally written October 2015, updated September 2019 Share Mark Chapman 28 August 2019 5 min read Sign up for the EazyStock Newsletter Stay on Top of the Latest News, Trends, Tips, and Best Practices for Supply Chain Management, Inventory Optimisation, Replenishment & Purchasing, and Demand Forecasting with Our EazyStock Newsletter.