Inventory management is a key success factor for manufacturers and distributors, or any other kind of business that maintains inventory. Inventory represents a significant investment, and without proper management, it can be a drain on company health. It’s cash sitting on the shelf, illiquid. There are four simple but effective strategies for smarter inventory control. Realizing them involves deploying an Enterprise Resource Planning (ERP) software that can significantly improve inventory Return on Investment (ROI) and more effectively manage company assets.
#1 – Maintain Accurate Inventory Records
Effective inventory management begins with accurate records. While seemingly simple, this vital part of the process can cause major problems when actual inventory doesn’t match what is on the shelves. The timely fulfillment of customer orders can be delayed and reflect poorly on the business if orders are not delivered as promised. Automating inventory management reduces human error and decreases potential costly errors.
#2 – Avoid Shortages and Overstock Situations by Planning Proactively
Inventory is one of the biggest “uses of cash” a manufacturer or distributor experiences. Thus, managing the inventory replenishment process is vital to ensuring the company’s financial health. It’s also necessary for completing orders on time. Automating systems so that materials and goods arrive just in time before supply runs out helps avoid shortages and overstock situations. A replenishment system relies on accurate inventory management to determine, as closely as possible, when materials need to be replenished. Maintaining a supply of safety stock can also reduce the risk of shortages as future orders cannot be predicted with full confidence.
#3 – Focus on Improving Incrementally Over Time
Implementing and adapting to a new inventory planning and control system takes time. By deploying a system that can improve inventory management, such as Acumatica’s Distribution Edition, manufacturers and distributors can improve the system over time. Working this way, they can reduce variability in future predictions and avoid forecast errors where possible.
#4 – Reduce Lead Time and Lot Sizes by Reducing Fixed Ordering Costs
Because the manufacturing and distribution process requires lead time, reducing lead times can improve the overall performance and health of the business. Shorter lead times translate into smaller replenishment quantities. This allows the business to bring in less inventory at one time. The inventory is also used up more quickly. Reducing the amount of unnecessary inventory and minimizing the number of replenishment orders can improve the company’s overall financial health.
Inventory tracking can be simple with the right strategies and software. Companies need to know what they have and what to replenish. Acumatica Distribution Edition helps manufacturers and distributors manage sales orders, track inventory, improve purchasing, and provide customer support from anywhere. It contributges to reduced order times by eliminating delays with automated sales order processing and shipping order generation. A steady supply of materials and an automated purchasing process can ensure that the required materials are available as orders are placed.
Adjustments to costs and physical inventory can be made directly within the system. Manufacturers and distributors can scale their businesses effectively through effective inventory management with full Customer Relationship Management (CRM) integration and real-time data analysis. Acumatica’s Distribution Edition also offers options for multiple inventory valuation methods, e.g., FIFO, standard cost, moving average and item-specific methods.
LEARN MORE IN OUR GUIDE: FOUR STRATEGIES FOR SMARTER INVENTORY CONTROL
Overwhelmed with inventory management and need a proven solution? Learn simple strategies for inventory management.
Inventory is a major investment for most companies and lower inventory is often an important management objective. However, simply lowering inventory without a plan is likely to increase the incidence of shortages, disappointing customers and losing business.
This paper will present four seemingly simple – but proven – strategies for smarter inventory control:
- Maintain accurate inventory records
- Proactive planning to avoid shortages and overstock situations
- Focus on improvement to get incrementally better over time
- Reduce lead times and lot sizes by reducing the “fixed” ordering cost
To learn more about how inventory management and how the right ERP solution can help make the process go better, contact us for a demo of Acumatica Distribution Edition.