Since I was old enough to understand the concept of money, my father has reiterated more times than I can count that a penny saved is a penny earned. Thanks to the pandemic and the supply chain crisis, as well as various global concerns, many prices have risen to uncomfortable rates. It seems now more than ever that saving money through inventory costs would be a challenge all manufacturers would want to conquer in order to have a stronger bottom line.
The answer lies in automation.
While it is true that manual methods are inexpensive thanks to minimal training requirements and the use of inventory sheets, these methods leave businesses open to human error and critical, costly mistakes. Truth be told, this method only appears to save you money, as it will cost you considerable time to manually calculate, input, combine data, find and fix mistakes, update, and finally communicate inventory values…and we all know that time is money.
An option that helps to alleviate manual inventory tracking, for the most part, is a standalone inventory system. However, due to their inability to keep inventory costing or stock levels stored in the financial system has many manufacturers outgrowing these systems quickly and replacing them with integrated manufacturing ERP systems.
Manual inventory approaches and standalone systems have their benefits, but when it comes to keeping an eye on inventory values, there are various hidden costs. For instance, neither offer much in the way of inventory visibility or control. Both methods make real-time knowledge and control impossible. Manual methods are unable to track inventory and cost losses in real-time, nor do they identify inventory shrinkage from theft. They also aren’t as user friendly when assessing month-to-month cost inventory levels to identify cost gaps. Standalone systems don’t require rekeying inventory, but there is still a delay in inventory data updating.
When utilizing manual or standalone inventory systems, if issues like cost variances arise, it is often too late to correct them. This is because both methods are helpful for looking into the past, but they cannot help you to look at and analyze where to go in the future. This causes you to move forward blindly. You wouldn’t drive a car at night without your headlights, and you don’t want to continue into this fast paced, highly technological world of business without an ERP system.
In addition to not having predictive analytics, manual inventory management approaches also prove costly because they require additional time and effort, for instance, when you have to do physical inventory counts multiple times just to ensure that the numbers are accurate due to a contradiction between the count and the accounting system. When the cost variance gap is too wide, many businesses begin doing more counts every quarter or even every month until they get a handle on where the discrepancy is coming from. Employees have better uses for their time, like getting orders ready and shipped out to customers. When employees can’t spend their time preparing customer’s orders, this could lead to incomplete orders or defective products.
When a company manually tracks its inventory of work-in-progress, finished goods, or raw materials, no truly accurate picture exists of the financial input and output. Standalone inventory systems isolate that information from other systems, meaning that it may not always be up-to-date.
However, an integrated manufacturing ERP system provides visibility from start to finish: raw materials to finished goods tracking. All data is in real-time, and this includes information on waste and consumption of materials, conversion, and shipments.
What this means is that an ERP tool helps to conserve a business’s inventory costs. It does this through:
- Automating all reordering and in-stock levels to enhance inventory management.
- Troubleshooting inventory management problems with real-time data and analytics to help formulate better informed decisions.
- Time savings and a real-time view of all raw material inflows due to automation; this also means there is an accurate picture of the pace of raw material consumption across the enterprise.
- Offering broader visibility of the quality and value, as well as quantity of finished goods inventory by production line and/or production process.
- Identifying scrap and spoiled raw materials by machine and production process; this waste tracking will assist in sustainability initiatives as well as cut costs.
A business’s finances directly correlate to its inventories; therefore, it makes sense to have the kind of system that can not only keep track of the inventory, but also make analytical predictions based upon it. While manual inputs and standalone systems may save you money in the short term, what will they cost you in the long term?
The consultants at Godlan can help you answer this question and more. Give them a call today at 586.464.4400 for more information on Infor’s SyteLine ERP and other technologies that can give your business the competitive edge. Or for answers any time of day, visit www.Godlan.com.