In this chapter, we will explain to you what exactly ERP inventory management is, why it is important to move from only inventory management to more robust and centralized ERP inventory management, the benefits of this system, and lastly examples of Microsoft ERP apps for Inventory management.
ERP is a product category of business applications that helps businesses to better run their operation, centralize business data, improve business processes and so much more.
And ERP inventory management helps to grow SMBs and medium-large businesses to move beyond basic inventory systems to get the right capabilities to manage the growing complexity of your growing business and allow your employees to be more productive, reduce human errors and do more with less.
Enterprise Resource Planning (ERP) Inventory Management is a system that provides a suite of capabilities for businesses to manage all business processes involved with inventory management such as sales, warehousing, order fulfillment, finance, supply chain, forecasting, and others.
There are many different ERP inventory management systems that businesses can implement however the two most common are:
Of course, then there are smaller inventory management systems. However, these are not really considered an ERP as they lack the capabilities and features to manage other than inventory management.
Therefore, if you are searching for an ERP inventory management system, you are looking at a more feature-packed system that offers more than just inventory management.
An ERP platform can help companies make better decisions and improve efficiency. The right system allows authorized users to access a central dashboard that includes information on logistics, finance, operations, and stock, reducing user error risk.
With this integrated solution, you can enjoy centralized access to a variety of data-driven, real-time insights, including:
The ability to access this information in just a few clicks can deliver a major competitive advantage. With this data, your company can make more informed purchasing decisions and develop more accurate forecasts.
As a result, you can meet sudden spikes in demand without keeping excess inventory in stock.
ERP inventory management systems are a more robust type of solution that helps companies better manage their operation, especially during growth.
This type of system allows you to manage the growing complexity of having more customers, SKUs, locations, returns, and other parts of your operation as they allow you to centralize your operation from finance, sales, customer service, warehousing, order fulfillment, purchasing and other aspects so you get a better view of your business by collecting more data and transforming it into insights to grow your business.
Therefore, ERP inventory management offers a large number of benefits for companies that are moving from inventory management to ERP, here are the most important benefits:
ERP inventory management solution allows you to use the same costing method or different ones for inventory items and easily move items between locations to control the quantity on hand using cycling counting.
You will see exactly where all your inventories are including those en route from suppliers and those being shipped to your customers.
ERP Inventory management software integrates all the information relevant to incoming and outgoing inventory and automates processes, which ultimately reduces the risk of overstocking or understocking. Furthermore, prioritization of monitoring provides a forecast of demand that is often crucial for each business, company, or organization.
ERP inventory management system improves your inventory forecasting and replenishment by using AI models that analyze your historical data from purchase orders, sales orders, and finance reports and predict the future of your inventory demands.
The system can automatically notify you if you are running low on important items and when they should be reordered to avoid out-of-stock and loss of sales as well as check your inventories by using automated processes with barcode scanners to ensure you are not overstocking.
ERP inventory management offers a huge benefit in cost savings and time savings through better inventory supply chain organization.
The cost savings are hugely using an ERP inventory management system, from automating repetitive tasks, reducing human errors, improving purchasing, reducing overstocking, improving supply chain processes,
In fact, despite studies proving that ERP systems help reduce inventory by 11% on average. Companies with the best-in-class practices utilizing ERP systems were able to reduce inventory levels by 22%. Those same companies also saw almost a 20% reduction in overall costs. (Source)
A 20% reduction in overall costs could have a significant impact on your company. It could double, triple, or even quadruple your bottom line. It could mean that your sales increase by 10, 15, or 20% because you can price more aggressively.
Human errors are part of every labor but with modern technologies included within ERP systems, you can minimize those errors.
For example, you can automatically insert data into your system using a barcode, create workflows for approval when certain thresholds are met or reached, automate customer service and fulfillment, improve inventory tracking and improve reporting with fewer mistakes being made in data.
With an ERP inventory management system, your entire business can be integrated into one seamless operation allowing your employees to focus more on creative tasks than repetitive ones.
ERP is generally the best friend when it comes to increasing productivity and doing more with less. That’s why every growing and forward-thinking company is implementing an ERP system to manage the growing complexity of their operation, enabling their employees to be more productive, thus more profitable while being less stressed and more focused on important creative tasks.
The #1 way how ERP inventory management system increases productivity is by automation allowing your employees automatically insert data into your system using a barcode scanner and automating repetitive and manual tasks such as reporting by getting real-time data on inventory performance, sales, and financials.
Streamline purchasing operations with cross-procurement workflows for purchase requisitions, RFQs, and trade agreements for direct and indirect purchases.
With an ERP system, you can automatically track the inventory you use on each job. This will help you plan production more accurately as you know exactly how much raw material is on-hand and what you need to order to complete a job.
An ERP system that is optimized for inventory management can automate the process of purchasing, organizing, and transferring stock. The system also helps maintain optimal levels of stock by integrating the inventory needs of staff, production, customers, and suppliers into one database.
Due to the increased popularity of outsourcing shipping and logistics requirements, a growing number of businesses are using shipping providers or third-party logistics providers. An ERP inventory management system enables you to integrate with external partners, ensuring all systems communicate with each other. Stock, order, and shipping information is therefore synced across the entire supply chain.
Supply chain management is an essential component of enterprise resource planning solutions that many companies have adopted. Companies need to interact with various suppliers and partners to obtain the raw materials, products, and resources at the right time and at the right amount.
Businesses are increasingly focusing on several supply chain strategies to boost operation productivity, enhance product quality, and cut down on business costs.
As operations become more extensive and globalized, the integration of SCM becomes all the more important. ERP solutions can support multiple modes such as make-to-order, engineer-to-order, and configure-to-order and provide operations support across multiple sites in real time. As a result, businesses can avoid supply chain disruption.
ERP System is designed to centralize business operations and data and streamline processes to simplify, standardize and speed up things.
This helps inventory-based businesses to improve their inventory management, better manage growth and complexity associated with it and improve business planning.
To achieve that ERP inventory management system should provide a certain set of functions or features in order to deliver the benefits. Here are the most important ERP inventory management features:
Inventory management should help you to perform the following tasks:
Warehouse management lets you manage warehouse processes in manufacturing, distribution, and retail companies. This module has a wide range of features to support the warehouse facility at an optimal level, at any time. Warehouse management is fully integrated with other business processes such as transportation, manufacturing, quality control, purchase, transfer, sales, and returns.
Supply Chain Management lets you manage your stock based on actuals, demand, and availability using built-in intelligence, sales forecasts, and expected stock-outs to automatically create purchase orders.
Companies can return to normal and ramp up faster due to the agility in planning, sourcing, and distribution processes driven by non-monolithic business solutions and de-risk from future disruptions. With a resilient supply chain, organizations are better equipped to generate positive cash flow by optimizing resources, staying profitable, retaining market share, and remaining competitive.
When demand is planned for and the materials have been issued according to production BOMs, then the actual production operations can start and be executed in the sequence defined by the production order routing.
An important part of executing production, from a system point of view, is to post-production output to the database to report progress and to update inventory with the finished items. Output posting can be done manually, by filling and posting journal lines after production operations.
Or, it can be done automatically with the use of backward flushing. In that case, the material consumption is automatically posted along with output when the production order changes to finished.
As an alternative to the batch journal for output posting for multiple product orders, you can use the Production Journal page to post consumption and/or output for one production order line.
Before you can begin to produce items, you must make various setups, such as work centers, routings, and production BOMs.
Procurement and sourcing cover all the steps from identifying a need for product and services through procuring the product, receipt, invoicing, and processing of payment with vendors. Procurement processes can be configured toward specific business needs by defining purchasing policies and workflows.
You can use sales and marketing to obtain, store, and use various types of data in the sales flow. This data includes the original sales initiative, future follow-up action, and additional sales.
Asset Management enables you to efficiently manage and carry out tasks related to managing and servicing many types of equipment in your company, for example, machines, production equipment, and vehicles.
ERP Inventory management should provide at least a default configuration that includes a chart of accounts and standard posting groups that make the process of assigning default general ledger posting accounts to customers, vendors, and items more efficient.
Inventory automation helps you improve productivity and get more done with easy-to-create workflows and audit trails.
By using automation you can connect workflows across sales, inventory, purchasing, supply chain, and accounting to automatically track cash flow and secure purchasing, credit authorization, vendor payment processes, and more.
Centralized operations enable you to access your data across accounting, sales, purchasing, inventory, and customer interactions for an up-to-date, end-to-end view of your business.
Reporting and analytics involve many business areas across the company and it is important to ensure that all relevant employees have access to the data they need.
For example, finance and accounting officers need accounting data from the general ledger; a warehouse manager, on the other hand, will need to use inventory-related data, while the head of the company will need specific information from data regarding the company’s efforts and performance goals, also called KPIs, which provide information on the direction and speed of meeting the company’s strategic objectives.
At first, it’s important to realize if you really need an ERP inventory management system in the first place or if a standard inventory management system is sufficient for your needs as ERP inventory management is more expensive and the price of it can go from RM100,000 and beyond depending on the size of your team, customization, and other requirements.
Therefore, investing in a more robust ERP inventory management system should be seen as a long-term investment with the goal of better managing the growing business.
With that being said, to get started with the right ERP inventory management you’ll first need to decide exactly what you are looking for.
As mentioned at the beginning, there are basically two versions of the ERP inventory management system and on top of that, each ERP vendor provides different functions and capabilities.
Therefore, it’s recommended to make a list of ERP vendors or their partners and contact them directly to explain your needs and requirements. Most of them should provide you with a free consultation on their software and if required also a free personalized demonstration of the suitable system.
Remember, the investment can reach 100ks RM therefore you should be very thorough when selecting the right ERP system.
Here we have created a few guides to help you with that:
Also keep reading to learn more about Microsoft Dynamics 365 as your ERP inventory management system.
Microsoft Dynamics 365 is a suite of ERP & CRM business applications tailored to meet your business needs and grow without.
Microsoft offers multiple ERP system options with inventory management, each offering different features and capabilities that are suitable for different businesses.
Therefore, here are the four Microsoft ERP applications with inventory management:
Microsoft Dynamics 365 Business Central is an all-in-one ERP business management solution suitable for SMBs with 50-250 employees and subsidiaries with finance, supply chain, CRM, warehouse and inventory, manufacturing, reporting, and analytic modules that allows you to manage your entire business with one centralized operation.
Dynamics 365 Supply Chain Management enables organizations to rapidly adapt to disruptions and profitably ensures business continuity. It provides them end-to-end visibility of their supply chain to make data-driven decisions to resolve demand and supply issues. This solution is suitable for medium to large companies with 250+ employees.
Microsoft Dynamics 365 Commerce empowers businesses to create exceptional, insightful shopping and purchasing experiences (for B2C & B2B) by unifying digital, in-store, and back office operations to personalize customer engagement, increase employee productivity and deliver better business outcomes.
Dynamics 365 provides a centralized source of commerce and operational intelligence that enables the global workforce and supply chain to collaborate and do business anywhere
Dynamics 365 Intelligent Order Management enables omnichannel order fulfillment. It helps organizations easily scale to support intelligent fulfillment optimization and order orchestration.
And it extends customers’ business with out-of-the-box, pre-built connectors to an ecosystem of partners for e-commerce, delivery, tax compliance, price calculation, and other specialized logistic services. It seamlessly integrates with existing ERP and CRM systems, Dynamics 365, and non-Dynamics 365 applications–allowing organizations to skip costly and time-consuming rip and replace projects.
When it comes to choosing an ERP system it can get very confusing as every ERP vendor offers different types, versions, and pricing modules with different features and capabilities.
To help you with ERP implementation and selection we have written a guide to preparing you for the process of building a team, finding ERP vendors, and selecting the right application to implement and change management. Read more about ERP implementation here.
To learn more, contact us and our experts will provide you with personalized information based on your company’s needs and requirements.
Dynamics 365 is a portfolio of business applications that meets organizations where they are—and invites them to digitally transform. Each app is designed to remove the barriers and eliminate silos within organizations by working together with existing systems—or the entire portfolio of Dynamics 365 apps—for outcomes you simply can’t get unless every part of the business is connected seamlessly. Dynamics 365 offers several options for an inventory management system, each to fit your needs. Contact us to get personalized suggestion based on your needs, budget and industry.
Dynamics 365 Business Central is an all-in-one enterprise resource management System for Small-Medium Size Businesses to centralize, simplify and automate your business processes across Finance, Supply Chain, Sales, Inventory & Warehouse Customer Service, Manufacturing, and Projects.
Dynamics 365 Supply Chain Management transforms your manufacturing and distribution operations and predicts disruptions and responds fast by digitizing your supply chain, warehouse and inventory management, enhancing visibility, improving planning, and maximizing asset productivity.
Intelligently orchestrate fulfillment, automate with a rules-based system using real-time inventory data, AI, and machine learning. Adapt quickly to future order volumes, complexities with pre-built connectors to specialized technology partners for order intake, delivery and logistics services.
Is Customer Automation and Customer Management system. Differentiate your brand by taking advantage of built-in intelligence to deliver faster, more personalized service and add value to every customer interaction.
Provides complete field Service Management including service agreements, predictive maintenance, preventative maintenance, work order management, resource management, product inventory, scheduling and dispatch, mobility, collaboration, customer billing, and analytics.
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Beyond the Basics with Dynamics 365 Business Central
Since 1990 Agile Dynamics Solutions helping businesses to digitally transform with business applications. ADS has become the #1 leading Gold Microsoft Partner of Dynamics 365 ERP and CRM applications with a 100% implementation rate and the largest customer base in Malaysia.
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