Inventory Management for Manufacturing Companies: Assess Your Process

    12/18/19 10:00 AM

    inventory-management

    Inventory management is critical

    I visit companies all the time that are looking for an ERP software solution. In almost all cases, these companies mention that they need to manage inventory better. Solid inventory management for manufacturing companies is a result of solid processes, but solid processes are difficult to execute if you do not have a tool like ERP software (Cloud Suite Industrial or VISUAL) to support them. Below, I list some of the inventory management issues I hear about all the time and how ERP can address these issues, which will hopefully help you determine if your current solution measures up.

    Real-time manufacturing inventory

    This is probably the most common, and most debilitating, issue that manufacturing companies struggle with. If you have to update systems manually, or wait until the end of a week or quarter to get a firm grip on what you have in inventory, this is obviously an issue. Companies that struggle with inventory management are typically doing LOTS of full physical counts in order to try to understand what’s in stock. ERP software does a great job of providing tools which allow you to automatically track inventory moves (like issues, receipts, adjustments, etc.), so that you know what your inventory counts and value are at any point in time.

    Related: After the Inventory Count - What Your Results are Really Saying

    Barcoding

    If you want to cut down on errors for all of your inventory movements, then barcoding is a must.  Yes, there is an investment in hardware and labeling solutions, but putting this power in people’s hands gives you real-time inventory data in your ERP system, not to mention reducing errors by eliminating manual entry.

    Related: Barcoding Never Gets Old

    Accurate bills of material

    ERP systems tell you what to buy and when to buy it with robust planning tools. If your bills of material are inaccurate, guess what? Your manufacturing inventory is going to be inaccurate. I find this happens in more companies than I care to mention, so it’s critical to create accurate bills of material!  The ERP itself isn’t going to tell you whether or not your bill of material is accurate, but will execute its rules if you tell it that a particular material is needed.

    Accurate lead times

    Manufacturing and inventory control are not only about what takes place inside your four walls, but are affected by what goes on outside them as well. In the same vein as above, if an ERP software doesn’t have accurate lead times for raw materials, it opens up the possibility for purchasing to overbuy, underbuy, be forced to expedite, pay more for materials, and so on.  A solid ERP will give you tools to manage your lead times so you can avoid these situations. Accurate bills of material and accurate lead times are a must for solid inventory management.

    Related: How to Reduce Lead Times by Optimizing Your ERP

    Cycle count program

    Once you have perpetual inventory up and running, it’s important to implement a cycle count program.  With a cycle count program, you regularly and randomly count certain materials. Think of it as a spot check of how good your other manufacturing inventory processes are. If your counts are consistently off, then you have pinpointed areas to investigate and determine what processes are breaking down.  An ERP solution will help you enforce a cycle counting program by prompting you to carry out the counts.

    Consignment

    A lot of people I talk to would like to start a vendor consignment program, but it can be a bear to manage without the right tools. Most modern ERP systems have consignment functionality to help you strengthen the relationship with your consignment vendors, and even automate a part of your supply chain, while reducing the cost your company is carrying.

    In conclusion…

    There are many ways to improve inventory management in manufacturing companies, but it usually requires better tools to get where you need to be. Do you want some ideas on how to control inventory in manufacturing processes? Would you like to talk with someone who has a ton of experience in the manufacturing industry and is NOT a salesperson?  Click here to set up a free, 30-minute discussion with Jack Shannon. Tell him about your particular situation and see if your inventory processes are solid!

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    Bryan Foshee

    Written by Bryan Foshee

    Bryan is a Regional Manager at Visual South and has been working with the company since 2002. Prior to that, he was a consultant and implemented SAP in manufacturing, distribution, and service industries.