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How Can Companies Use ERP For Inventory Cost Management

Friday, 24 April 2020, 13:20 Hrs

How can Companies Use ERP for Inventory Cost ManagementCost incurred for inventory management accounts for a major part of the overall expenditure of companies that are especially dealing with a number of various inventories. With business leaders taking note of the situation, the development of various inventory management software is on the rise. According to a recent study, the global inventory software management market will be valued at 3.2 billion US dollars by 2025. This is in itself a reminder of how much companies nowadays focuses on the efficient management of their inventory and the cost incurred for inventory management. While many industry experts vouch for having dedicated inventory management software to get the desired results in the most efficient way, many others believe that proper implementation of ERP system in an organization will perform just as good as any other inventory management software. The biggest advantage that ERP has over other inventory management software is its versatility and the array of tasks that it can be used for.

With new developers creating ERP software that can be integrated with other software, more and more companies have started using ERP in their organization. The stats and the growth percentage show that the ERP software market is said to be valued at 97 billion US dollars by 2023. With the growing popularity among business leaders from all the different industry verticals, ERP is developing into a go-to software when it comes to increasing the overall efficiency of business operations.

Now let’s look at how business leaders can use ERP software to deal with inventory cost management:

  • Maintaining Optimal Inventory Level: The major concern that many businesseshave to deal with when it comes to inventory management is overstocking and understocking. Both these scenarios will have an adverse effect on the day to day operations of the company and this will also have a negative impact on the spending of the organization. An ERP system will help companies to find the optimal level of inventory required so that the company is not overstocking and thereby reducing the liquidity of the firm. At the same time ERP will also help companies to make sure that there is enough inventory available to carry on the production without any major glitches.
  • Keeping Track of the Dead Stock: ERP creates trackable records of the various inventories so that organizations can have a wholesome view on the movement of the various inventories that they are dealing with. This feature of ERP will also come in handy when one is trying to streamline their inventory management and find out the dead stocks or slow-moving stocks. By storing all the previous data, ERP can be used by firms to look at the performance of their various inventories and by that take better informed decisions when it comes to dealing with the dead stock and thereby reduce the cost of inventory management.
  • Improved Efficiency of Warehouses: Warehouses are an integral part of inventory management and ERP will help companies to operate their warehouse efficiently so that their overall inventory management costs are reduced. ERP systems can also streamline the storage aspects of the warehouse by providing the organizations with key inventory information including the location of items, the overall sales rate of the inventory, and the storage requirements.
  • Taking future requirements into Consideration: Business operations are getting bigger and wider consistently. So, in order to have better control over the cost incurred for inventory management, businesses should always have an eye for what the future inventory requirements are going to be. In this scenario, ERP will enable the organization to predict and formulate future inventory management policies and plans by offering them relevant business information based on previous data.

In this growing competitive market, proper inventory management goes a long way when it comes to achieving success in the industry. Apart from reducing the cost incurred for inventory management, ERP systems will also enable companies to maintain an optimal inventory level as well as assist businesses in creating future inventory management strategies and techniques.