Effective inventory management has never been more important or difficult in today’s accelerated manufacturing and distribution environment. In addition to the basics of being aware of what is in stock, when and how much to reorder, and so on, inventory management today must also account for things as real-time visibility, accurate forecasting, and cross-departmental collaboration. ERP integration with inventory management systems is one of the most effective ways to achieve this. Integrating these two key business systems allows for silos to be broken down, for operations to be streamlined, and for data-driven decisions to be made with immediate and visible impact on efficiency and profit.
ERP and Inventory Management: A guide to each system
To discuss the benefits of bringing these two systems together, it is necessary to first discuss what each system does. Enterprise Resource Planning (ERP) software is what runs the operations of an organization. It combines several business processes and functions – accounting, purchasing, HR and CRM management, among others – into one, centralized system.
On the contrary, inventory management systems are designed to track and manage stock levels, tools, and assets specifically. They monitor inventory across various locations, track usage patterns, and alert users for reorder points or potential shortages.
Both systems are extremely valuable on their own. When used separately these systems tend to produce information silos because vital data becomes dispersed throughout all departments in the company. The result of these systems operating separately includes errors as well as stockouts and overstocking which leads to overall operational inefficiency.
The benefits of ERP-inventory integration
Connecting your ERP to an inventory management system means there is only one source for all inventory data. Here’s why it’s a win-win:
- Real-time inventory visibility
Linking ERP and inventory allows stakeholders to view levels of inventory, tooling usage and asset availability in real time, instead of having to wait for a manually created report. Production can plan smarter, procurement can forecast and finance can reconcile costs as they occur.
- Streamlined reordering and procurement
ERP-inventory integration can help with automated reorder points. If an item dips below a certain point in inventory, the system can automatically generate purchase orders so that the production line doesn’t come to a grinding halt. Not only will it decrease human error, but it will also save time and keep stock levels where they need to be.
- More accurate data
Manual entry errors are common. Integration removes duplicates in the systems, minimising mistakes and increasing overall data accuracy. Correct inventory information means accounting, reporting and audits are more accurate depictions of actual operations.
- Better reporting and analysis
By using a comprehensive system, companies can generate reports that combine financial and operational statistics with inventory records. The unified interface enables business leaders to analyze trends and track stock rotation as well as pinpointing slow-moving products and optimizing inventory performance.
- Fewer silos in operations
If there is no integration between ERPs, there is less collaboration between departments. Each of the production department, purchasing team, accounting department and warehouse personnel maintain separate software systems and unique data sets. When your organization operates on an integrated real-time ERP system it guarantees universal alignment which reduces miscommunications along with bottlenecks and delays.
- Better indirect material management
The integration of tool/inventory management software with ERP systems enables a unified and precise data source by merging shop-floor consumption details with ERP level data. The integration maintains optimal tool availability while enhancing forecasting capabilities and automating replenishment through improved cost tracking. Read more about the management of indirect materials with tool management software here.
Common challenges and solutions
While there are many benefits to integration, there are some challenges.
- Compatibility issues
Note that not all inventory management systems can be integrated with ERP systems. You must choose inventory management software that either has native ERP connectors or support for APIs to develop custom integrations.
- Data migration
The process to move historical inventory and financial data involves complicated procedures. A successful transition requires both systematic data migration planning and comprehensive data cleansing procedures.
- Change management
Adopting an integrated system requires employees to modify their workflows to match new work procedures. To facilitate system adoption, organizations should look for a provider who offers training sessions, a help centre, comprehensive documentation and dedicated support.
- Scalability
Your integration must be flexible and scalable up and down to accommodate your increasing business requirements of more locations and a larger product catalogue. Choose a cloud-based solution which will give you the scalability you require with little impact on your everyday business.
To maximize the benefits, companies should follow these best practices:
- Begin with a plan: Set integration objectives, key performance indicators, and processes that will be enhanced by real-time data the most.
- Map your data: Determine which information needs to be shared between your systems, for example stock levels, purchase orders and asset utilization.
- Automation first: Set up workflows to automatically handle reorders and stock takes along with alerts and other tasks.
- Plan for data audits: Automated data audits enable continuous data quality assurance despite perfect integration systems.
- Involve all departments: Maintain all stakeholders from each department. You don’t want to end up with a system that does a great job for one set of users (warehouse), but a terrible job for another (finance).
ERP-inventory integration is not only about streamlining operations or enhancing visibility. In today’s hyper-competitive business environment, it’s about survival. Those companies that can harness the power of technology to bring all their operations together and provide their employee with accurate, useful information will be the ones that win. Inventory management, with ERP integration, is no longer a game of catch-up – it can be a strategic weapon.
ERP Integration with CRIBWISE Inventory Management Software
CRIBWISE is an advanced yet simple to use cloud-based software that automates inventory and order management. By setting the max orders, reorder points and min orders for all your products, CRIBWISE actively tracks your inventory level and delivers timely recommendations on where to order, what to order and how much to order to keep stock in check and automatically identify slow moving products. Inventory automation means no more errors, more visibility and smarter, faster decisions in your business. Say goodbye to silos. Sign up for a demo today and see how CRIBWISE can optimize your ERP.
