ERP Systems

We’ve learnt from chapter 4 talking about how important it is for procurement, now we need to know the relationship between warehouse management and the effects of the business making the wrong procurement decision.

A running business requires purchase, produce, warehouse (storage), sales and marketing, research and development, finance and accounting, human resource, and information system. With that being said, a functioning warehouse plays an important role to every business.

When the purchasing department places an orders for goods and the order is misplaced, it will result in erroneous deliveries and shortage of stock. However, an effective warehouse is the key to a successful business, because a well-managed warehouse may be the company’s largest expense and largest asset.

What will happen to a business if any of below points break down:

1. Inaccurate receipts and purchase orders
2. Lack of communication between employees
3. Lack of cooperation between departments
4. Time management
5. Warehouse space and organization

To prevent this from happening, ensure accurate products coming in and out, keep reliable stock records, and create an open environment for employees to communicate; these are the various ways by virtue of which the business will run smoothly.

 

 

 

After studying the inventory last week, we can say that it is the place where we manage our products to potentially make money when we sell them. For most companies, managing the inventory is also a troublesome activity. It seems that in the management of inventory, we are always left with disappointing choices:

 

In fact, in order to make the optimal amount of money, a business needs to satisfy 100% of its customers 100% of the time with 100% of the offered inventory. Therefore, many companies plan to bear the cost of excess inventory. It’s part of the cost of doing business. They are willing to absorb, within certain limits, the cost of holding excessive inventories to make sure they are always reactive to sales opportunities.

A business aims to satisfy 100% of its customers 100% of the time with 100% of the offered inventory…

However, operating a business with excess inventory is a huge and painful burden, requiring markdowns, margin-loss, and most of the time, liquidation of the excess inventory.

Despite years of developing new methods to manage inventory and the implementation of sophisticated ERP systems, many challenges still persist because of the dynamic nature of markets. Therefore, to optimize the inventory management and to get closer to the 100% figures stated above, a company needs to align the best technology, the best processes, and the greatest people to operate in this dynamic environment.

The inventory management and warehouse management processes deal with how materials are stored and moved within and out of an organization. The inventory and management processes are important efficiently moving goods in and out of warehouses on time, and transferring them appropriately through warehouses based on business needs. By efficiently, organizing the inward and outward flows of goods, warehouses can improve the amount of storage space available.

The Internet of Things has been having an impact on the inventory and warehouse processes. An IoT warehouse would enable smarter and more efficient processes by making warehouse processes more efficient by for example, integrating warehouse processes with fully independent and automated robots, to pick up products, and perform their respective processes. An effective IoT solution would need to integrate with existing systems, as well as support these newer devices and technology. An IoT solution could consolidate data from a variety of sources, and enable the most efficient business decision to be made. With this accumulation of data, existing and older data from these variety of sources, can be than used to also make business decisions in the future.

Source: http://www.inboundlogistics.com/cms/article/how-the-internet-of-things-impacts-supply-chains/

Radio-Frequency Identification (RFID) is the use of radio waves to read and capture information stored on a tag attached to an object. RFID is used by many industries such as commerce, transportation, animal identification and so on. Moreover, the integration of RFID Inventory Tracking and Warehouse Management Solution enable the retail and manufacturing industry to identify and track inventory real-time and automatically.

Manufacturing companies using SAP can use RFID to track their products along the supply chain. During the inbound delivery process, the goods receipt will identify incorrect items and quantities sent by the vendor. During the outbound delivery process, the items can be tagged, loaded onto cases, and automatic goods receipt. When the item is stored in the plant, the item also can be tracked.

The technology of integration of SAP ERP and RFID is called SAP Auto-ID. It receives the data from the RFID reader and converts those data into ERP system. SAP Auto-ID also automatics the delivery process. It includes the flexible definitions and rule set environment. For example, if the data from a tag is captured for a goods receipt, then SAP Auto-ID would automatically generate a goods receipt based on the rules defined.

 

 

 

A warehouse management system (WMS) supports the day-to-day operations in a warehouse. An ERP system has most of the capabilities of WMS like tracking the course of inventory items picked, packed and shipped but integrating a WMS to ERP offers many beneficial features. Following features and capabilities demonstrates importance of integrating a Warehouse Management System to ERP system:

Information analysis: WMS facilitates optimization of inventory on the basis of real-time information. Information analysis helps to show the best location for every item to be put based on historical trends and data and so on.

Reduce man-power: WMS facilitates to cut manpower expenses as the system itself can do many things at the same time. It help accomplish many things with a small number of people.

Automate: Automating and streamlining the processes helps to overcome the problems of stock visibility and traceability, and improving picking accuracy, avoiding losses made through non deliveries, mis-deliveries, returns and service level fines.

Reducing Employee Theft: Warehouse-related theft costs as much as $80 billion each year. WMS can help management isolate exactly what’s gone missing to provide an early warning that employee theft may be occurring.

Improve ground-visibility:  Provide visibilities across warehouse operation to clearly identify areas of blockage and wastage of materials.

(Fig ref: daniday.wordpress.com/2010/03/04/warehouse-management-system/)

Inventory management is central to getting the results you need from your ERP. At the same time, your ERP helps provide the good inventory management you need.

1. Planning Replenishment Orders

Inventory management allows us to properly plan replenishment orders. Our inventory quantity must be accurate so when the signal to buy or make more is received; we have confidence that we need to take action. ERP inventory management system allows us to categorize parts which helps easily order the right quantity. One item is ordered only when there is a specific demand in exactly the quantity to meet the demand. Another item is ordered when at a lower cost and easily procured. Our goal here is to make fewer transaction so that we order enough to cater the demand. Hence optimizing inventory means fewer transactions and that leads to better inventory accuracy.

2. Surplus Inventory Management

You can quickly see and react to surplus inventory. Whether the surplus is caused by a decrease in some demand or you learn that the economy of a good buy wasn’t so economical, your ERP inventory management system will spotlight the surplus immediately. This leads our capital to be bound in the inventory instead of earning money.

3. Inventory Turnover Tracking

You can track turnover of inventory by segments and not just overall. ERP inventory management systems allow you to categorize your inventory in many ways and to analyze whether your inventory assumptions are true.

4. Business Savings

You save time and money through better inventory organization using your ERP inventory management software. Better organization can lead to improved customer satisfaction. Organization might mean moving your items with the most transactions to locations at the front of the stock room and near each other. It could mean combining the parts used for a particular order in nearby bins. ERP is easily used to improve inventory organization and the results can be much improved efficiency and better productivity in your stock room. Your employee satisfaction goes up and your profits right along with it.

In this week, we talked about the inventory and warehouse management in ERP. During the project discussion we found out that inventory is the “bridge” between different business process. Inventory management is way more important than we used to think; it plays a crucial role in every business process.

ERP systems help manage inventory up and down the supply chain and enable profitability and provide the competitive edge needed to survive. Having an ERP system to help you with the inventory management will benefit your organization in a few ways:

1. It provide the Real-Time Data

ERP inventory modules can help enable the controls that lead to accurate knowledge of inventory for every SKU. When a customer asks for availability, the ERP provides in real time exactly what is on hand and when the next incoming delivery is expected and nets that quantity against existing customer orders. Delivering on promises leads to satisfied customers.

2.     It helps with Planning Replenishment Orders

Inventory management allows you to properly plan your replenishment orders. Your inventory quantity must be accurate so when the signal to buy or make more is received. Your ERP inventory management system allows you to categorize parts which helps easily order the right quantity. One item is ordered only when there is a specific demand in exactly the quantity to meet the demand.

3.     It quickly reacts to Surplus Inventory

When surplus is caused by a decrease in some demand, your ERP inventory management system will spotlight the surplus immediately. There are options you have when the surplus is quickly found and reaction is immediate. Should you return the item? Can you contact the customer and ask for another order to use up the surplus? Delay might mean you move the surplus to the trash pile and disposition costs money instead of earning money.

Reference:

http://www.erpfocus.com/four-benefits-of-erp-inventory-management-2896.html

4 Benefits of ERP Inventory Management

http://www.erpfocus.com/erp-inventory-management-4-benefits-for-distributors-2690.html

ERP Inventory Management: 4 Benefits for Distributors

 

 

Ikea

Cost per touch inventory tactic : Ikea uses this technique where customers select and retrieve the packages themselves. The more an item moves, the more it costs. By making the customers retrieve the packages they are reducing moving and retrieval costs for an item.

High-Flow & Low-Flow Warehouse : Products stored in High flow warehouses are in high demand and they are fully automated to reduce costs per touch. Low flow warehouses are not in demand and the processes are mostly manual because the workers don’t have much to move and stock.

Walmart

Cross docking is Walmart’s strategy of replenishing inventory effectively. Cross-docking is the process of unloading materials from an inbound truck and loading these materials directly into outbound trucks with little or no storage in between.

Amazon

Products in amazons warehouse are not organized by category. They are placed on shelves as if by random. When a product is picked up hand by a collector he scans it with a handheld device to ensure that the right product is picked up. The products progress in the warehouse is monitored in every step because of the scanning of the product in each step. By doing so, Amazon is able to track where a particular product is at any given point of time.

A 90-second video on how Amazon manages its warehouse https://www.youtube.com/watch?v=5TL80_8ACPc