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Enterprise 21 ERP Software Addresses Too Much Inventory for Distributors
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Enterprise 21 ERP Software Addresses Too Much Inventory for Distributors
Rebecca Gill, vice-president of Technology Group International, contributed a feature in the current issue of Progressive Distributor. Today’s enterprise solutions offer standard reports for helping users manage optimal inventory levels. By utilizing a top product listing report to review high-volume items, a user can focus on areas where the application’s suggested minimum and maximum levels deviate from the existing levels. For those who lack such systems, mathematical formulas exist to manually calculate these levels, although the task will quickly become tedious.
Gill reveals, “Maintaining an over abundance of inventory is a classic problem for the wholesale distributor. This issue is generally a result of one of these causes: incorrect forecast of demand, a belief that one must have a lot of inventory to service customers, and an inability (or perceived inability) to procure product rapidly enough to service customer orders (classic 30-day lead time).”
When best practices are deployed, the correct level of inventory is determined by several primary factors: customer demand, product lead time, and an organization’s desired service level. A solid ERP or distribution package will include functionality designed to optimize inventory levels to meet the simultaneous results of high inventory turns and high order and line-item fill rates.
An example of this technique is the “Smart Pull System” which was developed by Arthur Hill, a well-known professor of Operations and Management Science at the University of Minnesota. Hill determined the key to maintaining proper inventory levels is a balancing act between maintaining conservative inventory levels, while also having enough inventory to adequately service a customer. A successful equation for obtaining this success focuses on three factors which include safety stock, minimum inventory, and maximum inventory levels.
It is preferable to use sales history to calculate all three of these parameters. Ideally, the desired levels are unique to a facility and take into account any shifts in demands due to seasonality and forecasts.
About Technology Group International, Ltd.
Founded in 1990 and headquartered in Toledo , Ohio , Technology Group International is a proven technology leader delivering Tier 1 application software functionality at a price performance level that can be readily accepted by organizations of all sizes. Specializing in software systems for small and mid-market manufacturing and distribution companies, TGI’s integrated Enterprise Series software suite is a complete business process management solution. The product offering includes Enterprise Resources Planning (ERP), Manufacturing Resource Planning (MRP), Supply Chain Management (SCM), Warehouse Management System (WMS), Advanced Planning and Scheduling (APS), Decision Support System (DSS), Business Intelligence, Manufacturing Execution System (MES), and eCommerce. TGI implements, maintains, enhances, and supports its packaged distribution and manufacturing software solutions directly and via its channel partners.
Technology Group International
www.tgiltd.com
Rebecca Gill
rgill@tgiltd.com
800-837-0028
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