ERP (Enterprise Resource Planning) systems play an essential role in the control of a business, but are lacking when it comes to inventory management.
Where do they go wrong?
For each product on your system you may be asked to enter:
• A manual sales forecast, expressed as a single on-going weekly demand or as individual weekly demands
• A safety stock, expressed as an amount or as a number of weeks cover (based on the forecast)
• Other inventory parameters, such as 'minimum order quantity' and 'lead time'
What happens next?
Your system produces a recommendation for works orders (manufacturing) and/or purchase orders.  The integrity of these recommendations will depend entirely upon the forecast and the inventory parameters set. Your ERP system is unlikely to provide you with any help in determining what these values ought to be. They are all extremely difficult to set manually, and you may have several thousand of them!
In the real world
You know that once set, the inventory parameters will be rarely reviewed due to the enormity of the task. Over time they are likely to become increasingly inappropriate. As a result, inventory is certain to inflate as corrective actions are only taken when shortages occur (i.e. by increasing safety stocks). Little attention is normally given to products ‘not presenting a problem’. But that is the problem!
The problem
The ERP system holds all the information necessary to provide an answer, but fails to do so. All but a few of the larger systems (i.e. SAP, Oracle), fail to consider 'customer service level' as a significant element in the calculation of safety stock. Most ERP systems do not even provide a field for it in the database.
The solution
The solution is Inventory optimisation. This process will provide a dynamic and self monitoring set of values for sales forecasting and the inventory parameters. At least 90% of the items will 'look after themselves'. The rest will be addressed by the inventory manager or buyer on a 'management by exception' basis.
Regain control of your inventory;
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and we will arrange a FREE Inventory "Healthcheck"
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Principles & Concepts 
