The Inventory Mentor

Jan 12, 2020


How and when to choose an inventory management system

How and when to choose an inventory management system

Your supply chain business may be at the stage on the inventory maturity curve where you want to consider extending your ERP functionality to provide better demand planning and forecasting functionality. You won't be starved for choice as there are many solutions available today. They all have their strengths and weaknesses, and it's essential that you identify these by conducting thorough research.

Identify your need

First and foremost, identify whether you need an inventory management system, to begin with. You are most likely running an ERP solution that has an inventory control module, and you're using the built-in min/max re-order feature. Take a deeper look into the functionality and results that you are currently getting from your current solution. Taking the questions below, see if any of these areas are a problem and check if your current system is able to give you the necessary information and relevant recommendations to solve them.

  • Do you waste money by over-ordering inventory?
  • How often do you run out of stock?
  • Do you have visibility of your sales data?
  • Do you have visibility of your supplier's performance?
  • If you extract sales and supplier data manually from your ERP into a spreadsheet, how many staff-hours every month/week does this take?
  • Are you able to automate promotions and discounts?
  • Do you get system alerts when you are about to run low on a stock item?
  • Are you able to forecast your demand using statistical analysis, or do you forecast using some data and a lot of gut feel?
  • How accurate are your seasonal forecasts?

Calculate your existing investment costs

Don't take into account your ERP costs as you will still have these no matter what. However, if you are using Excel to manage your inventory, it may only cost you a minimal annual license fee but calculate the number of hours it takes for your staff to take in and manage this static data on an ongoing basis. Look at previous errors that have occurred by using Excel such as incorrect formulas or macros and what this cost you. Look at additional costs associated with not having the right information at your fingertips - for example, perhaps there was an urgent order that you had to air freight in because you stocked out of an item and didn't want to lose a customer. 

Now that you have identified the need for an inventory management solution, and have a clearer idea as to what it costs you by not having one, you can start your research into the many available solutions.

Integrability and deployment

Even if your ERP solution is an on-premise installation, look for an inventory management tool that is cloud-based. Cloud-based technologies are where we are all heading and when you update your legacy on-premise ERP, you will most certainly update it to the cloud. Cloud systems not only cut down on your IT expenses, but they give your staff 24/7 access to your operations and are real-time so your data is always up to date. You will also want your inventory management solution to integrate into your ERP. This is where the magic happens. Your data pulls through automatically, and the calculations begin, providing you with order recommendations and dashboards of critical information to help you avoid stocks outs and reduce your excess. 

Vendor selection 

Now that you have narrowed down your choice to include only cloud solutions, your next step is to delve deeper into the companies behind the products. 

  

  • How long have they been in business?
  • Do they have representation in your country? Being cloud-based, it's not critical, but it is a significant advantage.
  • How many customers do they have?
  • Do they have customer testimonials/references?
  • Do they have any reviews on software review sites such as G2 or Capterra?
  • How expandable is the system?
  • How often do they release feature updates?
  • What is their product roadmap for the next 12 months and beyond?
  • What is there online reputation like?
  • What is their social media reputation like?
  • How does their pricing work?
  • What services and technical support are included in their monthly fees?
  • Do they provide training?
  • Is the training on-demand, and is it built into their monthly fees?
  • Do they lock you into a long-term contract, or is it month by month?

Product functionality and pricing

Your list should now be small enough to drill down into the products and their features and capabilities. Most vendors will have online demos, but consider getting them to give you a personal demo either online or physical if time and location permits. Keep your requirements gathering simple at this stage, and delve into the detail later. A full-blown set of system specifications takes a significant amount of time, effort, and skill to put together. Such detail is overkill when initiating a vendor selection exercise. Rate them according to these questions.

  • How quick was their response to book a date and time for the demo?
  • Did they keep the appointment?
  • Did they listen to your needs and demonstrate the product accordingly?
  • Did they customize your demo to be specific to your business/industry?
  • Did they answer all your questions and handle any objections?
  • Are they knowledgeable in the inventory and supply chain space?
  • Did they send a personal followup 'thank- you' email or call?
  • Did they follow up with you a few days later to check-in and see if you need any other information?
  • How is their product priced, and how will this impact your business model, i.e., is it priced per user, per location, per company?

The way the demonstration is handled pre, during, and post, will be a direct representation of what you can expect if you were to select them and their offering. 

Besides these somewhat obvious points on vendor selection, it helps if your chosen vendor has the same outlook towards running a business that you do. How do they approach customers? Are they proactive? How do they communicate? How agile or rigid are they? If your business objectives align with theirs, it will be a far more successful partnership. Make sure that your full set of system specifications are identified and agreed on together and that the vendor can deliver on his promises. Elect a dedicated employee to manage the project from implementation to sign off and ongoing from a maintenance aspect.

Inventory is the foundation of any supply chain business, so it makes sense that inventory management be your number 1 goal. Inventory should be run and managed with care and precision, using tools designed to give you optimal results. Results that directly show an impact on your operations and your bottom line. This is not an area of the business that should take a back seat.  

 


Written by Barry Kukkuk

Barry comes from a systems architect and application development background. He started his career as the co-founder and chief developer for Icon Retail Management, a full-fledged retail management system that integrated with mainstream ERP. Barry later conceptualized and developed Inventory Optimiza for Barloworld Logistics and provided technical support for the application. It was here where Barry’s passion for Inventory Management solutions began and the industry where he would later return. Barry went on to start his own business in 2008, where he was an avid user of cloud-based apps and would only use online solutions for his business. In 2010 Barry began his journey with NETSTOCK. His enthusiasm for Inventory Management and his strong belief in “all things Cloud” collided, and we saw the release of the Inventory Management solution - NETSTOCK. Barry is the CTO at NETSTOCK, where he is responsible for all customer-facing technologies and systems that keep thousands of NETSTOCK customer instances working correctly.

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