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The inventory advisor

Jun 10, 2015

Choosing the best Inventory Management System

A familiar scenario: Your business holds inventory to supply customers yet despite your best efforts to arrive at the perfect order, you still:

  • have stock outs on key items, impacting your cash flow and financial success
  • end up with excess stock of items that seldom sell, no matter how much you discount them

The inventory module in your accounting system/ERP is great at telling you how much stock you have on hand, but does little to assist with the above inventory issues.

While most of these systems have “MIN” and “MAX” levels to automate reordering, these are typically manually computed, entered and then forgotten. And you continue to have both stock outs and excess stock. Not only that, you are never quite sure how much excess you actually have nor what value of sales you are losing due to stock outs. The traditional measure of “how much stock in excess of 12 months of sales do I have?” does not provide any clarity.

One thing is for sure: your inventory is out of balance and nothing that you do appears to resolve these two problems. Both continue to cost you money and you realise you may need to invest in an “Inventory Management” system.

Automatically the first question that comes up is “Can I afford it?” The second question (prompted by the cost of stock outs and excess stock) is “Can I afford not to?” However, a simple Google search for “inventory management software” returns well over 19 million results, ranging in cost from free to millions of dollars and from simple PC-based systems to enterprise solutions.

So where do you start? Probably the best place to start is with a definition of what you need. Once you are clear on the benefits such a system must provide, you can begin to narrow down your search for a solution.

So what about Enterprise Solutions?

Enterprise Solutions are designed to address the full range of problems experienced by an inventory manager and/or planner. However:

  • they are expensive
  • complex to install
  • take significant time to implement
  • require a lot of IT involvement and support

Complex systems often need highly trained “specialists” to operate them to achieve the benefits. Raising your concern during product demo’s will result in you being reassured that your existing employees will be adequately trained.

Future staff turnover requires each new user to be fully trained, with training rarely as focussed, intense and complete as when the system was first implemented.

In addition to the cost of servers and software licences, you will be provided access to upgrades “free of charge” as long as you “pay” the annual maintenance fees. While the access to the upgrade is free, you will be invoiced for the time it takes to upgrade the servers and users’ computers to the latest version and for additional training time.

And should you fall more than x versions behind – your version will no longer be supported!

Is this really the answer? Let’s try and gain some perspective.

  • Inventory management is complex – the very reason we need inventory is that the market we operate in is complex and uncertain
  • Complex systems:
    • can provide the mechanism to deliver exceptional results
    • require exceptional people, who are in demand and may leave (new staff are seldom trained as rigorously)
    • are not fully utilised when people are not fully trained
    • try to solve every problem
  • Systems selection:
    • is based largely on the promises of the sales team and less so on reference site visits
    • is done with very little real understanding of the new system
    • is made a long time before you find out whether the system is actually a good fit for your business, by which time you just have to make it work

A 100% perfect solution is simply not achievable. In fact, an 80% solution may well be the perfect solution.

The solution is to use a system that allows ordinary people to deliver extraordinary results

Lets consider an alternative perspective

  • An 80% solution represents a major improvement for most companies
  • A system specifically designed to provide an 80% solution will be a lot simpler to use
  • Sustainable benefits will be easier to achieve
  • The training requirements are less complex and a combination of webinars, online videos, real time chat facilities where users can ask for help when they need it, will enable ordinary people to deliver extraordinary (80%+) results
  • Why pay a huge sum of money for a system that cannot be guaranteed to deliver?

A typical cloud-based solution

Cloud-based solutions have matured and gained much wider acceptance, and continue to offer significant benefits:

  • The highest level of security available
  • No additional investment in server(s) and infrastructure
  • Lower implementation costs and shorter time frames
  • Subscription-based fees that do not require a long-term contract
  • Access is:
    • Via a web browser on a desktop, laptop, mobile device or smartphone
    • Operating system independent, irrespective of whether you have Windows, Mac, Linux and other new systems appearing on the market
    • Possible anywhere in the world, wherever you have internet access
  • Upgrades are rolled out virtually immediately they become available, meaning you are always up to date at no extra cost

Hopefully this post has given you some food for thought when choosing your inventory management system.