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The inventory advisor

Jan 22, 2020

When is the right time to implement an inventory management tool and what should you look out for?

Does this messy warehouse look familiar? If you are thinking about extending the functionality of your ERP to provide better demand planning and forecasting abilities, then this is the article for you. There are many solutions available, and you won’t be starved for choice, but like with everything in life they have their pros and cons, so it is vital that you identify these by conducting thorough research.

Let’s begin

Recognize your need

First and foremost, determine whether you need an inventory management system. Your inventory control module within your ERP probably only provides you with a min/max re-order feature, but this may be adequate for your business needs right now. Take a closer look at the inventory results that you are getting from your ERP by answering the questions below. Are any of these areas are a problem for you?. If they are, does your existing inventory functionality provide you with the necessary information to manage these?

  1. Do you have too much capital tied up in excess stock?
  2. How often do you run out of stock?
  3. Do you have visibility of your sales data?
  4. Do you have insights on your supplier’s performance?
  5. If you export your sales and supplier data into a spreadsheet, how much time does this take in staff-hours every month/week?
  6. Can you automate promotions and discounts?
  7. Do you get alerts when you are about to run low on an item?
  8. Are you able to forecast using statistical analysis, or do you forecast using a bit of data and a lot of gut feel?
  9. How accurate are your seasonal forecasts?

Now, calculate your current costs. However, don’t take your ERP cost into account as you will still have this cost no matter what. If you are using Excel to manage your inventory, for example, this may only cost a minimal annual license fee but add to that the number of hours it takes for staff to input and update the data, formulae, and links on an ongoing basis. Look at previous human errors that may have occurred by using Excel, such as incorrect formulas or macros. These errors could end up costing you a fair amount. There are also costs associated with not having the right information at your fingertips. Perhaps there was an urgent order that you air-freighted in, so you weren’t at risk of losing 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 all the available solutions.

Integration and deployment 

Even if your ERP solution is on-premise, look for an inventory management tool that is cloud-based. Cloud-based technologies are the way of the future, and when you update your legacy ERP, you will most certainly update it to the cloud. Cloud systems reduce your IT expenses, give your staff 24/7 access to your operations, and are real-time, so your data is always up to date. With ERP integration to your inventory management solution, your data pulls through automatically, and the magic begins, providing you with order recommendations and dashboards of critical information to help you avoid stocks outs and reduce your excess. 

Software Vendor selection 

Now that you have filtered out all the on-premise solutions and narrowed your choice to only the cloud ones, your next step is to investigate the companies behind the products. 


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

Product functionality and pricing

Your list of possible product options should now be smaller than when you started. Now you need to drill down into the product’s features and capabilities. Most software vendors will have an online demo option, but rather request a personal demo either online or in-person if time and location permits. Keep your solution requirements list basic at this stage; you can go into more detail later. A full-blown set of system specifications takes a significant amount of time, effort, and skill to put together and is overkill when initiating a vendor selection exercise. Rate the Vendors on your shortlist according to the below.

  1. How quick was their response to book a date and time for the demo?
  2. Did they keep the appointment?
  3. Did they listen to your needs and demonstrate the product accordingly?
  4. Did they customize your demo to be specific to your business/industry?
  5. Did they answer all your questions and handle any objections?
  6. Are they knowledgeable in the inventory and supply chain space?
  7. Did they send a personal followup ‘thank- you’ email or call?
  8. Did they follow up with you a few days later to check-in and see if you need any other information?
  9. 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 not only during the demo but pre and post as well will be a direct representation of what you can expect if you were to select them as your solution. 

Besides these obvious indicators on vendor selection, it also 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 relationship.

 Make sure that your full set of system specifications are identified and agreed on together and that the vendor can deliver on his promises. Once all the I’s are dotted and the T’s are crossed, select a dedicated employee within your operations 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 the management of this inventory receives high priority. This is not an area of the company that should take back seat. Your stock 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.