Whether you are a large, multinational manufacturer or a job shop with just a dozen people, your inventory and your people will be the most important and most expensive line items in your financials. So we are tackling these issues first when reviewing when or why you might purchase a production control system.
We’ve talked about problems that are very difficult to solve like unconnected people, processes, materials, and job information. Now we want to dive into inventory; this one is particularly challenging as most manufacturers believe “my ERP can handle that.”
It's true that your financial system is the first one to touch inventory. It will often have controls for how much you have and where you purchased it. At the completion of an order, it will usually decrement the inventory that was used. This is barely helpful to manufacturers that run tighter inventory controls or have rapidly turning inventory. For these situations, budget and availability require you to have tighter controls on inventory than your financial system(s) will allow.
Microsoft files cannot keep this information unless you employ one or more full-time people to manually record and track inventory usage daily. Inventory counts are off from almost the moment you do your last inventory sampling or count. Inventory is constantly shifting on the shop floor and these tools have no way to track usage or current position in real-time. Inventory is also constantly being consumed and created; the first within production and the latter at the conclusion of it. Inventory has to be managed as changes are happening so that you always have fresh, accurate information to be flexible and adjust and respond.
Your ERP can usually track your purchase records. It can tell you what you have, maybe where it is, and its relevant value. Without a highly customized (and very expensive) ERP, you likely don’t know consumption rates. How do you know what time(s) of year you will require what materials to make the orders that you typically receive? Trends like this are hard to manage without a system that does it naturally and that system is not in your front office.
True control of inventory requires a view of current raw goods inventory, current required raw goods, and current finished goods for possible order fulfillment. Knowing that you can take and deliver an order to its promised delivery date requires a much higher degree of detail than your current front-office financials can provide.
It is also critical that you know where you have used specific inventory. In the case that you use lot-based or serialized components, or parts or materials, you will want to track the usage of those specific materials into sales orders and customers. This is true not just for regulated industries or orders, but for companies that want or need to provide higher levels of customer care to meet a need.
Next week, we’ll dive into the questions you should ask to ensure that your system meets your manufacturing floor needs. Inventory is much more complex than it looks; talk to any manufacturer that needs to perform inventory counts and they will warn you of the massive amounts of time that are required to actually get control over your materials, parts, components, and products.
We’ve started the discussion here, but we’ll dig into the various issues we see, what’s causing them and what you can do to stop them. We’ll go through almost 20 areas before we end this series on how to buy a system. These pieces should serve as a step-by-step guide to get you there.
Ready to move forward faster? Engage with us to talk about assessing or mapping your systems and processes. We’re only an email away, info@cimx.com.
Contact CIMx Software to see how paperless manufacturing can improve inventory control for you.