ERP-integrated supply chain: the key to optimised stock management

Inventory management is at the heart of the supply chain and is a priority objective for many companies. Inventories are both a vital asset and a financial burden for companies, which have to avoid the two pitfalls of overstocking and out-of-stock situations.  

Keeping up with demand while remaining profitable can be a balancing act, with so many complex factors to consider. To optimise stock management, it is essential to integrate the supply chain with the information system. We take a look at the importance of ERP to optimise stock management. 

Integrating the supply chain with ERP: a necessity to remain competitive   

Whether it's goods, raw materials, semi-finished and finished products or packaging, stock management is crucial for any company wishing to maximise its operational efficiency and profitability. To achieve this, you need to find the right balance by implementing the right method, but that's not always enough. 

Avoid overstocking and out-of-stock situations  

Excess storage exposes the company to additional costs associated with storage space, insurance and the staff needed to manage these assets. What's more, the capital tied up in acquiring these stocks hinders more profitable investment opportunities. This situation can also lead the company to reduce its margins by forcing it to sell its products at reduced prices to free up space. In some cases, overstocking can even result in net losses if the products stored are obsolete or perishable. 

Conversely, a stock shortage can lead to a production stoppage, and therefore an inability to satisfy customer demand. As well as directly affecting the revenues of the company, this situation can disorganise the entire production chain, create bottlenecks and, in the worst case, result in the loss of customers to more reliable competitors. 

The limits of traditional inventory management methods 

Traditional stock management methods help to reduce the most significant stock management risks. However, they do have their limitations, which you need to be aware of if you want to improve your company's profitability and operational efficiency: 

• Procurement calendar: the company orders fixed quantities, which are delivered on defined dates. This method does not offer flexibility and may give rise to contractual difficulties in the event of changes to orders.  
• Replenishment method: ideal for expensive and/or perishable products sold on a regular basis, this method entails a risk of surplus or out-of-stock situations if consumption does not keep up with forecasts. 
• Order point method (just-in-time): in this case, the order is placed as soon as the stock reaches a critical threshold. This method requires rigorous monitoring and involves the constant immobilisation of a safety stock (and the associated costs).  
• Replenishment-to-order: As the name suggests, this method involves replenishing supplies on a one-off basis, in varying quantities and on varying dates. Relevant for specific projects, this method is complex and leads to a lack of visibility for suppliers.  
• Drop shipping: Here, the company holds no stock and acts solely as an intermediary between the customer and the supplier. Suitable for B2C e-commerce, this method is difficult to transpose to the industrial sector. 

If you're encountering limitations in the stock management method you're implementing, it's because It's time to get an ERP system.  

The benefits of ERP for stock management 

By enabling companies to manage their entire production cycle, ERP plays a central role in industrial performance. Here's an overview of the benefits of ERP for stock management.  

Centralise your data for better visibility 

One of the main advantages of an ERP system is the centralisation of data, which provides greater visibility across the entire supply chain. By integrating information from various departments such as sales, purchasing and production, ERP enables stock levels to be monitored in real time. This global visibility enables decision-makers to take proactive measures to avoid overstocking or stock-outs, thereby contributing to cost optimisation and customer satisfaction. 

Reinforce traceability and quality 

In industrial environments such as Traceability and quality are essential, an ERP system offers advanced functionality for tracking each product throughout its production and distribution chain. This end-to-end traceability not only enables a rapid response in the event of a product recall, but also identifies areas where quality improvements can be made.  

ERP stores and centralises all product quality information, including quality controls, expiry dates and batches. This accumulation of data plays an invaluable role in making decisions based on accurate, up-to-date information, thereby enhancing the efficiency of stock management while maintaining high quality standards. 

Documentation and regulatory compliance 

Gone are the days of filing cabinets overflowing with paperwork. Modern ERP systems centralise documents in a digital database, making them easier to access and retrieve. This is particularly useful during audits or for proving compliance with various standards. 

Automate replenishment processes 

ERP allows you to automate replenishment processes: the system can be programmed to place orders automatically based on stock levels, seasonality and other variables. This automation minimises the risk of human error in the ordering process, reducing the costs associated with last-minute emergencies or excessive stocks. What's more, the time you save means you can concentrate on higher value-added activities.  

Integrate forecasts using artificial intelligence 

One aspect of stock management that is often overlooked is demand forecasting. Modern ERP systems incorporate business intelligence and machine learning tools that can analyse past sales trends to predict future demand. These forecasts help to adjust stock levels accordingly, reducing costs while better meeting customer needs. 

At the heart of the supply chain, stock management is a complex task, but an ERP system offers a relevant solution to this challenge. Each company has its own needs and constraints, so it's essential to visit Compare different ERP systems to find the one that will help you achieve your objectives.