What's the advantage of ERP over stand-alone inventory software?
When you start researching inventory management software, you’ll find you have two options – a dedicated inventory software or an inventory ERP solution. Before we go any further, let’s talk about the big difference between the two.
Inventory software is what you would call a point solution – it only handles inventory management. You can use it to track your inventory quantities and manage warehouses / bin locations. For distribution companies, these are important features to manage your biggest asset – but what about the rest of your business?
Everything that you can do with inventory software is included in an ERP system. But ERP also includes the other key areas of your business, in the same system – everything from sales, to purchasing, accounting and more.
So, if you can handle your inventory needs with a stand-alone inventory software, why would you choose an ERP inventory management system instead?
1. ERP offers more sophisticated inventory planning tools
While most inventory software packages will claim to give you advanced inventory planning tools, the reality is that they’re pretty basic. You can track item quantities and set reorder points to prevent stockouts, but there’s nothing really advanced about that. These point solutions won’t give you predictive capabilities that allow you to do deep analysis of trends to identify future opportunities.
This is where ERP gives you a leg up. You can use demand planning tools like MRP (Materials Resource Planning) to calculate and predict demand based on multiple factors, like your historical demand, open opportunities and sales forecasts. Instead of trying to make these predictions manually, using a best guess, you can rely on data to optimize your inventory at a whole other level.
2. ERP allows you to manage inventory data more efficiently
You might think an inventory software would be designed to optimize inventory management. And most solutions will claim to automate these processes – right from sales to order management, payment collection and customer management. But the question you should ask is, ‘How?’. To achieve this level of automation so the data is flowing through all departments in your organization, you’ll be heavily reliant on integrations. Often posed as a positive because it gives you flexibility, the reality is that every integration you add increases complexity.
With an inventory ERP system, all departments are working in the same system. You don’t have to worry about configuring multiple integrations between your sales, inventory and accounting systems (plus others). The system is built to do this automatically. You get a higher level of automation, with far less effort on the IT side, increasing efficiency across the organization. Not to mention that the user experience is far better for your team when they have one interface to learn, rather than three or four.
3. ERP gives you greater visibility and business intelligence
An inventory system will give you reporting and analytics capabilities, but only for your inventory. What about the rest of your business? You’ll be forced to reconcile data from your inventory software, accounting program and possibly other applications, just to get meaningful insight into your business. Consider the time it takes to do this type of reporting – you’ll be slower to make decisions and by the time you have the report in your hands, the data has already changed!
Moving your key business data under one roof is critical for useful reporting and business intelligence. ERP software gives you far greater visibility into your data, so you can make data-driven decisions, quickly. From a day-to-day perspective, consider what data your employees need to do their jobs effectively. With an ERP system, your sales and customer service teams have quick access to inventory information – what’s on hand, where it is, what’s on order, how quickly they can get it to the customer. This allows them to respond quickly to customers and provide a quality experience. Can you do that with your inventory system?
4. ERP enables you to grow
For small businesses with a handful of SKUs and a relatively small number of customers, inventory software might do the trick. But high growth companies will likely outgrow it in just a few years. They add complexity in your IT stack and your operational processes. And while a collection of integration point solutions might seem like the more affordable option, the costs can add up quickly.
Simplicity is key for any growing business and ERP is the key to achieving that. You want to make the decision that supports your business needs today, but also 5 and even 10 years from now. Many of today’s ERP solutions offer a modular approach, that allow you to implement the functionality you need as you need it. Not only does this keep the cost manageable, but it gives you far greater flexibility to adapt your system as your needs change over time.
Many inventory software vendors will tell you that ERP is too much for SMEs. Here’s the thing – it’s not. In fact, the top 20% of growing businesses use ERP to run their business. That’s how they’ve become top performers – by leveraging the right tools to optimize every aspect of their business and beat out the competition.
We help growing companies across Canada and the US get to the next level, with leading-edge technology. We’re here to guide you through the process – right from evaluation, through implementation and beyond.