The complexities of balancing inventory and supply chain management are enormous. Each element offers its own challenges, but they must also work in concert to help manufacturers meet demand effectively. Adding to the challenges are labor shortages in manufacturing and ongoing supply chain constraints across the globe.
What can help, however, is an ERP system for manufacturing that addresses inventory and supply chain needs simultaneously and aligns both ends of this equation within one simple-to-use platform. ERP for manufacturing can then help rectify the problems between inventory and supply chain management, alleviate pressures on workers, and enable better manufacturing productivity and efficiency.
Problems Facing Manufacturing Inventory and the Supply Chain
Inventory and supply chain are intertwined components of manufacturing operations. There is no supply chain without inventory and no inventory without a supply chain. To be effective, ERP for manufacturing must address both components together. Or, alternatively, a separate ERP for supply chain management and a separate inventory ERP system is a recipe for disaster.
Challenges to both inventory and operations arise when a supply chain is disrupted. Impacts on a manufacturer’s inventory of raw materials will impact the ability to produce and build an inventory of finished goods. Customers are then affected by orders which are delayed or missed altogether.
With a limited inventory, manufacturers then must choose which customers have orders fulfilled. The remaining customers obviously become frustrated and are forced to seek other suppliers. It creates a ripple effect where downstream customers become unable to support their own customers while the manufacturers see sales and order volumes drop. That, then, forces manufacturers to reduce orders to upstream suppliers, impacting the entire supply and demand chain.
The impact of poor inventory and supply chain management cannot be understated. However, it is worth mentioning that COVID-19 has been a key contributor to the current manufacturing climate. In many ways, the pandemic didn’t create new problems so much as exacerbate existing ones, such as:
- Global Supply Chain Issues – With the push towards just-in-time inventory management, the global supply chain had become optimized to an extreme degree. It then fell like a house of cards when the underlying balance of supply and demand was disrupted by pandemic-driven shutdowns. The war in Ukraine has worsened these issues and has driven the global economy to the brink of recession. Yet while global events have tested the strength of global economies, greater end-to-end supply chain visibility—even if the news is bad—can help insulate manufacturers from disruptions and can be realized with ERP for manufacturing.
- Materials Shortages – Disruptions to the supply chain are occurring on every level, but arguably, raw materials shortages are having the greatest impact. The reduction of basic raw materials and components cascades up the supply chain resulting in entire industries being unable to deliver the components and products to fulfill demand. Manufacturers have always relied on forecasted materials availability to satisfy demand and capacity planning and make operational decisions. Manufacturing ERP features can help manufacturers better understand how much they can produce, for which customers, and how and when they can be delivered.
- Labor Shortages – Fewer workers are seeking manufacturing careers, leading to a downward trend of staffing shortages and skills gaps that began in the late 1970s. While factory automation has become a hot topic in the industry, skilled technicians to keep technology running are also in short supply. Deploying the best ERP for manufacturing can offer insights to help manufacturers uncover talent quality and quantity gaps and then work to fill those gaps.
Of course, manufacturers have been working to digitize records and processes and move them to the cloud for years. Yet many manufacturers still rely on paper-driven processes or slow, difficult-to-track, and error-prone digital tools such as emails, spreadsheets, and legacy systems. But these processes and tools fail quickly when under pressure.
Modern ERP for manufacturing capabilities connect inventory and supply chain management data and processes, enabling goods to flow to and from manufacturers and suppliers to satisfy customer demand. Since 2020, the balance of supply and demand has swung due to higher demand. Suppliers and manufacturers who can catch up with that demand through deft inventory and supply chain strategies can also capture that business, but it takes ERP for inventory and supply chain. What we are seeing is just the beginning of a long digital transformation that is fundamentally reshaping the industry.
To prepare for this industry transformation, manufacturers must focus on solutions designed to support the intertwining of inventory flow and a supply chain that delivers that flow. They need an ERP system that was purpose-built for manufacturing.
How Manufacturers Benefit from an ERP for Inventory and Supply Chain Management
ERP, or enterprise resource planning, systems have been around for decades. These solutions generally include capabilities to manage an entire business, from finance and human resources to procurement and logistics to inventory and supply chain. ERP solutions can be generic or be tailored for specific industries like food and beverage, chemicals processing, healthcare, professional services, and others. Today’s leading ERPs are cloud-based and easily integrate with the tools, systems, and processes already in use.
Manufacturers, just like those in other industries, should seek ERP purpose-built for manufacturing. The high-level benefits of cloud ERP for manufacturing are comprehensive control of manufacturing operations, a 360-degree view of customers, production, and supply chains, and a single source of business truth that easily pulls customer data, sales and service data, and other data together to increase productivity and control. With a cloud ERP solution, manufacturers can then move with more speed, empower workers to do more and do it with more accuracy, and improve efficiency and profitability.
Inventory is the “golden thread” that runs through every manufacturing operation. When a manufacturer can precisely manage inventory and inventory costs in real-time, across multiple locations, and down to the lot and serial number, it can better manage operations, control costs, and meet customer expectations. More importantly, everything in manufacturing operations depends on inventory management. It’s unique to manufacturing and inventory success requires a purpose-built ERP for manufacturing.
Supply Chain Management ERP System
The pandemic-induced supply chain disruptions illustrated the critical nature of accurate measurement and reporting on supply and demand signals. Moreover, the related outcomes highlighted how important supply location visibility was to manufacturers, whether in route, lost at sea, or merely delayed. Manufacturers can thrive in today’s era of digital transformation only with earlier visibility into those supply and demand signals. Agility matters most and having the information to respond instead of react empowers manufacturers to meet market needs immediately and precisely.
ERP supply chain management improves supply chain forecasting using historical data or makes it fast and easy to manually create forecasts based on past data and expected future sales. It further maintains a complete and detailed record of all suppliers and provides communication and data-sharing tools to collaborate with suppliers in real-time. Internally, manufacturers can connect and collaborate across finance, purchasing, logistics, and other departments so decision-makers make smarter choices.
Inventory ERP System
Despite the numerous advances in manufacturing technology, spreadsheet-based inventory management is still prevalent in many manufacturing companies. Not only are multiple, linked, and uncontrolled spreadsheets usually the norm, but the manual nature of spreadsheets also invites human error and makes them obsolete the moment data is entered. Moreover, keeping files in desktop folders and sharing versions across email prevents them from being trusted and usable across an organization. Instead, cloud-based ERP for manufacturing provides real-time insights to those who need it, any time, in nearly any location, from any device, and with the utmost security.
Inventory ERP systems that are modules of a manufacturing ERP provide so much more than disconnected spreadsheets. The comprehensive visibility into customers, orders, supply chains, suppliers, and more, all in the context of inventory. This visibility transforms how manufacturers handle materials and products, how they communicate to vendors and customers, and how they manage all aspects of the operations.
Bridging the Labor Gap
According to Deloitte, there will be a shortage of 2.1 million workers in the manufacturing sector by 2030. Manufacturers are scrambling with the “key challenges manufacturers face: sourcing, training, and retaining talent.” While AI in manufacturing has received more attention to fill this gap, manufacturing ERPs can also provide a much-needed boost to efficiency and productivity.
Manufacturing ERPs are designed to improve and enhance the worker experience. Providing workers with a complete picture of manufacturing signals in an intuitive platform helps workers better address the needs of customers, especially when changes in the supply chain occur.
The best ERP for manufacturing provides low-code capabilities to create tailored last-mile apps and mobile solutions workers can use across the factory floor, at customer locations, from home, and anywhere in between. This improves the experience for workers, improving job satisfaction and retention, but also closes the skills gap and makes for easier hiring. When workers have more information, on-demand and in their hands, they can better stay ahead of inventory and supply chain issues while keeping customers happy.
More Than an ERP: The Manufacturing Operating System
Manufacturers wanting to gain competitive advantage are best served with ERP for manufacturing purpose-built for manufacturing companies. Only those solutions have the production, field service, inventory, supply chain, engineering, and other manufacturing-specific components manufacturers need. But, even more, manufacturers need manufacturing ERP features that seamlessly integrate sales, order, customer, supplier, quote-to-cash, and other data to provide 360-degree manufacturing and operations insights. An increasing number of IT leaders are coining this complete view as their manufacturing operating system.
Rootstock Cloud ERP is the only connected manufacturing cloud ERP built for manufacturing and built on the Salesforce platform. Traditional legacy ERP systems can’t meet the speed, collaboration, connectivity, mobile, scalability, and other challenges of modern business. Rootstock Cloud ERP combines the data, user experience, and workflow together to enable manufacturers to deftly manage supply chain and inventory processes, and every other aspect of manufacturing operations.
Manufacturers are entering a new era of digital transformation, initially forced by the pandemic but now necessitated by the constraints and expectations of today’s supply and demand chains. Only with modern ERP for manufacturing can manufacturers compete effectively.