The Issues Resulting from Not Having Current ERP Software

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In today’s challenging business environment, many business owners face the dilemma about whether they should update their outdated ERP Software or continue using it. Many say, “if it ain’t broke, don’t fix it.” What they fail to realize is that not getting modern ERP Software will result in the domino effect of business disruptions affecting bottom-line profit. 

Issues resulting from having an Un-automated Warehouse 

  • Inventory received at the warehouse is manually verified against the purchase order and the computer records are manually updated, often resulting in errors. 
  • If the shipment was short of what was ordered or the wrong amount was charged, the computer records need to be manually updated.
  • When new inventory arrives at the warehouse, half-empty shelves are consolidated and often the computer records do not update this change. 
  • The misplaced inventory may not be found until the next physical count is taken in the warehouse.
  • Manual picking from shelves often results in the wrong products being picked.  
  • When the products are shipped, one person packs it and a second verifies the shipments for accuracy. This results in additional labor costs.
  • Inventory accuracy cannot be determined until the physical count is taken.

 Issues Involving Incorrect Shipments 

  • Incorrect items that were shipped get returned resulting in double freight bills.
  • Returned inventory can become excess inventory because new products were ordered.
  • Invoices that have returned inventory will not be paid until credit or adjustments are given. This often results in cash flow issues.
  • The Accounting Department has additional work issuing credits and adjustments and Vendor early payment discounts are often missed.  

The Benefits of Having Automated Warehouse Software

  • Inventory received in the warehouse is scanned by RF devices and the computer records are instantly updated.
  • Received quantity is matched against the purchase order. If a discrepancy is found the Vendor and the Accounting Department are notified.  
  • The RF device instructs the picker from which location the inventory should be picked, and verifies the quantity picked.   
  • When the products are ready to be shipped, one person scans the product, verifies they are the right items and quantity, and then packs it.
  • If one warehouse has excess inventory and a second warehouse is short, a transfer can be done and the computer records are instantly updated. 
  • Each location is scanned on a timely basis and manual count is no longer necessary. If incorrect inventory is found, a physical count takes place and the computer records are instantly updated.

Purchasing with Outdated ERP Software

  • Just because the product sold last year does not guarantee it will sell this year.
  • A very big order might have been made for a one-time purchase due to a promotion.
  • When a product reaches its maturity, sales will decline. Not taking the product maturity into account can result in excess inventory.
  • Not having an accurate count of the inventory in the warehouse can lead to open orders and purchase orders given to vendors, resulting in excess inventory.

Purchasing with Modern ERP Software

  • The forecasting software analyzes the previous year’s sales determining the product maturity.
  • A one-time big order gets disregarded and  is not considered for new purchasing.
  • The computer software suggests what products should be bought based on their maturity, inventory level, open orders and purchase orders issued to the vendor.
  • Determining vendor delivery time-table will help “Just in time” purchasing.
  • Knowing whom to buy from: the vendor who has the lowest price might have late deliveries resulting in inventory shortage and customers cancelling their orders.

Analytic Information with Modern ERP Software

The analytic software provides real time information of various aspects of the company activities such as:   

  • Financial information
  • Products sold history 
  • Inventory status
  • Customer performance and buying trend
  • Territory and sales rep’s performance  

SUMMARY:

Having outdated ERP Software goes beyond “the cost of doing business.” It results in the “domino effect” of business disruptions resulting in excess inventory, increased operating costs, lost sales and additional expenses affecting bottom-line profit.

About SMC & Dani Kaplan:

Since 1980, Dani has worked with Manufacturers, Food Distributors, Food Processors and the Pharmaceutical industry as their trusted advisor helping them lower their operating costs, streamline operation and control inventory.

Dani can be reached via SMC – http://www.smcdata.com/contact