In the short history of ERP, it is seen more than a handful times that an ERP Project that was supposed to bring large benefits to the organization after Go-Live, does exactly the opposite. Without doubt, ERP is one of the most powerful IT tools that have the potential to take an organization to the next level of maturity in supply chain, manufacturing, financials etc. but it demands an equally intensive pre-work before you take a dig at deploying it. The intent of this paper is to look at the major issues or areas that need to be fixed or fine tuned before this exercise starts and also provide a recommended approach for a successful solution implementation.
Since the space where ERP operates is quite large so without focusing on one single area, doing justice to the whole approach will be difficult. So, this paper will talk more about the Inventory optimization function that is one of the key performance indicators of all ERP or SCM projects and it greatly impacts the bottom-line of the organizations. One of those rare enigmas that a supply chain expert is still trying to resolve is that how to have correct inventory in the warehouse so that the stock-outs are zero, on-time delivery is 100% and yet there is no over stocking or obsolescence. Every manufacturer has more inventory than needed. Experience shows that inventory excesses are at least 20 to 40% and sometimes much more. Any inventory that does not support a very specific strategic objective is excess.
There are multiple questions that bother the Inventory Planners and some of them are:
- Where to stock inventory – at the finished goods level or raw material level?
- How to address demand volatility?
- How to balance supplier lead times with cost & quality of item procurement?
- How frequently one should revise the inventory targets?
- Are bulk purchases at low cost really beneficial as they increase inventory?
