Anand Jajodia, Co-founder of Alignbooks | 26 Oct, 2021
What is Inventory?
Inventory is one of the most important building blocks for every business. As a
small business, it can be challenging to purchase a large number of raw
materials in advance due to a capital crunch. However, managing inventory is
crucial as it can either make it or break your business. Investing in an
inventory management system can be a good place to start. It is important to
simultaneously adopt a few well-tested strategies to manage your inventory
What is Inventory Management?
Before we dive into the importance of Enterprise Resource Planning systems
(ERPs), let us understand the basics of inventory management. Inventory
management is essentially the process of managing inventory in a manner so that
costs are optimized while scaling your business. It includes elements such as storage of
inventory, overseeing the inventory orders, and stocking the right amount to
minimize wastage. Without a good inventory management system, meeting
production needs can become challenging. This can cost you money, time,
customers, and even your reputation.
What Are Cost Efficiencies?
Managing cost is core to running a business. The
means of managing working capital is prime to the success of a business.
Inventory is one of the key elements of working capital. Having a high working
capital translates to a longer realisation cycle. This would ultimately lead to
a higher capital financing cost, be it owned or borrowed capital.
How Can the Costs be Optimised?
There are a few ways in which costs of a company
can be optimized. Here are some of them.
● Shorter working capital cycles
● Insights into supply and demand
○ Fast and slow moving stocks
○ Inventory options that are just
○ Critical stocks
● Timely vendor payment
especially in cases of critical and high-demand inventories
How ERP Systems Help Inventory Management
Investing in an ERP system for your business is one
of the smartest decisions you can make. Many businesses tend to lean towards
using spreadsheets to carry out their operations. However, spreadsheets come
with several challenges like human error, missing information leading to
incorrect inventory requirements amongst others. With an ERP solution, there is
no room for human error. In addition, ERP systems automatically integrate with
the other existing systems of your business and thereby enable efficient
operations. There are plenty of ERPs available in the market. No two ERPs offer
the same benefits, features, or functionalities. Here are some areas in which
ERPs can help your business perform seamlessly:
● Stock tracking and storage
● Automation of processes and
● Insights into business
intelligence and analytics
● Payment gateway for seamless
● Notifications and alerts
● Managing accounts receivable
and accounts payable
● Facilitating transactions
between businesses and lenders
By assisting across
these areas, ERP systems can help your business function seamlessly and help
you rise to greater heights.
4 Reasons Why
SMEs Should Adopt ERP Systems
With the advent of technology, every business has leveraged digital solutions
to improve its efficiency and business outcomes. ERPs have evolved to become
the backbone of businesses thereby enabling companies to have a competitive
edge in the industry. To improve and scale your business, ERP is absolutely
important. Let us have a look at 4 reasons why you should adopt ERP systems.
ERPs provide 360-degree
coverage for your business ranging from HR and production to marketing and
sales. It can save you and your team both time and money by eliminating the
manual processing of redundant tasks. With automation, there is no scope for
human error, and potential discrepancies can be avoided.
2. Cut Costs
invest in different systems for each task. Instead, it can be more
cost-efficient to invest in an ERP system that can handle different aspects of
your business in one place.
To maintain an accurate
pipeline of products, it is crucial to understand the stock of your inventory.
Inventory management systems by themselves cannot effectively optimize your
inventory unless it is integrated with the entire workflow. ERPs integrate your
inventory systems with the rest of your operations. It helps streamline
business processes and helps in production and planning.
Restock, and Manage
ERP systems keep track of
your sales, purchases, and logistics all in one place so that you can match
your inventory levels with your business needs. Insights on real-time stock
levels can help you either replenish or return inventory depending on your
On-Line vs Off-Line
Online and offline ERP have their benefits.
However, most companies use online ERPs. Let us have a look at the pros and
cons of online ERPs.
● The entire application and data can be stored on cloud with advanced
● Accessible 24x7 on any device
● Gives businesses a competitive advantage by helping them make smart
decisions and enhance customer and vendor experience.
● The security varies on the credibility of the service provider
In a Nutshell
With customers becoming more aware of products
and features, they tend to prefer companies that actively listen to them. ERPs
can help you meet all of your business needs in a seamless manner. Technology
has allowed SMEs to bridge the gap with corporate businesses. With ERPs, SMEs
can be efficient and be smart about meeting their goals. ERPs are also
cost-efficient leading to more profitability for the company, thereby ensuring sustainability.