The best businesses only have the right amount of inventory at the right time. Looking at Business Central inventory management features might be something you need to do in order to improve your business' situation.
Manufacturing and distribution companies must be careful with their inventory. They need it to make things or ship products to customers, but if they have too much it will cost them a lot of money.
Operations managers and manufacturing or distribution companies are constantly juggling a million different tasks and responsibilities, so it's important to be able to quickly and easily identify when something is off-balance in their supply chain for raw materials, manufacturing workflow and shipping to their customer.
One of the most critical aspects of any operation is inventory management, and if you're not keeping an eye on things, it can easily spiral out of control.
In this blog, we will go over some of the ways you might be suffering with inventory management problems today and a few notes about how a proper inventory management system such as Business Central will help.
If your business is considering adding Microsoft Dynamics 365 for the Business Central Inventory control features - then this article will help you look at what this software can do and whether it's right for your business needs today!
Sabre Limited has been providing manufacturing companies with the tools they need to be successful for over 25 years. As experts in Business Central, our focus is on features that will help you grow and succeed.
If you enjoy this article and would like to talk to Sabre Limited’s president Rob Jolliffe to chat about these concepts, you can book a one-on-one 30-minute call with him at https://calendly.com/robert-jolliffe
If you are already feeling overwhelmed - Business Central Inventory management can help.
So, how do you know if you need business central inventory management? Here are the top six signs:
1. You Have Too Much Obsolete Inventory
Do you have many obsolete items in your inventory?
Obsolete inventory is product you cannot use or sell because it purchased or fabricated in too high a quantity. Can you be sure your staff aren't buying more of these kinds of certain items than you need? Check and see when they were purchased last. You may be unpleasantly surprised by what you find.
Too much obsolete inventory can have several negative consequences for a business, including decreased cash flow, increased storage costs, and diminished customer satisfaction. In order to avoid these consequences, businesses need to establish an effective inventory management system that considers the lead time of their products, the cycle time of their business, and the projected demand for their products.
With an effective inventory management system in place, businesses can avoid the pitfalls of holding too much obsolete inventory and keep their business running smoothly.
Business Central tracks every time something is brought in and taken out of inventory. This information is easy to track by dumping it into Excel or Power BI.
2. Staff are Rescheduling Work because Required Items are Missing.
This could mean that the work is rescheduled to not be too disruptive - or it could mean a machine literally can't run because raw materials are missing. It is important to check that all the items needed for a project are present before starting work.
Track every time work is rescheduled and categorize it. This is a LEAN/Six Sigma methodology that Sabre highly recommends - is super easy to do - and virtually nobody does. Give your employees a sheet printed in Word with 5 to 6 categories across the top and columns down the page.
Categories might be machine breakdown, employee absence, inventory missing etc.
Tally (marks on the page to track the times) every time work is rescheduled. After a few weeks you'll see one category leads the others. I would put money on it being inventory management.
If work is delayed, it can cause a domino effect that will ultimately impact the bottom line. For example, if the assembling process is delayed, then the delivery of finished products will be impacted. This could ultimately lead to missed deadlines and customer dissatisfaction.
In short, any delay in the workflow process can have a negative impact on business performance.
3. High levels of cash tied up in inventory you’re not moving.
Related to Inventory Turns(see below) but not the same thing. This is best measured with perpetual inventory management system, like Business Central. If you aren't even sure how much value of inventory you have - you probably have a crisis.
Measure how much cash is tied up in inventory (over time). Do some analysis of what your inventory levels are at different points in time. Point in time inventory analysis is a little tricky to do - so you may want to use Microsoft Power BI or other analytical tools to handle that.
If you can’t keep track of what inventory you have on hand, it’s time to invest in business central inventory management. This will help you know exactly what products you have in stock at all times.
Having too much inventory ties up capital that could be better used elsewhere in the business. Business central inventory management can help you strike the perfect balance between too much and too little inventory.
4. Your safety stock levels are too high.
Your purchasing and planning team are buying inventory all the time. If you walk byit and think to yourself "why do we have so much crap?" then you might have too high a safety stock level.
If your current system doesn't have the safety stock feature - that doesn't mean you don't have safety stock. This can be an amount your staff keep "in their head" and thus is even more out of control. If you keep your safety stock levels too high, it can cost you a lot of money.
This is because the safety stock will take up space and storage costs, your inventory may expire before you are able to use it, and a company's inventory purchases are not deductible from taxes until they're sold or deemed "worthless" and removed.
Analyze your safety stock levels (are they too high or too low - accounting for variability). This builds on the item usage analysis you should do in the previous step.
5. Your delivery performance is suffering.
No one likes a stockout. Not you, not your employees, and definitely not your customers. Stockouts can lead to frustrated customers and missed opportunities. This is probably the biggest and most dangerous problem of them all.
In manufacturing a stock out occurs when you expect or want inventory to be there (and it should be), but it is not. In distribution a stockout happens when you run out of a standard stocked item. These aren’t quite the same thing.
An ERP software could help you avoid stockouts by providing you with a real-time view of your inventory levels. This would allow you to see when you need to reorder items and would always give you an accurate representation of your inventory levels.
Measure your delivery performance. You do this by tracking your original due date against your actual ship date with a delivery performance report. This is inherent in Business Central inventory as your promised delivery date and the actual delivery date are tracked on each order and archived order. You can easily run a report against these to get your own delivery performance.
6. You have an unacceptably low inventory turns.
Inventory turnover is a measure of how often your company sells and replaces its inventories. Low inventory turns is a sign that you have too much inventory on hand. Business Central inventory management can help you optimize your inventory levels to improve your inventory turnover rate.
Your turns are the total amount of inventory you use or sell in a year, divided by the current amount on hand. If you use $4M of inventory every year and have $1M on hand at any one time - that is 4 turns. By the way - 4 turns are not good. You need to get Business Central Inventory Control up and running as soon as you can.
Measure your inventory turns (by item category). This will involve figuring how much inventory you use over a year, and how much you have in stock. It's best to focus on the different types of inventories. For instance, your finished goods; or your raw materials; or even different sub-categories of raw materials. Ensure that no one category has an unusually low (bad) level of turns.
If you want to know if these problems exist you need an inventory control system, or you need to spend a significant amount of time trying to research your existing inventory to get answers.
Without a proper system (like Business Central inventory management) you will have to rely on a lot of error-prone Excel sheets and maybe Access databases, if you are ambitious.
It can be time-consuming to manually review all of your inventory data. Second, it can be easy to overlook or miss errors in your data. And finally, even if you do find errors in your data, correcting them can be a challenge.
A more efficient way of looking at inventory data is with an ERP system such as manufacturing Business Central. If you are experiencing inventory control problems, it might be the right product for you. It has many modules that can help your business manage inventory more smoothly.
At Sabre Limited, we are experts in manufacturing. We stand among the best manufacturing ERP implementation partners across North America. What sets us apart from our competitors is that we use fixed fees instead of time and material billing and we always put the customer first.
If you're interested in learning more about what Sabre Limited can offer, we've been dedicated to helping small to medium-sized manufacturers learn and adopt Business Central. Reach out, and let's explore how we can contribute to the success of your manufacturing journey. Contact us at firstname.lastname@example.org or call (519) 585-7524. We look forward to hearing from you.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.