The problem with surplus inventory

In the manufacturing industry, inventory management can make or break a budget. You need to produce enough units to meet customer demand, otherwise your customers will go elsewhere. If you produce more units than you need, then you have a whole other set of problems. Your customers may be content, but you still have excess units and wasted materials to deal with.  

Dealing with a surplus
What can you do with excess inventory? There are a few options, but none of them are great. Here are a few reasons why:

  • Storing the units could require you to rent additional warehouse space. Otherwise, the accumulating units could take up too much space on your site and get in the way of your operations. 
  • Selling it at a discount could come back to bite you. The products could end up in a secondary market, where they could be competing with yours. 
  • Destroying or dumping the surplus products is a waste of resources. Not only that, but filling up a landfill with your waste can have a negative effect on the environment. 
  • If you keep trying to sell the products despite reduced interest, your sales team is going to grow frustrated about having to sell an unpopular product while, updated models might be rolling out. The demand was down for a reason, so why would you expect them to suddenly start selling again? Also, soon the products will be out of date. 
ERP inventory management software offers many tools to help you plan for customer demand, and deal with surplus issues. ERP inventory management software offers many tools to help you plan for customer demand and deal with surplus issues.

How ERP inventory management software can help
One of the most important components of a manufacturing enterprise resource planning platform is a robust set of inventory management tools. 

  • Demand planning: An ERP system's inventory management tools provides up-to-date information, so your business can produce exactly what is needed, keeping inventory low while meeting demand. 
  • Identifying a surplus immediately: Sometimes, unexpected events reduce demand with little warning. Whether the surplus occurs because the demand for a particular product drops or because of changes in the market, the ERP software will identify it and notify you right away. This immediate reaction gives you more options than the ones mentioned above, such as contacting the customer right away to offer an additional order. 
  • Automated replenishment: Inventory management software can automate many of the processes around your production and distribution channels, streamlining operations and reducing many costs. As demand grows, ERP software orders the ideal quantities of materials to meet it. This automation reduces the number of transactions you have to make, and helps maintain an efficient turnaround between you, your partners and the end users. 

At Accent Software, we work with growing manufacturers to implement Microsoft business software, helping them reduce costs to achieve a competitive advantage. If your legacy system isn't cutting it, contact us to see how a sophisticated ERP program can make a difference.