Inventory is often the largest asset most of the distribution companies have. It is also expensive to purchase. Therefore, having poor inventory control may result in working capital crisis, damage, expire/ perish of inventory which will have a ripple effect on profits. On the other hand, if a company doesn’t manage to sell its inventory at the right time, it “eats” the profits by increasing the cost of inventory handling that can be one of the main bottlenecks for the growth of wholesale distributors, warehousing and logistics companies.
Wholesale distributor often stocks and sells thousands of inventory items; and some may contain slight variations in size, style, or other attributes. So, it’s important to pick the right items for production/processing to align with the customer/ production specifications. On the other hand, when it comes to handling customer orders, proper management of SKUs with similarities need careful mapping to avoid wrong items being sold. Also, it promotes fewer returns and scraps while ensuring efficient sourcing of materials from suppliers.
Accordingly, poor item management strategy can lead to harmful miscommunications and loss of productivity, ultimately hurting your business, while proper item management supports an organized warehouse, with carefully tracked inventory and supply chain movement.
Here’s are 5 reasons why well-defined item management should be in place;
1. To manage alike items
These are usually called matrix items. These items may contain slight differences in type, size and colour etc. that could be a hassle, creating various combinations ultimately resulting in confusion, time-consumption, wrong items being sold or purchased, overstock or stockout and many other things that can limit growth.
Hence, fully-fledged item management automates and streamlines item creation, sales, and purchasing processes for product families that use item attributes and values. These functionalities need to be simple to perform and should be constructed well for flawless operations.
2. To streamline kitting process
Kitting is common in durable goods such as automotive, electronics, machinery and some of the goods such as; food & chemicals. It can be either disassemble of items into stock to resell as separate components or to pick as components to use in assembling or bundle with the products as kits in the form of instructions, user manuals, etc. which are call non-stock items. Especially, when the items are disassembling to use in other orders there is a high chance of components getting lost or damaged.
Therefore, the ideal ERP for distribution should consist of flexible item management options that provide flexible kitting options for both stock and non-stock kits which also enable accurate costing associated with scrap accounting.
3. Manage compliances, recalls and quality control (QC)
Distributors require serial tracking to seamlessly monitor and manage inventory movements. Serial numbers provide full visibility with tracing down stocks at the receipt of them from suppliers to sales orders to identify which items to include in the customer orders. It helps understand what’s gone wrong and where the exact problem is in the value chain and assist in taking the corrective measures fast.
On the other hand, when it comes to handling product replacements and recalls for warranties, lot tracking capabilities are crucial. Lot tracking improves compliance with industry and customer quality requirements and is used in combination with expiration dates to manage stock rotation for perishable inventory, to manage recalls and to track items and inventory attributes.
Serial and lot tracking provides the ability to backtrack the material throughout the production/ value-adding process where it supports quality control by identifying and avoiding using expired/perished/ damaged items in the production/assembly process before the final product goes out to the market.
An ERP solution that provides complete item management functionalities with serial and lot tracking will enhance customer experience, quality of work while enabling you to confidently face regulatory or customer compliance.
4. To overcome problems related to the unit of measure
Warehouse distributors will face over-complication of their processes when it comes to the unit of measure conversion, where they may purchase in one unit of measure, stock in another unit of measure, and sells in yet another unit of measure. It will be an even more struggle to deal with bulk quantities and when larger quantities should be broken into smaller quantities.
ERP users also should be able to define units of measure and how each unit of measure is related or converted to other units of measure while providing user-defined UOM conversions and variable UOM for purchasing, inventory, and sales avoiding manual calculations. This is why you should research item management capabilities when you are selecting an ERP solution that is a long-term investment for your company.
5. Manage expiration dates
Expiry dates play a vital role when it comes to the storage of perishable goods. Some of the non-perishable’s such as rubber, plastic etc also can have expiry dates even they do not seem to have where their expiry may be due to outdated technology, depreciation or degrading etc. Therefore, it is important to associate your inventory with lots and serial numbers for Quality Assurance (QA) and Quality Control (QC) processes. Managing expiry dates efficiently also enables efficient stock rotation for maximization of your inventory profitability. On the other hand, it helps manage customer satisfaction by assuring the quality of the products by removing expensive after-sales rectifications/ replacements.
Thus, lot expiration dates in item management help improve stock rotation, quality control while amplifying customer service visibility.
Accordingly, it is very important for you to carefully select your ERP solution for your distribution/ logistic company as you will need extensive capabilities in item management with having understood the importance of inventory management for businesses of this nature.