Coatings / Manufacturers

Managing Inventory: A Delicate Balance

Managing inventory in a highly regulated environment directly impacts a company’s ability to offer competitive pricing without eroding profits.

September 5, 2013

Businesses face inventory management challenges with varying degrees of difficulty. From struggling with how much product to keep on the shelves to waging the battle between decreasing costs and increasing quality, determining how to manage inventory effectively—and the inevitable result of doing this successfully (or not)—can make or break any business. For many manufacturers, high levels of operational complexity and increasing pressures surrounding regulatory compliance compound this struggle. These additional variables weigh heavily on the already dynamic operational environment, demanding a balance that can be hard to manage.

Maintaining the correct levels of inventory is delicate balance. Levels should be high enough to provide effective speed to market, but low enough to limit investment and risk. Each business must take into consideration the damage that can be done by not properly balancing the two when determining these values. Having too much inventory can result in mismanaged handling and holding costs, disposal fees and potentially even regulatory fees for environmental non-compliance, all of which translate to reduced profit. Not having enough inventory can result in a loss of market share because of an inability to effectively service customer needs or meet price expectations.

Efficient inventory movement is a critical component to striking the necessary balance, and directly impacts a manufacturer’s ability to offer competitive pricing without eroding profits. In order to succeed, manufacturers must find ways to control inventory management while maintaining a competitive edge.

Taking Control

Establishing a comprehensive view into all areas of the business will allow much needed visibility for inventory control and facilitate the streamlining of inventory management. Implementation of a single software enterprise resource planning (ERP) system provides this visibility while also offering the single database needed to store and access company-wide data.

However, it’s important to understand the software models being evaluated and the effect they will have on daily operations. Traditional “integrated” ERP systems are often built by bolting together several third-party systems under the guise of one brand name. While it may appear to be a sufficient solution that is customizable to meet all identified requirements, the system suffers from inherent weakness due to the instability in the underlying infrastructure. This weakness leads to the use of unreliable workarounds (such as Excel), as well as unnecessary operational complexity. By increasing complexity, the risk of failure also increases.

A single system ERP simplifies business operations and reduces risk of failure by offering all required functionality without customizations, bolt-ons or workarounds. The advantage of one system developed, implemented, and supported by one vendor is the accuracy and availability of real-time results, a simple-to-use interface, and the ironclad process control provided when information is synced from formulation to shipment.

This single system is a central tool needed to manage and produce reports that are essential to optimizing inventory movement. For example, running an aged inventory report that can be sorted by the products’ age in days allows manufacturers to easily determine the products that should be disposed of and those that can be reworked or resold at a discount—minimizing waste, maximizing profit and offering insight into products that aren’t performing. By identifying slow-movers, companies can refine their product line and eliminate costly extra materials. This increased control over data and reporting facilitates more informed decision-making and ultimately improves process control.

With Control Comes Compliance

This ability to collect, organize, and retrieve information from across the entire manufacturing process is crucial to maintaining effective and compliant operations. While many manufacturers make primary investments in systems and training for compliance tracking, they ultimately sacrifice productivity due to ongoing manual record verification. The overall expense of this method is high, but it doesn’t compare to the cost associated with hefty fines, product recalls, plant shutdowns and loss of market share due to non-compliance.

A single software ERP system allows manufacturers to input, organize and have real-time access to their information at relatively minimal cost. This ability to document the entire manufacturing process in one accessible system provides a tool with which to establish controlled, repeatable processes whereby the end result is always the same. For some manufacturers, this can mean the difference between surviving and thriving in a highly regulated environment.

Customer-Driven Quality

Compliance is only one of the factors that help determine if a manufacturer will remain competitive; another is quality. Having a well-balanced line of quality inventory that meets both customer and regulatory requirements is key, and is also heavily dependent on effective formula management. Being able to manage inventory from product specification through production and shipping directly impacts a manufacturer’s ability to quickly deliver quality products to the market. Real-time tracking of materials facilitates this increased rapid order fulfillment. Coupled with reliable service, manufacturers can more successfully maintain high levels of customer satisfaction.

In order to stay ahead of the curve and grow their customer base, companies must manage, capture, track and analyze customer specifications as well as product quality information. An effective ERP system simplifies the management of manufacturing-driven processes while supporting the implementation of customer-driven quality.

Gaining Competitive Ground

Though the inventory management battle wages on, coatings and adhesives manufacturers that use ERP software correctly are successfully striking the much-needed balance in order to maintain—and potentially grow—their market share. With the power to track inventory in real time and ship quickly to meet customer demand, these manufacturers gain additional control over the fate of their business, further substantiating that the return on investment of a best-fit ERP software is infinite.

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