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Inventory Turnaround in Manufacturing - Making ERP Integration Work

Reliable forecasting for raw supplies and parts acquisition by inventory managers is an essential science in production today. With manufacturers required to move at a faster pace, processing orders, buying supplies, producing a product and shipping end goods out the door must be accomplished with ever-decreasing lead times and ever-increasing expectations of quality. It is a tightrope walk that inventory managers must take when evaluating production requirements as a result of sales orders and production throughput. While consumer demand can, in some cases, be predicted based upon previous records, increased demands or slowdowns must also be contingencies planned for, with regards to inventory management. In other words, the best-case scenario for inventory management is one in which stocks and parts are constantly in hand yet move very quickly through the plant.

As a process to maintain in-hand raw supplies and parts, inventory turnaround is the idea that covers how long purchased inventory must sit in the store until it is used, or in a worst-case scenario, made obsolete due to no-usage. Frequently, it is measured as a simple ratio computed by dividing the cost of goods sold by the average inventory. This ratio is significant because gross profit is earned each time inventory is turned over. Of course, to any manufacturer, the maintenance of high inventory levels is undesirable because they represent an investment to the company with a zero rate of return. Indeed, inventory turnaround is an integral concept within pull-production processes whereby production is an outcome of customer demand. In the best-case scenario, pull-production means that inventory is acquired just in time for use, there is no long-duration maintenance of inventory on the shelves, or in the bins.

To manage this sort of real-time inventory, provisions must be made to combine real-time production data from all aspects of the production operation. System-wide integration of data gives a clear view of business needs as an idea of both present and anticipated needs. To this end, enterprise resource planning (ERP) software provides inventory management with a tool that helps inventory turnaround by combining system-wide data into one simple to read and use terminal screen view. By combining such areas as Purchasing, Scheduling, Inventory Control, Production, and Shipping, ERP software systems assist the inventory manager in making accurate decisions with regards to inventory maintenance. To avoid tying up cash flow and inventory space by having too much in-hand material/ parts at any one moment, inventory managers can use ERP software for better and more accurate forecasting.

With all plant functions fully integrated through an ERP software system, inventory turnaround is sped up and maximized for higher efficiencies. And, it is these two factors in manufacturing: speed and efficiency that are the name of the game in the modern production operation. By maximizing turnaround through proper forecasting techniques, the inventory manager contributes to the maximization of the company's bottom line.