If your warehouse looks like this, it`s time to make use 
of SYSPRO to manage your inventory 

Goods and materials held in stock are known by many names, most commonly as stock holding or inventory. These goods and materials may be unimproved raw materials, processed materials, components, assemblies or finished goods and may be for resale, manufacture or internal use (consumables).

However inventory is used, you buy it and keep it until it is needed, and therefore the result is an investment in items that tie up your working capital until it, or the end item it is used in, is sold or consumed.

Business objectives

Typical objectives which businesses set for inventory include:

• Setting the sales service level for the business (eg 95% of sales orders are to be met ex stock)
• Determining the mix and quantity of inventory to be held in order to meet the above service level (eg it may be necessary to hold R15 million of inventory)
• Having replenishment processes which support the above two objectives
• Minimising stock losses caused by damage, obsolescence or pilferage
• Ensuring that inventory costs are accurate and up-to-date
• Ensuring that the investment in inventory does not strain the working capital requirements of the business
• Applying industry measurements and ratios to inventory holdings and turnover to provide management with the correct controls.

Pitfalls and problems                    

The pitfalls and problems which can be experienced with inventory are many. Problems that we have come across and helped resolve include:       

• Excess inventory: the main causes are poor planning, ad hoc buying or failing to recognise changes in demand.
• Too little, or the wrong combinations of inventory are held: result = companies have lost sales or had hold-ups in production.
• Obsolete stock: companies often realise too late that they are holding obsolete stock which indicates that no analysis of market changes has been done to understand what is bringing this about.
• Identification: when similar inventory items which look alike are not properly identified, this leads to returns when the wrong items are issued or sold - and these items are then unavailable to other customers when they want them.
• Stock: items subject to lot / batch traceability and expiry dates are not issued on a FIFO basis, resulting in stock having to be discarded and written off.
• Inventory shrinkage: shrinkage (due to theft and/or handling damage) will not be picked up unless there are adequate controls in place.
• Unit costs: if these are not tracked and kept up to date, this results in items being sold below cost or at very low margins. 

Successful inventory management involves balancing the costs of inventory with the benefits of inventory. Many companies fail to appreciate fully the true costs of carrying inventory, which include not only direct costs of storage, insurance and taxes, but also the cost of money tied up in inventory. This fine line between keeping too much inventory and too little is not the manager`s only concern. Other inventory problems may include:

• Maintaining a wide assortment of stock - but not spreading the rapidly moving ones too thin;
• Increasing inventory turnover - but not sacrificing the service level;
• Keeping stock low - but not sacrificing service or performance;
• Obtaining lower prices by making volume purchases - but not ending up with slow-moving
  inventory
• Having an adequate inventory on hand - but not getting caught with obsolete items.

The Computer Bird is mindful of the business objectives and typical pitfalls when implementing systems or assisting SYSPRO clients. It is our experience that SYSPRO systems, correctly implemented and with appropriate user training, are an extremely effective business tool.

Please contact us if you would like to discuss any of these issues further.