Manufacturers today have to continuously increase profit margins by cutting costs with the implementation of efficient processes. For any manufacturing company whether a make-to-order or make-to-stock, having optimal levels of inventory (raw materials) can prevent backorders, and keep warehouse costs for storing excess products in production, or finished goods to a minimal.
Using Just In Time Inventory Management to Increase Efficiency
Manufacturers employing Just in Time (JIT) inventory management strategies use accurate demand forecasting to predict when to buy inventory or raw materials to create a more efficient and cost effective inventory management system.
However, the key to successful demand forecasting and planning starts with easy access to operational data, and having the right forecasting tools that automate manual calculation processes. With the right manufacturing ERP systems manufacturers are able to get access to real-time business information for demand forecasting, budgeting and strategic inventory management with JIT. Essentially, legacy ERP systems that are not built to deliver real-time information may provide a disservice to the manufacturing business relying on the information from these systems for accurate forecasting.
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How Does The Right ERP System Help With Just In Time Inventory Management and Capacity Planning?
At first glance, a sudden influx in demand can leave a manufacturing business with the inability to meet that change in demand due a fixed operational capacity. On the other hand, instead of investing in new infrastructure, manufacturers have the option of taking a look at their current business processes to determine ways to increase operational capacity without investing in expansion.
At the core of process improvement comes automation and the elimination of strenuous manual processes, to help increase connectivity among all business units, right from sales to production, all the way to the delivery of finished goods.
Here are few ways innovative manufacturing ERP system such as Epicor, help with inventory management and capacity planning:
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1. Automatic Inventory Management
With the right manufacturing ERP systems manufacturers can minimize inventory costs by automating the management of their bill of materials (BOM). With multi-level and single level BOM management, you can quickly determine when you need to order more materials or when production is slowing down and there is need for a halt in ordering new materials. This prevents overproduction and overstocks, aiding you with reaching your JIT inventory goals.
2. Implementing Lean Strategies
In implementing a lean manufacturing strategy, there is the need for continuous business process improvement to eliminate unnecessary costs. The best-fit manufacturing ERP system should help you with your inventory management and cost reduction strategies – as it’s a crucial step to eliminating the 7 deadly wastes of manufacturing, namely – overproduction, inefficient transportation, waiting time, over-processing, unnecessary tock, unnecessary motion, and rejects and defects.
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3. More Accurate Forecasting
Accurate demand forecasting is vital to the success of a JIT inventory management strategy. Employing manufacturing ERP systems with easy data analysis and reporting features for demand prediction and forecasting, you can quickly plan your production capacity ahead of time and implement an efficient JIT inventory management system.
4. Production and Engineering Coordination
While inventory planning, and demand forecasting can assist with production capacity planning and optimization of inventory levels, to implement a true JIT strategy, your forecasted demands need to meet actual demand. To do this, your manufacturing system should be equipped with visibility into all operational areas for your business. With easy visibility into the order to production process, you can employ a pull production approach, which is based on real-time insights into demand and not just planned forecasts.
In conclusion
Implementing a successful JIT inventory strategy starts with having access to real-time data and insights for quick and effective decision-making. A feature-rich ERP system geared towards your specific manufacturing needs is the best place to start.