5 Ways Using Your ERP System for Service Parts Inventory Management is Creating Hidden Costs

With the mammoth investments companies make in their ERP systems, you may rest easy and assume that your service parts inventory management is being taken care of by your company’s ERP system. However, aftermarket companies that are resisting investing in inventory management solutions are typically incurring costs, such as capital, service, time and resources. These costs can actually be more than the investment in a specialized inventory management solution.

1. Relying on your ERP for inventory management still requires manual processes and multiple reviewers to achieve acceptable inventory performance. This results in time and funding being spent on managing the ERP system that could be otherwise allocated to worthwhile cost saving projects, other IT initiatives or even a more optimal inventory management solution.

To minimize manual effort and ensure more efficient processes, best-of-breed replenishment planning solutions use end-customer demand to create a pull-driven replenishment process at all echelons of the supply chain with the goal of increasing service and optimizing inventory. The process takes into account existing stocks, local and global planned movements, variable lead times and replenishment planning policies.

2. ERP systems lack the necessary analytical tools to predict the impact of changing service level, stock level and invested capital targets. Balancing service level against inventory level can pose a big risk with significant cost implications. Inventory analysis and simulation, provided by an inventory solution, can help improve your decision making and produce “what-if” scenarios before implementing policy changes.

Companies face higher customer expectations regarding availability of parts. To maintain customer loyalty and elevate the overall integrity of the brand, parts must be delivered immediately. ERP systems can leave companies in the dark about the relationship between inventory policy and customer service. Inventory solutions can help companies increase margins along with service.

3. ERP systems are not designed for global multi-location service part distribution networks. Inventory management solutions are designed specifically for multi-echelon inventory management, producing an accurate forecast at all points in the supply chain and planning across the entire supply chain to optimize and right size inventory. In addition, inventory management solutions that can provide users with full network inventory levels from a single screen equip companies with the best possible information for decision making.

4. Many companies have locations that operate independent ERP systems. Unconnected ERP systems add many levels of inefficiency throughout a global supply chain. A single service parts inventory management solution lays the foundation for a coordinated global supply chain. The immediate benefits of a coordinated system include improved excess material utilization and better inventory positioning across echelons.

5. Most ERP systems lack advanced functionality, which is required for service parts planning. One such example is planning for rotable parts, which is different than planning for consumable parts. Automated service part inventory management systems provide advanced optimization for rotable items and dynamic inventory policies. Inventory management systems manage scenarios that take into account the repair lead time vs. supplier lead time, along with the effect of scrapping.