As it concerns profit margins, inventory control is one of the more visible and appreciable aspects of the manufacturing business today. Raw materials, goods in process, and finished goods are each the visible consequences of inventory in some form or fashion, and each means actual money locked up until product is finally shipped out to the customer. The longer any of these aspects stands idle in the shop, the longer company dollars get tied up in inventory carrying costs. Conversely, the shorter the time inventory stays on-hand, the greater are the enhancements to the bottom-line. What every inventory manager seeks is a rapid throughput and system flow of inventory, especially as a result of the supply chain stream so vital to business today. When inventory moves rapidly through the plant, the benefits in supply chain and inventory management are already being realized. To this end, inventory turnaround means that finished goods are flowing out of the plant and all-important delivery dates are being met.
Inventory turnaround (also termed inventory turnover) is that notion that speaks to the amount of time raw materials and parts spend in the plant after purchase and before they are put to use. Inventory managers seek the fastest turnaround possible, for idle inventory only depreciates in value to the detriment of the company�s bottom line�a wasted cost, so to speak. To enhance inventory turnaround, enterprise resource planning software is developed to integrate all aspects of plant operations to bring real-time data to bear in determining optimum inventory acquisitions/replenishments relative to incoming sales orders and outgoing finished products. Vital to the efficiencies realized in this function of buying-to-the-job is an accurate pull-production scheduling system whereby raw material and/or parts needs are anticipated. Indeed, to provide for just-in-time inventory management and cost savings through economies of scale purchasing, accurate scheduling systems within an enterprise resource planning (ERP) operation allows inventory managers to quickly consolidate purchasing for multiple-jobs that use the same parts.
On the other hand, when raw materials or parts are bought-to-stock for economies of scale, rapid inventory turnaround is bit more problematic and a result of strategic planning. For example, when repetitive production is involved, robust ERP software systems store past purchase histories for material and parts bought-to-stock, and will instantly measure on-hand inventories against anticipated seasonal or otherwise historical inventory needs. This material requirements planning (MRP) involves getting material on hand when needed for production and should address such basic notions as when to place order, how much to order, which vendor to order from, and when the material/parts need to be on hand. A robust ERP software system will provide an easy way to employ MRP programs that schedule and reschedule materials as far into the future as required for repetitive production, and maintain inventory at minimal levels to eliminate waste.
Ultimately, MRP through ERP will create a total inventory management system that is flexible enough to purchase either to-the-job or to-stock. Such flexibility offers the modern manufacturer the ability to take on jobs quickly and without worry for facilitation, and to be able to meet those job delivery requirements consistently and, most importantly, on-time.
Dusty Alexander is the President of Global Shop Solutions. Global Shop Solutions is the largest privately held ERP software company in the United States.
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