While there is no doubt on the efficacy of inventory planning software, companies can be hesitant to invest in them because of their costs. Most managers look at the return on investment of the systems before determining whether to buy one. If your distribution company is still on the fence on whether to install inventory planning software, here are eight reasons that should convince you of the importance of the software:
1. Reduce stock shortages across the supply chain
Since inventory planning software have solutions for almost every occurrence at the supply chain, it becomes easy to anticipate and put in measures to mitigate the impact of various factors on demand, manufacturing, and supply. Inventory planning software enables the detection of problems such as stock shortages in advance. Managers can then take the necessary actions to prevent the shortages and improve on-shelf availability.
2. Save on operating costs
Inventory planning software enables organizations to improve processes across the entire enterprise. Companies can save millions of dollars from global inventory pools, reduce expedited transportation costs by 20 to 50 percent, and benefit from other savings related to service, distribution, production, and supply.
3. Reduce working capital requirements
Inventory planning software can help organizations achieve leaner inventories and reduce total supply chain buffers. With leaner inventories, organizations can retain liquid cash and reduce working capital requirements. According to a study by IBM, some companies that use inventory planning and optimization strategies experience reduced working capital requirements between 10 and 25 percent.
4. Improve demand forecasting
One of the most critical inputs of inventory planning software is inventory optimization with regards to demand plans, forecasts, and forecast errors. Inventory optimizations allow inventory to move with changing patterns. As a result, organizations can improve efficiency and lower their costs through reduction of stock-outs in the supply chain and reduction in alternate sourcing.
5. Improve decision making through cross-channel visibility
As more B2C companies begin to adopt multiple selling channels (directly to consumers, online, catalog, and retail) to have their products reach their markets, there is need for adequate monitoring, balancing, and allocation of inventories where and when needed. Inventory planning management software enables managers to make decisions that will benefit all channels without skewing the operations of another or the entire supply chain.
6. Improve margins and competitive advantage
The software enables distributors to optimize their inventories, thereby freeing up capital for investing in the growth of the business. The capital can also be used to provide the needed liquidity in tight markets.
7. Improve agility, adaptability and responsiveness
Inventory planning software improves cross-channel visibility in the organization. Distributors can see supply chain activities across the whole supply chain, and thus spot any early signs of changing patterns in supply and demand. This insight can help managers anticipate changes and respond adeptly to manage them.
8. Lean inventories across multiple channels
Inventory planning software can help managers optimize inventories and assess buffer stocks and locations correlated to demand. This helps in permanently streamlining supply chain inventory levels. Determining the optimal locations of a distributor’s buffer can lead to a reduction of finished goods inventory. Companies can also meet operational requirements, cost, and service with the least amount of inventory.
Distributors are constantly facing many challenges of unprecedented scales. Some of the challenges include changing consumer behavior, supplier constraints, retailer service demands, fragmenting marketplace channels, cost and margin pressures, emerging markets, changing demographics, and so on.
Fortunately, specific inventory planning software platforms like Microsoft Dynamics AX offer distributors proven tools that can be used to counter these challenges. By using software such as Microsoft Dynamics, CEO's, Controllers, CFO's, and other users can utilize alerts, dashboards, and analytics for real-time decision making. Smarter decisions allow organizations to realize significant savings across the supply chain, while at the same time meet the changing demands of customers responsively and effectively.