Strategy, Legal & Operations

The ultimate ERP inventory management guide

Time to level up your inventory management? We've got you covered with the ultimate guide to ERP inventory management software.

Effective inventory management is critical for companies to drive sales conversions, keep customers happy, and avoid over or underspending on supply chain logistics.

The challenge?

Increasing complexity combined with evolving customer expectations has created a need for accurate, real time, and actionable inventory data.

But accessing this information is easier said than done.

Enterprise resource planning (ERP) inventory management software can help.

In this ultimate guide to ERP inventory management, we take a closer look at the current state of inventory issues and explore the role of ERP software in streamlining supply, stock, and sales processes.

The state of inventory issues

There are two main problems that plague inventory processes: stockouts and oversupply.


Stockouts began in earnest during 2020 when global supply chains were disrupted.

As noted by Food Manufacturing, in 2021 the US consumer packaged goods industry lost $82 billion in sales due to stockouts.

Not surprisingly, stockouts are tied to shopper frustration.

If buyers can’t get what they want, when they want, they’re more likely to seek out another retailer than wait for replenished stock—even if they’re repeat purchasers.

In addition, stockouts hurt the customer experience.

While the Harvard Business Review notes that warning customers about possible stocks can limit the impact on customer satisfaction, prolonged problems will lead to steady sales losses.


Oversupply is also an emerging issue, with many companies opting to over-order as a way to reduce stockouts.

As Bloomberg points out, however, 8% of global surplus stock ends up as waste, in turn costing companies $163bn in wasted inventory.

The result?

Businesses must find a middle ground between too much and too little stock.

What is ERP inventory management software?

ERP inventory management software provides tools and workflows that help companies better manage their current stock levels and ordering processes.

It also integrates with broader ERP processes to help businesses gain complete visibility into all aspects of inventory operations.

These may include current supplier lead times and material sourcing challenges, logistics pricing, and timelines, and demand forecasting to help align stock ordering with likely sales outcomes.

Common components of inventory management software include:

  • Tracking: Software can track products from their initial manufacture to shipping, delivery, storage, and sale.
  • Barcoding: The use of barcodes, often in combination with mobile apps, handheld scanners, or RFID (Radio Frequency Identification) tags can help companies see what they have, where it’s stored, and how much is left.
  • Analysis: Data analysis helps companies track current trends and make predictions about future buying patterns.
  • Logistics: Visibility into logistics processes, from packaging costs to shipping times and potential port delays, makes it easier for businesses to provide customers with accurate information.
  • Forecasting: Demand and supply forecasting lays the groundwork for just-in-time inventory management, which focuses on aligning stock levels with existing market conditions, and regularly reevaluating these conditions to stay ahead of demand changes.
  • Reporting: No ERP inventory management software is complete without comprehensive reporting tools that let C-suite teams, sales staff, and front-line workers find and leverage the data they need when they need it.

When does deploying inventory management software make sense?

Every business has its own approach to inventory management.

Some companies still make use of paper processes and spreadsheets to track inventory movement and supply levels.

Others use legacy software tools purpose-built for their inventory operations.

In both cases, however, existing processes may no longer be capable of keeping pace with emerging inventory challenges.

For example, if a supplier experiences a sudden shortage, manual operations or aging software often struggle to report this issue in real time. As a result, businesses can end up short on stock and unsure when or how the issue will be resolved.

To understand the efficacy of current inventory tools and determine if new ERP software is warranted, start with these three questions.

1. Do current systems have access to relevant data?

When it comes to key data, are current systems capable of keeping pace?

Do they have access to relevant, real-time data, and can they access and report this data on demand?

One simple way to answer this question is by looking at the last six months of inventory management. If this analysis reveals multiple issues related to inaccurate inventory counts or supply chain challenges, this suggests that current systems can’t meet emerging needs.

It’s also worth examining the availability of day-to-day data, such as stock on hand, time to replenish, and inventory turnover rates.

Lacking or limited data suggests that a new approach to inventory management is warranted.

2. Are sales and service teams equipped with accurate information?

Both sales and service teams rely on inventory data to drive new conversions, enhance the consumer experience, and improve customer loyalty.

As a result, it’s worth asking these teams if they have the information they need to do their jobs.

If sales and service staff say they have trouble accessing inventory levels or delivery schedules, it’s worth considering a move to more effective ERP software.

3. Can existing tools provide strategic insights?

ERP inventory management software should do more than tell businesses what’s happening right now.

It should also help predict future demands and challenges.

This means solutions should be capable of using current and historical data to discover purchasing trends, allowing companies to adjust stock levels before demand exceeds supply.

In addition, it should be easy to search for relevant data without switching applications or tracking down paper documents.

If current tools can’t help plan for potential growth, it may be time for an upgrade.

Why should companies consider inventory management software?

ERP inventory management software offers several benefits for businesses, including:

  • Enhanced collection: ERP software makes it possible to collect inventory data from multiple sources such as product SKUs, the cost of goods sold (COGS), average markup, and purchases by location or sales channel. This provides a solid foundation for data-driven decision-making that considers the entire product lifecycle, from initial manufacture to eventual sale.
  • Increased accuracy: Common roadblocks for inventory management include inaccurate product counts and outdated supply chain information. With robust ERP inventory management software, companies can leverage automated processes to collect and correlate this data.
  • Improved transparency: Costs, profits, and revenues are influenced by the entire product lifecycle. ERP inventory tools provide end-to-end transparency that helps businesses see the big picture.
  • Reduced complexity: More products from more suppliers in more locations means more complexity for companies. ERP software can help reduce complexity by providing a single source of truth for all inventory data.
  • Expanded visibility: Metrics matter. The more teams know about average turnover rates, COGS, stockouts, and oversupply, the better they’re able to manage inventory assets and pinpoint areas for improvement.

Where can ERP inventory management tools help to streamline processes?

Inventory management software tools are only as good as their real-world impact.

In other words, just because a solution looks good on paper, it’s not guaranteed in practice.

As a result, it’s worth looking for solutions that include key capabilities, such as:

Anytime, anywhere data collection

Manual data entry processes are prone to errors such as inaccurate capture or missing information.

ERP inventory management solutions that connect to all relevant data sources make it possible for teams to collect data anywhere, anytime.

This both ensures that information is accurate and reduces the need for data re-entry or correction.

Interdepartmental integration

Solutions should integrate with multiple departments across the organization, including finance, sales, marketing, and operations.

Consider finance integration. Equipped with relevant and recent inventory data, financial departments are better equipped to create realistic budgets and reduce the risk of overspending.

Robust API ecosystem

Application programming interfaces (APIs) help ERP solutions connect with other apps and services on demand, in turn allowing businesses to scale up inventory management processes as operations expand.

Robust API ecosystems allow companies to quickly onboard new software or services without the need for complex and time-consuming integration processes.

Cloud-based delivery

It’s worth looking for ERP systems that are delivered via the cloud.

Not only does this allow the rapid expansion of inventory management services but also improves cost management since companies only pay for what they use.

Final thoughts on ERP inventory management software

Inventory management software makes it possible for companies to take control of their supply, order, and stock processes to reduce the risk of stockouts and oversupply.

Equipped with relevant, real-time data, teams are better equipped to make data-driven decisions that anticipate inventory trends and improve the customer experience.

While these solutions aren’t a silver bullet—human insight and experience will always play a critical role in effective inventory management—ERP software can shoulder the burden of repetitive, data-driven processes.

This allows staff to see the big picture of supply and demand and gives them the tools they need to take targeted, effective action.