Every metal fabrication company needs inventory. It drives production and keeps sales ticking over. If your company lacks essential inventory, production will grind to a halt and sales will soon follow. However, if you overstock, you could be exposing yourself to just as many issues, including rocketing expenses.
After all, most companies in the steel and metal fabrication sector pay 15-30% of total stock value just to keep inventory, with those expenses steadily being siphoned out of the company due to rental costs, maintenance, warehouse employee salaries, and utilities.
It’s a massive expense, and finding ways to reduce it is critical to the success of your business.
How to Reduce Inventory Costs with ERP
Enterprise Resource Planning (ERP) software is an all-encompassing software solution that connects multiple programs, tools, and departments to a single, interconnected system that provides real-time reporting and actionable insights for the whole company.
It’s the motherboard of a modern organization, and it’s constantly digesting, processing, organizing and relaying information to all other components.
When it comes to inventory management in the metal fabrication industry, a properly integrated and comprehensive ERP solution like RealSTEEL™ can assist in the following ways:
Make Informed Decisions About Stock
Every raw material must be accounted for. You need to know what you have and how much of it you have, and this information must be processed in real-time to account for the continuous cycle of production and sales. If you don’t monitor your stock, you run the risk of failing to meet orders, at which point everything backs up.
One solution is to overstock—if you buy more than you need, you won’t run out anytime soon. But the more you stock, the higher those costs become.
With ERP inventory management, you’ll have clear visibility on your stock at all times. Every incoming and outgoing material is logged, including everything in the production cycle.
Think Proactively and Not Reactively
You now have direct insights into stock levels, so rather than reacting to an influx of new orders by buying more materials and rushing them through the supply chain, you can prepare in advance.
ERP solutions are able to look at historic sales and other metrics to predict future trends. Every order and every dataset feeds into a machine learning algorithm to teach the system more about your company and clients, allowing it to make accurate predictions and ensure you are adequately prepared.
Automate Material Procurement
Take some paperwork away from your finance department by letting the ERP software do the work for you.
You can schedule automatic supply orders and invoice payments. So, if stock is running low or an uptick in sales is predicted, the system can send automated supply orders, pay the invoices when they arrive, and ensure the stock is on its way. You can then monitor its progress throughout the supply chain and prepare to receive it.
ERP software can also help you to find the best suppliers and materials for your needs. There is less chance you’ll end up with something you can’t use or don’t need and less demand placed on your procurement team.
Integrate Your Supply Chain
By integrating your supply chain and manufacturing process, you can reduce lead times. This means that materials will spend less time lying around in the warehouse and can be expedited to the production floor. You don’t waste as much money keeping stock in the warehouse and can keep clients happy by fulfilling orders quickly and with minimal fuss.
An All-in-One Solution
By incorporating multiple tools and software programs into a single system, ERP eradicates the need for many standalone programs and the integration, operation, and maintenance costs they accumulate.
In the metal fabrication sector, it means that companies can bring all manufacturing, financial, and employee-related processes under the same umbrella, including:
- Coil splitting software
- Finance and accounting systems
- Steel service center software
- Plate processing software
- Human resources
- Cut-to-length software
- Flat rolled software
- Supply chain systems
- Sheeting and leveling software
How Much Can a Metals Fabrication Company Save with ERP?
An ERP solution can be a significant investment, but it doesn’t need to be. With a customized and scalable solution like RealSTEEL™, you’ll get all of the elements you need and none of the ones that you don’t. And as this software is integrated quickly and seamlessly, you can start reaping the benefits immediately. Once it has had time to work its magic, it will start paying for itself with direct and indirect savings:
- Improved inventory management
- Reduced storage costs
- Faster lead times
- Fewer software requirements
- Lower staff costs
- Better client relationships
- Fewer mistakes
The average cost of an ERP system differs greatly depending on the type of system, the company implementing it, the features included, and the support that they need. The cost will be much smaller for a startup than an established organization with hundreds of employees, for instance.
Annual ERP reports suggest that integration can deliver a return on investment (ROI) of over 130% over a period of less than 4 years.
You can calculate your own expected ERP ROI by estimating the expected benefits and then comparing them to the total cost of ownership (including the initial implementation costs and ongoing support/maintenance).
Summary: Reduce Inventory Management Costs with RealSTEEL™
ERP is being used across the steel and metals fabrication industry, as well as the manufacturing sector on the whole. It is an asset for any company that deals with large quantities of stock, manages a complicated timetable, and handles numerous departments and employees, as it brings all of these together into a single source that is easy to manage and offers full visibility.
To learn more about how ERP can benefit your business, whether you need to improve efficiency in inventory management, combine requirements such as HR, multi-line processing software, coil processing software, and pipe and tube software, or just need a complete metal optimization software solution, contact RealSTEEL™ today.
We can help you to build and implement a customized solution for your business. Request a demo today.
