If you’re running a company focused on inventory, chances are you need to fill out purchase orders as a regular part of your workweek, or maybe even your workday. Manually creating purchase orders is a time-consuming process, and any time-consuming process costs money and inevitably involves a certain percentage of mistakes, which also cost money. Implementing an automated purchase order generator, then, might sound like the perfect solution.
However, automating your purchase order process comes with certain risks. Automated purchase orders require you to create reorder points so that your system knows when it’s time to generate a purchase order. If your reorder points aren’t accurate, you run the risk of your system generating a bunch of unnecessary purchase orders, which then result in a warehouse full of “dead” inventory.
If you’re struggling to figure out whether or not you should invest in an automated purchase order system, here are some important elements to consider.
Are you spending too much time and money manually creating purchase orders?
As with any question regarding what the best choice is for your business, you need to turn to the numbers for this one. How many purchase orders does your company generate, and how many employee hours are devoted to that? How many mistakes, such as duplicate purchase orders, lost purchase orders, or purchase orders with inaccurate information, does your company produce, on average, due to human error? With an automated purchase ordering system, you can drastically reduce the amount of time spent on purchase orders, and you can eliminate the vast majority of errors that only serve to set the whole purchasing process back.
Compare these costs, which you are currently shouldering, to the costs associated with implementing an automated purchase order generator. Shop around for a product that suits the needs of your business, then consider the cost of purchasing the software and the costs of putting in the employee hours necessary to set everything up correctly. Any worthwhile purchase order generator is not going to be a “plug and play” solution — you will need to devote some serious time and energy to making sure that you put in the correct reorder points, inventory data, vendor information, etc., to make your software earn its keep.
Do you know your inventory’s reorder points?
Reorder points help you manage your inventory effectively by determining exactly when inventory needs to be reordered, and how much inventory needs to be reordered. Reorder points can be extremely useful, but only if they’re accurate, and determining a reorder point for your inventory in March does not necessarily indicate what November’s reorder point needs to be. Various factors such as seasonal demand, product expiration, and market trends can mean that your reorder points fluctuate or need to be recalculated frequently.
Understanding your inventory and determining its reorder points is critical when setting up an automated purchase order generation system. If you’re not sure what your inventory’s reorder points are, you should invest in some serious inventory analysis first before making the decision to implement an automated purchase ordering system. Faulty data can easily create more work than it saves. And no matter how confident you are in your reorder points, no automated purchase order system should be a “set it up and then you’re done” solution. It’s still important to review the purchase orders that your system generates, but hopefully you can save yourself a lot of time and money by letting the software do most of the work for you.
For more information on purchasing and restocking strategies, including reorder points, check out this blog post.