An applied model for improving inventory management in ERP systems

Abstract

Enterprise resource planning (ERP) systems provide functions to calculate safety stock (SS), make demand forecast and determine reorder point (ROP) for each item contained in the database based on the item’s demand history. Most ERP systems are ill‐equipped to deal with the demand of slow moving items such as spare parts. Based on data from a Fortune 500 company, presents the development and evaluation of a spare parts inventory control model. Compares the proposed model with the results achieved using the forecasting and inventory management modules of a popular ERP system. Tested with computer simulation, the proposed model significantly outperforms the commercial ERP model on both measures of service level and expected total annual cost.