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Merchandise Management System

Why Is Merchandise Management System So Important Today?

Manage your goods and materials in SAP Business One : Merchandise Management System

A smooth flow of goods makes an important contribution to the company’s success. Many companies use a merchandise management program to control the flow efficiently. What is the added value of using such a program? And what does the goods management in SAP Business One look like? Find out in this article!

The flow of materials and goods in a business

The flow of materials and goods is an important factor for businesses, especially for those operating in production and manufacturing industry. It basically represents the entire supply chain from the supplier to the customer. With supply chains ever getting faster, with fast moving products from a raw material stage to the final product for the end user, businesses are pushed to move their goods and products efficiently from start to finish.

The material flow usually ranges from the procurement of materials to delivery, storing, assembly or production, up to the finished good issued and delivered to the consumer. The goal is to move the material between the different steps quickly, with least possible manual steps and manpower – efficiency is the keyword. This is where a merchandise management system comes into play.

flow of goods merchandise management system

What is a merchandise management system?

Merchandise management is fundamentally about the economic goods of a company being in the right place at the right time, in the right quantity and quality. To manage this successfully, a merchandise management system, or also called materials management system, is used: It deals with the management, control, and analysis of all flows of goods in a business.

A merchandise management software thus enables the digital mapping of all processes related to the flow of goods. With the help of such a program, all goods stocks and movements are recorded. The goods-related data is then provided by the software throughout the entire company. At the same time, the system connects different interfaces and manages connections between all stakeholders, such as customers and suppliers. Supporting areas, such as accounting, are also linked to the materials management. Professional goods and materials management is therefore essential for day-to-day operations and for a transparent and efficient flow of goods.

Types of a merchandise management system

Basically, three types of merchandise management systems can be distinguished:

  1. Closed system: All related operational tasks in goods management are covered by a single system: This means that all modules such as incoming and outgoing goods, disposition, or orders are included in the software.
  2. Open system: Individual modules or components of material management are not included in the merchandise management system and are therefore covered by a third-party system.
  3. Integrated system: A closed system that contains all modules and additionally provides interfaces to third-party systems.

In addition to the standard components, merchandise management software offers configurable interfaces, which might be required by a certain industry. Typically, there are interfaces to shop systems and marketplaces, payment and shipping service providers, accounting, customer relationship management, and controlling. Through continuous data exchange the different systems communicate and collaborate with each other.

Merchandise management and ERP

Although a merchandise management system is often equated with an ERP system, it is not necessarily the same: Whereas the focus of a merchandise management system is purely on the flow of materials and goods (purchase, sales, inventory), an Enterprise Resource Planning (ERP) system maps the entire resources of all company departments, like financials, HR, and CRM, in addition to purchasing, sales and inventory functions. Hence, an ERP encompasses many more features than a classical merchandise system.

the difference between ERP and merchandise management

How is a merchandise management system structured?

A merchandise management system offers comprehensive functions and covers many different areas of the materials management. This kind of software is necessary to manage all related and interconnected processes efficiently. All operations are entered as data records into the system and managed in an underlying database structure.

A merchandise management system mainly supports:

Ordering, procurement, tracking of incoming goods.
Storage, inventory management, and stock reconciliation.
Quotations and orders, delivery notes and invoices.
Additional functionalities in an ERP are:
  2. CRM
  3. HR

Why using a merchandise management system?

So what is the point about having a merchandise management or an enterprise resource planning system? Such systems address businesses’ pain points of over and under stocking, which may lead to delayed orders and decreased customer satisfaction. A merchandise management system provides you with better visibility into inventory turnover, overdue orders and items with quantities below minimum or above maximum. With a merchandise management system in place, you will be able to plan purchases based on actual demand, rather than on feelings. These topics are also covered in IT trends blog.

How much does a merchandise management system cost?

The introduction of a materials management system is a long-term decision, affecting the entire company. The costs depend on various factors, such as the scope and mode of operation. First, there are acquisition costs and later ongoing operating costs. Overall, the acquisition of a comprehensive materials management system is definitely a cost advantage compared to the operation of individual systems or transactions with many labor-intensive, manual steps.

Management of materials & goods in SAP Business One

SAP Business One - Core Business

SAP Business One is an ERP system (Enterprise Resource Planning) for small and mid-sized companies. It covers all the elements of materials and goods management, but it is much more than a classical merchandise management system. Basically, the management of goods and materials are the core of the ERP system as it originates in Material Resource Planning (MRP) systems. They were developed to support the manufacturing and production process by managing the need and supply of components and materials for production when and where they were needed.  After time, MRP evolved to a more extended system covering not only the materials flow and planning but also all other departments of a business. The big advantage: all departments act on the same common central database and share information in real time. The interlocking of all company-wide processes enables collaboration and boosts efficiency.

mapping materials flow in SAP Business One

Think of how many goods and materials pass through your business every day; whether it’s raw materials for production, purchased goods for retail or finished articles from production for sales. SAP Business One helps you to keep track of where these goods are, when and where they are needed. Let’s look in detail at the goods and materials flow: Say you are in the manufacturing industry; the purchasing department orders raw materials for the production process which will be delivered by a supplier. The incoming goods will be recorded and might be stored in a warehouse before they go into production. Once production is completed, finished goods might need to be stored again in a warehouse before sold and delivered to the customer. A similar process applies to other industries, for example retail and wholesale, only they acquire finished or partly finished products and might skip the production phase.

SAP Business One Modules Overview

SAP Business One ERP system comes with several modules going hand in hand to support all these steps. All involved departments, such as purchasing department being responsible for procurement or accounting department for invoicing and payments, interact with each other and make transactions based on the same data. With the help of SAP Business One’s powerful analytics, you can easily pull up reports with real-time data and track related KPIs such as product & inventory turnover on customized dashboards.

Relationship map from SAP B1 show related documents from all departments

purchase relationship map

The materials & goods journey in SAP Business One

In summary, this is how a typical end-to-end business process in a manufacturing business looks like in SAP Business One:

Sales & Service Icon
A customer orders a custom-built furniture; a Sales Order and later A/R Invoice are created in SAP Business One
Project & Resource-management
The materials requirement planning is run to determine what is needed to fulfil the customer order. From the MRP results, production orders are created to manufacture the furniture piece
Purchasing-& Operations Icon
The required materials are purchased for the furniture components in the procurement process (with Purchase Order, Goods Receipt PO, A/P Invoice)
Production-& MRP Icon
After receiving the material, they are issued to the production process
Inventory & Distribution Icon
After the furniture piece is built, it is reported as completed and recorded as finished inventory
Purchasing-& Operations Icon
The furniture is issued and delivered to the customer
Sales & Service Icon
If the customer has a future problem, he can reach out to the company based on the service warranty contract; a service call is created

Inventory management in SAP Business One

An essential tool to manage materials and goods in SAP Business One is the inventory module. This is where you define articles whether they are production or purchase articles, and their procurement type. You can manage items by serial numbers, assign batches to products and structure your warehouse space in BIN locations. The module processes goods receipts and goods issues, inventory transfer, pick and pack, and much more.

Warehouse Management Solution

To further enhance the management of stock and inventory in SAP Business One, Prestele IT provides a specific warehouse and logistics add-on. It comes with a scanning device and compatible software, to keep track of the incoming and outgoing goods or transfers in the warehouse. With this solution for SAP Business One, your warehouse BIN locations and every single item will be managed via a unique barcode. An incoming good from purchase or an outgoing good for sales, as well as a good that has to be relocated, is recorded by the system by scanning the item’s barcode with the mobile device. On top of that, many automations, such as automated creation of pick lists or automated initiation of delivery documents printing.

Get your SAP Business One licenses today

Start using the inventory & distribution module in your warehouse and goods & merchandise management. To book your free IT consultation , get your SAP Business One software trial, request a call back or to obtain more information, click on the buttons below: