With inventory management, no news is good news. That kind of calm and quiet is what inventory management professionals work so hard to achieve.

The importance of inventory management is difficult to overstate because it produces innumerable effects downstream for the supply chain, which have a huge cumulative effect on the manufacturer's reputation, rate of efficiency and financial performance.

Here are three downstream effects that help us realize just how how important inventory management is.

1. Customer satisfaction depends on accurate and insightful inventory management.

By the end of 2019, customer satisfaction for manufacturing in both the durable and nondurable goods categories stood at 79.1 and 80.4 out of 100, respectively, according to the American Customer Satisfaction Index. Those were the highest scores for any sector, and manufacturers might have inventory management to thank.

For a manufacturer, the three most important drivers of customer satisfaction might be:

• Quality of product.
• Price of product.
• Timeliness of order fulfillment.

Inventory management impacts all of these dimensions. Most obviously, keeping enough material in stock to fill orders on time means promises kept and happy customers.

In addition, proper inventory management enables manufacturers to purchase and store enough raw material to fill orders without having to buy more parts later at a higher price. It also keeps manufacturers from overstocking supplies, leading to reduced cash flow and extra storage costs or wasted materials.

Buying enough quality material upfront also helps manufacturers use the best goods for their finished products instead of having to scramble for cheaper substitutes if they run short.

2. Forward-thinking inventory management improves cost efficiency for manufacturers.

In addition to raising the price for customers, mishaps in inventory management can lead to cost inefficiencies across the manufacturer's supply chain, even when those expenses can't be absorbed by the customer.

Labor and operational costs essentially amount to a big loss for the manufacturer if they don't have the material on hand required to meet their throughput objectives. If they have excess material on hand, they may have to decide between paying extra to store the excess material or bankrolling overtime and taking out new contracts with logistics providers to move material out of their facilities quickly.

Lean operations are the objective, and inventory management is essential for making that happen.

3. Inventory management paves the way for smooth accounting.

As we've mentioned before, well-executed inventory management helps businesses streamline tax preparation, as well as other accounting functions and record keeping.

Decentralized and nonstandard inventory management procedures where manufacturers rely on various spreadsheets that are different from one facility to the next can be a huge headache.

When tax season comes around, manufacturers might find themselves struggling to synthesize or segment information so they can accurately and efficiently file the appropriate taxes in each jurisdiction where they operate.

Accent Software has a strong track record of creating industry-specific add-ons for our clients' enterprise resource planning (ERP) systems to enhance inventory management capabilities. Learn more about how we can help add value today.