November 30, 2015      5 min read

In a market driven by constant technological evolution and integration, the ways in which manufacturing businesses across industries are revolutionizing their performance and profitability starts and ends with the inventory management systems and software they have in place.

How inventory is managed and controlled exerts tremendous leverage on the ability of a business to operate optimally. This is because the flow of inventory through the supply chain impacts on virtually every aspect of a business – from sourcing and procuring raw materials to assembly and storage and finally to delivering the finished product into the custody of customers to specification, on budget and on time.

When one area of the flow of inventory is impeded due to mismanagement, poor decision-making or a failure to forecast future supply and demand accurately, the results can vary from inconvenient to disastrous.

This is why any manufacturing business looking for the best way to boost performance whilst at the same time drive down operating costs and unnecessary loss should strive to optimize their inventory management system. Doing so will help to ensure that the business will benefit in the following key ways:

Lower inventory levels = lower costs

Any business that allows its inventory levels to rise puts itself at risk of bleeding the bottom line. If inventory is allowed to accumulate unchecked and under-utilized it increasingly risks becoming damaged, tampered with, stolen or even rendered obsolete. Theft, damage and obsolescence of inventory all contribute to ramping up storage and labor costs, as well as more direct losses, by having goods on the shelves that either need to be liquidated or throw away.

This places a stranglehold on the free flow of cash through the business, effectively robbing it of the opportunity to purchase inventory that is actually required to meet customer service targets or to capitalize on unforeseeable opportunities that may arise in future.

Holding on to more inventory than is actually needed results, more often than not, in having the business attempt to compete with one or both arms tied behind its back. Mismanagement of inventory puts any business at a considerable disadvantage and if left unchecked can drive the business below the profit line and into the red.

A good inventory management software system – such as our cloud-based SaaS – allows manufacturers to track, trace and account for every unit of inventory in their process. Our powerful technology allows for seamless integration with all departments within the organization and even with the systems of suppliers via our API.

This amounts to a data driven solution that is accessible anywhere, at any time and on virtually any device able to connect to the Internet. Automated inventory controls can be put in place to prevent build ups of unnecessary goods and so keep cash flow available and the hefty costs associated with labor, storage and raw materials going obsolete to a minimum.

Hit the customer service target bull’s-eye every order

Nothing affects the profitability of a manufacturer more than being unable to fulfill purchase orders – whether through a lack of necessary raw materials or simply lengthy delays in the manufacturing process due to under stocked inventory levels and ill timed re-orders from suppliers.

When a customer places an order with a manufacturer they absolutely must be able trust that they will receive the goods ordered in the quantity required, at the quality expected and most importantly within the given lead-time.

Consistently failing to deliver on its promises is what drives manufacturers out of business. Lost sales as well as customers jumping ship can have a very deep and lasting impact on the bottom line of a business.

Faster, better, cheaper

Just as manufacturers should always be striving to develop faster, better and cheaper ways to bring goods through from order, production and delivery to customer, the same holds true for their management of their inventory.

Accurate inventory levels as a by-product lead to much faster, cheaper and better performance at all stages of the supply chain. With an inventory management software solution that ensures all required inventory is on hand when and as needed, lost time and lost revenue will not be allowed to occur. This effectively speeds up the procurement, manufacturing and distribution to customer of goods.

The manufacturer utilizing an integrated inventory management system will be able to procure, assemble and distribute raw materials and finished goods to customers more efficiently and on target. Better control over the flow of both raw materials and manufactured end product through the supply chain naturally entails better service to customers as well as suppliers.

As already mentioned, when inventory levels are accurate and unburdened by over stocking issues, cash flow is freed up and the procurement team can direct their time and resources to securing the highest quality raw materials at the most advantageous prices. Furthermore, the savings as a result of lower operating and overhead costs – storage, labor, obsolescence etc. – can be considerable and actually work at driving the cost of goods sold down thereby driving gross and net profits up.

Two competitors – one winner

The fact of the matter is that with increasing access to newer and better technologies, tooling and distribution channels – both global and domestic – competition in the manufacturing industry is fierce.

Two manufacturers with same production capacity, tooling and access to raw materials will experience very different growth trajectories if their inventory management is not optimized.

The manufacturer that is able to implement a smart inventory management software solution and optimize their inventory will outperform the competitor that is reliant on an outdated and inaccurate inventory management system every time. And with the low cost barrier to entry a modern cloud-based SaaS solution like Unleashed affords, even small manufacturing businesses can no longer afford to neglect one of the most important assets they own – their inventory.