Inventory Optimization Consulting for Established Companies

Why inventory is both too high and too short

The recurring pattern in established companies is inventory that is simultaneously excessive and insufficient: the warehouse is full, working capital is tied up, and yet the items customers actually order are expedited weekly. Both symptoms share one cause — replenishment policies that treat every SKU the same. A fast-moving, predictable item and a slow, erratic one receive the same safety stock logic, so the first is perpetually short and the second quietly accumulates for years.

Finance sees the aggregate number and pushes for a reduction. Operations hears “cut inventory” and defends service. The argument never resolves because both sides are working from the same undifferentiated policy. Optimization ends the argument by differentiating: reduce where variability is low, protect where service matters, and dispose of what should never have been stocked.

What an inventory optimization engagement covers

1. Diagnostic from transaction data

Two to three weeks with your own data — shipments, receipts, on-hand history and lead times by SKU. We reconstruct true demand variability and supplier lead-time reliability, then quantify the gap between current policy and the policy the data supports. The output is a dollar-quantified opportunity, item by item, before any change is made.

2. Segmentation of the assortment

Every SKU is classified on two axes: value and variability. High-value, predictable items earn tight policies and frequent review; low-value, erratic items get simple rules and deliberate buffers; obsolete and dormant stock gets an exit plan. Segmentation is what turns “reduce inventory” from a blunt target into a set of specific, defensible decisions per item family.

3. Policy redesign

Safety stock, reorder points, lot sizes and review cycles are recalculated per segment, using the measured variability rather than rules of thumb. Where the company runs an ERP, the new policies are parameters in the system it already owns — inventory optimization sets the policies the software executes, it does not require new software.

4. Cadence and handover

Policies decay when no one reviews them. The engagement installs a weekly replenishment review and a monthly inventory review inside the company's operating cadence, with a short KPI set — inventory turns, fill rate, weeks of cover and excess and obsolete value — each with one named owner. Demand and supply changes feed back through the S&OP cycle so policies are re-set as the business moves.

Where inventory programmes go wrong

• A uniform reduction target. “Minus twenty percent everywhere” cuts the wrong items and creates the stock-outs that discredit the whole programme.
• Forecast-first thinking. Better forecasts help, but safety stock exists precisely because forecasts err; policy must be sized on measured variability, not hoped-for accuracy.
• Software before policy. Configuring an advanced planning tool around unexamined policies automates the excess and hardens it.
• No exit for dead stock. Without a disposition rule, obsolete inventory is re-counted, re-valued and re-ignored every quarter.
• No owner. Inventory sits between sales, operations and finance; without a single named owner, every review is a negotiation.

What a typical engagement looks like

A focused engagement on one assortment runs eight to twelve weeks: diagnostic from transaction data, segmentation, policy redesign piloted on one category, then rollout with the review cadence and KPI set. In companies with unmanaged replenishment, reductions of twenty to forty percent of on-hand value are common — achieved while improving fill rate, because the stock that remains is the stock that sells.

For manufacturers, inventory work is usually sequenced with the wider manufacturing consulting track, since scheduling stability is what makes low inventory safe. The objective is the same as everywhere else in our practice: a system the company runs itself, measured by numbers everyone trusts.