Inventory Optimization:
Reducing Capital Tied Up in Inventory
Inventory levels reflect the quality of your processes and planning. Excessive buffers often mask production instability or planning errors in the supply chain. So, for us, inventory optimization goes beyond just inventory reduction.
We create transparency in your inventory management and resolve the causes of excess inventory and missing parts right where they originate. Here’s how we optimize your inventory levels – transforming them from a potential money pit into a strategic factor for resilience:
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Stable cash flow
We reduce tied-up capital and free up liquidity for strategic investments.
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Improved delivery capacity
We ensure the smooth operation of your outbound logistics using data-driven safety stock and optimized scheduling parameters.
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More resilience
We secure your supply chains against global market volatility.
Why Traditional Scheduling Parameters and Safety Stock Levels are Reaching Their Limits Today
Have you heard of the “inventory paradox”?
Despite overflowing warehouses and high levels of capital tied up in the supply chain, your on-time delivery performance (OTD) still drops. As a result, many companies find themselves in a constant state of emergency:
- Despite high inventory levels and significant capital tied up, your delivery performance (OTD/OTIF) still falls.
- Your production schedule is never permanently stable and requires frequent manual adjustments (Expediting).
- In an attempt at risk compensation, even more inventory is built up.
This kind of paradox in inventory management arises not from a lack of commitment, but rather from outdated control mechanisms, parameters, and processes. When the system's logic no longer aligns with market realities, five critical inefficiencies arise:
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How can I identify and resolve inefficiencies in my inventory management?
The first step involves conducting an inventory analysis and establishing a professional inventory control system. Only the continuous monitoring of key performance indicators such as days on hand (DOH) and service level can objectively identify deviations from the optimal operating point. Once inefficiencies are made visible, it is possible to identify the true inventory drivers by in-depth data analysis. To resolve this issue, we eliminate opaque Excel silos in planning and instead establish a system-supported control mechanism based on a "single source of truth".
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How do I gain transparency regarding my inventory drivers?
Transparency results from the systematic analysis of the causes of excess inventory (a root cause analysis). This reveals whether stock levels are due to poor coordination, outdated lot sizes, or unstable processes.
Sustainable Inventory Optimization: Reducing Capital Tied Up While Improving Supply Security
Efficient inventory management is the result of dynamic, data-driven control. In-depth analysis of demand trends and supplier performance lets us replace “gut feelings” in the planning process with reliable data and clear decision-making logic. Data-driven strategies enable us to align our required safety stock precisely with actual volatility.
We can pinpoint exactly where capital is unnecessarily tied up, freeing it up without jeopardizing your security of supply.
Our approach to optimizing your inventory encompasses four key areas:
What is inventory segmentation (ABC/XYZ)?
Inventory segmentation is an analytical method used to classify inventory based on its value (ABC) and its predictability or consumption pattern (XYZ) in order to manage service levels, replenishment parameters, and inventory levels in a differentiated manner.
How We Improve Inventory Performance and Reduce Working Capital
The goal of our consulting services is always to deliver measurable value. Based on our track record of successfully completed projects, we typically achieve the following improvements for our clients through inventory optimization:
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Inventory reduction
Up to 20% sustainable reduction in working capital.
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Days on hand (DOH):
Reduction of up to 50% (e.g., from 8 to 4 days) to improve the cash-to-cash cycle.
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Delivery performance (OTIF/OTD)
An increase of 10–20 percentage points to ensure the long-term stability of your delivery commitment.
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Plan adherence:
A 15-percentage-point improvement leading to more stable processes and fewer operational escalations.
Strategic Perspectives: From Sustainability to the Digital Supply Chain
Effective inventory management combines economic efficiency with environmental responsibility and digital control capabilities. Your inventory is part of an integrated system in which strategic buffer strategies, resource efficiency, and end-to-end data harmonization form the foundation of your long-term competitiveness.
Our comprehensive consulting services cover the following areas:
Sustainability and Resource Efficiency
Reducing Working Capital and Material Waste
Efficient inventory optimization contributes directly to your sustainability goals – every reduction in excess inventory helps limit the waste of valuable resources.
Resilience Through Supplier Screening and Buffer Strategy
In a volatile market environment, inventory acts as a strategic hedge. We use a systematic supplier screening process to objectively assess risks and dependencies in your N-tier supply chain.
Digital Supply Chain
Data Harmonization Instead Of Excel Silos
A digital supply chain is the technical foundation for controllable, transparent, and scalable inventory management.
Mobilizing Working Capital: Start Inventory Optimization Now
Put an end to the inventory paradox in your company. Let’s work together to identify the levers that will free up your tied-up capital and stabilize your delivery capability. Our consulting services for optimizing your inventory management help you define your specific operating point and anchor it sustainably in your systems and processes.
Further Information
Supply Chain Management and Production Networks
How to develop a viable vision for your operations based on your corporate strategy.
Make-or-Buy Strategy
Before relocating any plant, determine which value-added activities will remain at your own plant and which will be outsourced.
FAQ - Answers From Our Experts About Inventory Optimization
How do I reduce my capital tied up without risk to my delivery capability (OTD)?
The key is to define the optimal operating point. We optimize your scheduling parameters and safety stock levels based on data to ensure that the service level (customer promise) is maintained while eliminating unnecessary buffers.
Can task force deployments be permanently avoided through stable inventory planning?
Yes. Consistent plan adherence and systemically correct planning parameters ensure reliable planning. Reactive problem-solving caused by missing parts is avoided through proactive and forward-looking management.
What are the main causes of high inventory levels in global supply chains?
The bullwhip effect, a lack of planning stability in S&OP processes, and a lack of end-to-end transparency often lead to safety margins at every stage of the supply chain.
How do I calculate safety stock under conditions of extremely volatile demand?
Traditional static formulas often fail when market conditions are highly dynamic. We rely on dynamic safety stock levels that take into account actual supplier reliability and demand volatility in real time, rather than maintaining fixed buffers.
How do machine learning-based forecasting models help with inventory management?
ML-based forecasts improve prediction accuracy. They are better at identifying patterns in demand volatility than traditional statistical methods, thereby reducing forecasting errors and the resulting excess inventory.
What is Multi-Echelon Inventory Optimization (MEIO)?
MEIO is an advanced inventory management method that works across multiple stages of the supply chain (from raw materials to the finished goods warehouse). Instead of treating each inventory level in isolation, MEIO optimizes the overall inventory across the network to minimize safety stock and maximize availability at the customer interface.
Which inventory management methods are the most effective?
We rely on a combination of ABC/XYZ segmentation, Multi-Echelon Inventory Optimization (MEIO) for cross-tier control, and dynamic safety stock calculations that take current market fluctuations into account.