Case Study:
Inventory Optimization
Initial Situation
- Significant inventory buildup due to pandemic-related safety concerns and long lead times
- Inventory levels rose to 3-digit million euro value
- Average „Months of Supply“: >6 months for multiple vendors
- Low inventory turnover in many product groups: in some cases < 2.0
- Increased risk of aging stock, write-downs, and cash flow impact
- Elevated forecast demand due to unvalidated customer requirements
Actions & Approach
Structured Inventory Optimization Approach
1. Inventory Transparency
- Developed a weekly dashboard with all relevant KPIs:
Inventory Total / Projected Inventory Trends / Months of Supply / Turn Ratios / Overdue Backlog
- Vendor-specific analysis & urgency classification
2. Targeted Inventory Actions
- Prioritized measures for the tier 1 manufacturers
- Initiated inventory promotions, vendor returns and customized reallocations
3. Cross-Functional Collaboration
- Coordination with Sales, Finance & Demand teams on push/pull scenarios
- Integrated financial criticalities (e.g. Shipment Blocks)
- Analyzed backlog risks & initiated reallocations for at-risk inventory
4. Structured Decision Reviews
- Weekly performance reviews at SKU/vendor level
- Early warning system for aging stock (>9 months)
- Included critical „Risk Backlog“ positions in action planning
Results & Impact
- Significant inventory reduction of >20% with Tier1 suppliers within 3 months
- Reduced inventory reach to < 5 months on a weighted average
- Improved turn ratio to 3.0+ in strategic product groups
- Avoided double-digit million euro write-downs on excess inventory
- Substantially improved transparency for management decisions and controlling
