2. Monitor Key Inventory Health Metrics

Go beyond the basic stock value. Use a mix of financial and operational indicators:

• Days Inventory Outstanding (DIO) — how long inventory sits before it’s sold
  
• Inventory Turnover — number of times stock is sold and replaced annually
  
• Sell-through rate — % of stock sold in a period
  
• Service level vs fill rate — to evaluate stockouts versus availability
  
• Obsolete & aging stock — % of stock past its shelf life or inactive
  

🧠 A well-designed dashboard can give you daily visibility across these metrics by segment, warehouse, or business unit.

3. Balance Safety Stock with Reality

Many companies either don’t calculate safety stock at all — or they overcalculate based on worst-case assumptions.

Use statistical models to define optimal safety stock based on:

• Forecast error (MAPE or WAPE)
  
• Desired service level (95%, 98%, etc.)
  
• Lead time variability
  

📊 Formula (simplified):

SS = Z × σdemand × √LT

Where Z is the service level factor, and LT is lead time.

🎯 Adjust regularly as demand patterns shift.

4. Fix the Structural Causes of Inventory Excess

Excess inventory is often a symptom — not the root problem. Fixing it requires upstream action:

• Review MOQ and batch size agreements with suppliers
  
• Challenge long lead times or poor planning parameters
  
• Improve forecast accuracy (see related article)
  
• Address delays in product phase-outs or launches
  

💡 One CoreChain client in FMCG reduced excess stock by 30% by synchronizing product transitions with sales and adjusting supplier ordering policies.

5. Drive Inventory Governance and Accountability

Inventory is cross-functional: procurement, sales, planning, finance. To manage it well, you need:

• A monthly inventory review cycle (linked to S&OP)
  
• Assigned owners per category or warehouse
  
• Business rules for write-offs, promotions, or donations
  
• Escalation rules when inventory KPIs breach thresholds
  

📌 Use targets that combine volume and value (e.g. “Max 5% of inventory value in slow movers over 180 days”).

Inventory health isn’t about cutting stock blindly — it’s about strategic control. By monitoring the right KPIs, segmenting SKUs, optimizing safety stock, and aligning cross-functional governance, companies can improve cash flow, reduce waste, and protect service.

CoreChain helps clients build end-to-end inventory management frameworks — from policy design to operational dashboards — that align with business risk and growth targets.