Introduction: The Real Cost of Getting It Wrong
In 2022, a global electronics manufacturer ended the year with $2.6 billion in excess inventory. Just months earlier, they had faced critical component shortages that halted production. How did they go from not enough to far too much—so quickly?

The answer lies in disconnected forecasting, poor cross-functional visibility, and reactive inventory management. These challenges aren’t unique. They plague organizations across industries—and cost far more than most leaders realize.

The Hidden Problems Undermining Inventory Strategy

1. Poor Forecast Accuracy

Too often, forecasts rely heavily on historical trends that don’t reflect today’s volatile demand shifts. Without integrating upstream and downstream signals—like supplier lead time variability or real-time sales behavior—teams are flying blind.

Impact: Mismatched inventory to actual demand, higher obsolescence rates, increased emergency orders, and missed revenue.

2. Siloed Inventory Views

Sales, supply chain, and finance often operate from different playbooks. One team sees inventory value; another sees unit volume. Inventory optimization fails when there’s no common understanding of what “healthy” means.

Impact: Misaligned metrics, conflicting decisions, and fragmented planning that breeds waste and distrust.

3. Chronic Overstocking

In a well-meaning attempt to protect service levels, teams overbuy “just in case.” Without scenario planning or a system to account for true variability, safety stock becomes bloated insurance—and cash is locked in slow-moving SKUs.

Impact: Working capital tied up, rising carrying costs, and difficulty responding to sudden demand changes elsewhere.

4. Lack of Predictive & Prescriptive Capabilities

Traditional ERPs and spreadsheets can’t answer critical “what if” questions. When a supplier misses a shipment, planners scramble instead of simulating recovery options with financial impact.

Impact: Delayed decisions, limited agility, and an inability to prioritize recovery strategies by revenue or margin impact.

From Reaction to Resolution: Rethinking the Approach

To overcome these pervasive inventory challenges, organizations must shift from reactive, fragmented planning to proactive, intelligent orchestration.

Integrate Demand and Supply Intelligence

True inventory optimization begins with connecting demand sensing, supplier capacity, and in-transit visibility. AI-Enabled Digital Twins enable organizations to model real-world volatility and align inventory accordingly.

Build Scenario-Based Recovery Plans

It’s not just about stocking more—it’s about stocking smarter. What happens if a supplier is delayed? If a promotion overperforms? Scenario-based planning lets teams test, align, and execute contingency plans based on business priorities.

Monitor Inventory with Financial Impact in Mind

Not all SKUs are created equal. Optimize based on revenue contribution, margin risk, and customer SLAs—not just volume or turns. This transforms inventory from a static liability to a dynamic asset.

Conclusion: Elevating Inventory from Afterthought to Advantage

Inventory is no longer just about avoiding stockouts or cutting costs. It’s a strategic lever for resilience, agility, and growth.

To lead in today’s supply chain, organizations must treat inventory as a dynamic, data-driven system—one that can flex with volatility, support service, and fuel financial performance.

The question isn’t whether you can afford to optimize.
It’s whether you can afford not to.

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