How to Reduce Inventory Costs Without Sacrificing Service Levels

Reducing inventory is one of the biggest levers in supply chain cost reduction. But cut too deep and you risk stock-outs. Here's how to find the right balance.

The single biggest driver of excess inventory is inaccurate forecasting. When you don't know what customers will order, you compensate by holding buffer stock. Improve your forecast accuracy and you can safely reduce that buffer.

Safety stock exists to buffer against uncertainty. But many companies set safety stock based on gut feel or outdated rules of thumb. Modern planning tools calculate optimal safety stock levels based on actual demand variability and supplier lead time reliability.

How often and how much you replenish has a significant impact on average inventory levels. Working with your suppliers to optimise order quantities and frequencies can unlock significant inventory reductions.

sofco's clients have achieved inventory reductions of 15-25% while maintaining or improving customer service levels.