Inventory is the core of every product-driven business – too many ties up capital, too little risks lost sales. Effective inventory management is about more than stock counts; it is about maintaining the perfect balance between availability and cost. This is where inventory optimisation strategies step in.
As supply chains grow more complex and customer expectations shift rapidly, businesses need smarter ways to manage stock efficiently. From improving cash flow to enhancing service levels, optimising inventory drives both operational and strategic gains.
understanding inventory optimisation
Inventory optimisation is the process of balancing stock levels to meet fluctuating demands while reducing excess inventory to minimise costs and inefficiencies. It ensures the right products are available at the right time and location without the risk of overstocking or stockouts.
The building blocks of optimised inventory levels include:
- Demand forecasting
- Inventory categorisation
- Safety stock calculations and replenishment strategies
- Reorder point calculations
- Inventory turnover and planning
Choosing the right inventory management strategy not only reduces excess inventory but also offers a host of benefits, including:
- Cuts handling and holding costs while improving cash flow.
- Increases profitability through better cost control.
- Enhances customer satisfaction by meeting demand accurately and on time.
- Improves operational agility, helping businesses manage disruptions and seasonal changes.
- Supports sustainability by reducing waste and resource overuse.
- Enables smarter, data-led decision-making.
- Builds a resilient supply chain and sharper competitive edge.
10 inventory optimisation strategies to reduce excess inventory
Managing inventory across complex supply chains has never been more challenging. Businesses face issues like variability in demand forecasting, fragmented visibility across sites, outdated tools, and volatile supply conditions. These hurdles often lead to overstock or stockouts – both of which drain resources and disrupt service.
proven inventory optimisation strategies that can help companies tackle these challenges head-on and reduce excess inventory include:
embrace just-in-time (JIT) inventory control
Minimise excess by aligning inventory orders closely with production or sales cycles. This approach reduces holding costs but requires tight coordination with suppliers.
classify inventory using ABC analysis
Segment items based on value and consumption rate. Focus on high-value ‘A’ items for closer monitoring while automating control for low-value ‘C’ stock.
calculate optimal order quantity
Use the Economic Order Quantity (EOQ) model to strike the right balance between ordering costs and storage costs, preventing unnecessary buildup.
optimise safety stock levels
Avoid overstocking by basing safety buffers on realistic risk assessments, lead times, and service level targets.
improve demand planning with predictive analytics
Use historical data, trends, and external signals to generate accurate forecasts. Smarter demand planning ensures timely replenishment and avoids stock discrepancies.
implement vendor-managed inventory (VMI)
Let trusted suppliers manage replenishment directly. VMI improves stock availability and visibility while reducing carrying costs.
automate replenishment with data-driven triggers
Replace manual tracking with automated systems using reorder point formulas based on consumption patterns. This reduces errors and improves responsiveness.
streamline stock using SKU rationalisation
Reduce excess inventory by reviewing underperforming SKUs. Align product offerings with customer demand and operational efficiency.
embrace lean inventory practices
Reduce waste and inefficiency by focusing on value-added processes. Lean thinking enhances agility and responsiveness across the supply chain.
leverage real-time inventory management technologies
Integrate tools powered by AI, machine learning, and behaviour analytics. These systems help monitor demand shifts and stock movements instantly, enabling proactive decision-making.
Real-time visibility into inventory operations, with intelligent automation tools, is no longer optional. Adopting advanced tools for smarter decision-making is essential. Infosys BPM offers end-to-end inventory management and BPM services to help businesses gain accurate, real-time insights into stock levels, demand patterns, and supplier performance. These capabilities enable faster response to market shifts, achieve 10-15% inventory optimisation, reduce excess inventory, and improve service levels across industries.
best practices for inventory management
Choosing the right inventory optimisation strategy is only part of the equation. Sustained success stems from embedding best practices into everyday operations. These practices help refine processes, improve accuracy, and consistently reduce excess inventory over time.
Here are some best practices for inventory management that facilitate inventory optimisation:
- Track inventory in real time across all locations.
- Optimise reorder points and quantities.
- Use automation to improve efficiency.
- Build stronger supplier relationships.
- Audit inventory regularly.
- Train staff on inventory practices.
- Encourage continuous improvement.
conclusion
Efficient inventory management is no longer a back-office function but a strategic driver of growth, agility, and customer satisfaction. Businesses that embrace advanced inventory optimisation strategies can unlock real value by reducing waste, cutting costs, and responding faster to shifting demand. By combining accurate forecasting, smarter stock classification, automation, and strong supplier partnerships, companies can significantly reduce excess inventory while maintaining service excellence.
The use of real-time tools and continuous process improvement further strengthens inventory control and decision-making. In a world where supply chains face constant disruption and complexity, staying ahead means moving beyond reactive stock management. With the right mindset, strategies, and technologies in place, inventory becomes a competitive advantage – not a burden.
