Excess inventory is stored decisions. Reducing it permanently means changing the decisions, not just running a clearance exercise.
Segment the inventory
- Value versus usage (classic ABC/XYZ segmentation).
- Months of supply on hand relative to forecast usage.
- No-movement periods: 6, 12 and 24 months.
- Obsolete versus slow-moving service or spare requirements.
Diagnose how it got there
- Minimum order quantities far above real usage.
- Safety stock applied uniformly.
- Cancelled or reduced customer programs.
- Engineering changes that stranded old revisions.
- Buying to price breaks without a usage horizon.
Act by category
Return, sell, use up through substitution, or write off — each requires a decision owner and a deadline. Material that stays 'under review' for a quarter is a decision to keep it.
Close the loop
Change the order policies, minimums and buffers that produced the excess, and add an inventory review to the monthly planning cadence so the same build-up is visible early.