Review items with no recent use
When it may fit: Slow movers sit in stock.
Evidence needed: Last-use dates and demand.
Trade-off: Write-offs may be needed.
Manufacturing Intelligence Brief
How to Investigate Excess Inventory
Inventory ties up cash, takes space and can become obsolete. Excess is usually the result of forecasting errors, large batches or protection against shortages.
1. The business problem
How much inventory do we really need, and what is the rest costing us?
Inventory protects against shortages and smooths production, so some is needed. Beyond that it costs money to finance, store, insure and sometimes write off.
Excess builds up slowly, often as a response to past shortages, and it is hard to see in the totals.
2. What the evidence can reveal
An excess-inventory review measures several things:
- Calculated Inventory value and days on hand, by category and item.
- Calculated Inventory turnover compared with the company’s own history.
- Calculated Items with no or low usage, which are candidates for excess or obsolescence.
- Information gap Lead times, minimum order quantities and demand forecasts, which decide how much is needed.
Money tied up in inventory is not available for anything else, and it has a cost.
3. Investigate the problem
The synthetic plant has no inventory data, so we use its materials cost to size the issue. Calculated Materials cost $27.3M a year, roughly half of all production cost. Illustrative If the plant held 60 days of materials, an invented figure, about $4.5 million would be tied up ($27.3 million times 60 divided by 365). At an assumed 10% annual cost of carrying inventory, that costs about $450,000 a year, and each 10 days trimmed would free about $750,000 of cash.
Calculated Costs and demand are moving. Revenue grew 7.8% and materials cost grew 11.0%, faster than units at 8.8%. Hypothesis A plant whose material cost per unit is rising may also be buying ahead of price increases or holding larger safety stocks, either of which raises inventory. Information gap Actual balances, turnover and aging are needed.
Information gap Because Custom Orders have grown, with units up 35.0%, the plant may be buying specialized materials in small, irregular quantities, which is a typical source of slow-moving stock. A listing of items by days of supply and last-use date is the first view to build.
4. Explore the interactive experience
Investigate it yourself.
Manufacturing Performance Dashboard: a product-line dashboard with downtime and scrap, a scenario simulator for volume, price, materials and scrap, evidence-linked answers from APIS, and a sample brief, all on synthetic data.
The experience below is built on a synthetic manufacturer, “Demo Components Inc.” It has no inventory, supplier or material-usage records, so it is used to show the production and cost side of the picture. Nothing in it is real.
- In the cost table, select Materials and compare its growth with units produced.
- In the Scenario tab, raise materials cost per unit by 5%. A plant holding extra inventory may be buying ahead of such increases.
- Ask APIS what additional information would help validate these conclusions.
5. Evaluate possible solutions
Reducing inventory safely is a gradual process.
6. What leadership should do next
Questions to answer
- How much inventory do we hold, in days?
- Which items are slow or obsolete?
- What drives the levels?
- What is it costing to carry?
Data to gather
- Inventory by item with last use
- Usage and lead times
- Order history
- Carrying cost
Steps to take
- Rank items by days of supply.
- Review the top slow movers.
- Reset levels.
- Track turnover.
7. Engage Two Pillars
Identify Opportunities Across Production, Costs, and Capacity
Two Pillars can help manufacturers investigate production performance, cost structure, inventory and capital investment decisions using your own plant data. A good first step is an inventory review that finds excess and slow-moving stock and sets better levels.
Sources and data notes
- The organization, its figures, and every number in this article and its interactive experience are synthetic and illustrative. They are not real data, a benchmark, or a forecast.
- Reviewed October 2026. This article describes an approach to investigation. It does not replace review by qualified professionals.