The CEO Lens: Turn inventory back into Cash: on purpose

What we did and what it unlocked

Using the approach outlined here, we connected Finance with the demand/inventory owner and set clear targets. The team had been prudent, rightly, to avoid stock-outs, and over time blanket buffers crept in across the catalog. We replaced those with coverage and service targets based on what customers were actually buying and how suppliers were actually delivering. Result: €1M+ released from inventory while protecting service levels.

This wasn’t a complex transformation. It was steady, disciplined work around three moves, especially the second one.

The three moves (with #2 as the engine)

1) Define the minimum you truly need (be deliberate)

Segment products by categories. Keep proven winners on hand; push the long tail toward order-on-demand. For each segment, set explicit reorder points and sensible maximums. Build those points on supplier history, not guesswork: use each supplier’s typical lead time and a planning worst case so your minimums reflect real performance by lane and vendor. This removes “it feels low, let’s buy more” decisions and replaces them with choices grounded in demand and replenishment reality.

Expect a few useful truths to surface. Some items are still stocked because they used to sell. Others look cheap only because bulk discounts hide the cost of holding them. When you agree on what “enough” really means, you stop overfeeding inventory and start freeing cash.

2) Monitor demand and buy smaller, more often

This is where momentum comes from. Set a short weekly Finance-to-Demand cadence with two simple targets everyone can follow:
• Service level (did customers get what they wanted?)
• Weeks of coverage (how long current stock lasts at current demand)

Base coverage on patterns and trends not just last week’s sales. Look at seasonality and recurring peaks from history, then layer in new signals (recent uplifts, campaigns, marketplace shifts). Shift from big, occasional orders to smaller, more frequent purchases that match reality, not optimism. When an item is volatile, respect that volatility: tighter ordering cycles, closer/faster suppliers, and coverage targets you can actually hit without overbuying. If a supplier’s lead time swings, ask why and fix the basics: earlier PO cutoffs, a different shipping method, or a second source.

A side benefit: supplier conversations improve. Sharing a steadier order pattern often leads to relaxed minimums and tighter lead-time commitments. Savings from lower holding costs and fewer write-downs usually outweigh any lost bulk discount. (A discount isn’t a deal if it traps your cash.)

3) Get a real-time view and connect it to Finance

Create one source of truth for stock by product and location, including aging and late POs. Then wire it into Finance so changes in buying plans flow straight into a cash forecast. With that connection, a low-coverage alert on a best-seller doesn’t just trigger a replenishment check, it also updates the cash plan so you see the impact before you commit.

A simple start (lead time → safe minimums → cash → forecast)
• Lead times by supplier & lane. Pull the last 6–12 months of POs for top SKUs and the suppliers behind them. Capture each supplier’s typical lead time and a planning worst case. Use that history—not guesses—to set planning lead times.
• Safest lowest minimums. Estimate weekly demand from recent history and adjust for seasonality, campaigns, and new trends. Set safe minimums against your planning worst case and keep winners on hand to that level; push long tail items toward order-on-demand.
• Close the gap to target—link it to cash. Keep one shared view per SKU showing current level vs. target. Sit with Finance to turn the path-to-target into cash timing, what arrives near-term from slowing/deferring upcoming POs, and what arrives over time from selling down existing stock and update the rolling forecast before placing orders. The purpose is to arrive at the target level safely, with the financial outcome understood in advance.

Bottom line: Prudence is a strength. Don’t fight it aim it. Tie Finance and the inventory owner together, set clear targets, and make lead-time discipline non-negotiable. That’s how inventory turns back into liquidity, on purpose, and how your balance sheet starts funding your next chapter instead of holding it back.