Why Inventory Control Is the Hidden Lever for Manufacturing Success in 2025
August 13, 2025In my earlier days as a consultant with our Supply Chain team at Design Systems, Inc. (DSI), I remember working on a project for an Aerospace parts manufacturer. Our core mission was helping them reimagine their factory layout and material flow, with the ultimate goal of freeing up white space for a new product line.
During our initial findings and analysis, something DSI does on nearly every engagement, we took a deep dive into their on-hand inventory and compared it with purchasing data and policies. As I crunched the numbers, I tried to reconcile what I was seeing in the Excel sheets with what we’d observed during onsite visits. The results floored me.
The storage racks in the warehouse were cramped, with no room to ergonomically pick inventory or fill orders. Each shelf had corrugated boxes jammed between uprights, stacked front to back, with easily 15% overhang - which turns out to be a great way to upset your material handling operators (IFYKY). The deeper we dug into the analysis, the more staggering the picture became: our client was carrying over $13 million in excess inventory.
The cause? Purchasing had been taking advantage of Economic Order Quantities (EOQ), getting discounts for bulk raw material orders. The problem was that these savings didn’t come close to offsetting the operational expense and floor space inefficiencies it was causing. That was the first moment I truly understood just how critical disciplined inventory control is to a manufacturer’s success.
A High-Stakes Manufacturing Landscape
Today’s manufacturing environment is defined by complexity, volatility, and relentless customer expectations. Factories operate with tighter margins, global supply chains span multiple continents, and product lifecycles grow shorter. In this landscape, inventory isn’t just a cost center, it’s the operational lifeblood that determines whether production flows or stalls.
Well-managed inventory ensures materials are available exactly when needed, supporting smooth production and on-time delivery. Poorly managed inventory, however, can create bottlenecks, tie up millions in working capital, and erode profitability.
According to APQC, the median manufacturer holds inventory worth 10.6% of its annual revenue, with carrying costs consuming 20–30% of that value each year. That means a $500M manufacturer could be spending upwards of $15M annually just to hold inventory, before accounting for the ripple effects of inefficiency.
Why Inventory Management Is Harder Than Ever
The challenge is that inventory management has never been more difficult. Supply chains are longer and more interconnected, often involving suppliers from multiple countries. A single disruption—whether due to geopolitical events, transportation delays, or raw material shortages—can throw the entire operation off balance.
Demand variability further compounds the issue. The bullwhip effect can cause minor changes in customer demand to translate into significant fluctuations in upstream orders. One month you’re paying for expedited shipments to cover shortages, and the next you’re sitting on excess inventory that strains storage capacity and material handling efficiency.
Meanwhile, customers expect faster delivery, more customization, and consistent quality. Manual processes, siloed data, and outdated systems are no match for these demands, leading to inaccurate counts, overproduction, stockouts, and missed commitments.
How Can Manufacturers Turn Inventory Into a Strategic Asset?
The pressing question becomes: How can manufacturers manage inventory in a way that doesn’t just prevent shortages or overages, but actively enhances performance? The answer lies in transforming inventory control into a dynamic, technology-driven capability.
This means creating systems that respond in real time to changes in demand and supply, freeing up capital, accelerating throughput, and enabling rapid adaptation to market shifts.
Six Strategies for Smarter Inventory Management
Implement Real-Time Inventory Tracking:
Integrate warehouse management systems (WMS) with ERP and MES platforms to achieve instant visibility across every inventory movement. IoT sensors, RFID tags, and barcode scanning eliminate manual errors and ensure accurate counts. Companies using real-time tracking report 10–30% reductions in holding costs and up to 80% fewer stockouts.
Leverage Inventory Optimization Engines:
Deploy optimization software to assess demand, lead times, and storage capacity, and recommend ideal stock levels across facilities. Manufacturers using these tools have achieved 25% inventory reductions within a year while boosting cash flow by over 50%.
Use AI-Enhanced Forecasting:
Artificial intelligence can forecast demand, predict shortages, and dynamically adjust inventory more accurately than manual methods. Leaders like Walmart and Target use AI to prevent stockouts, optimize replenishment, and tailor inventory to regional needs.
Integrate Manufacturing Execution Systems:
MES platforms provide real-time production data, enabling alignment of inventory with actual demand. This reduces waste, shortens lead times, and improves schedule adherence.
Standardize Processes Across the Organization:
Consistency in receiving, storage, picking, and cycle counting minimizes errors and builds operational reliability. Track KPIs such as inventory turnover, days of inventory outstanding (DIO), and shrinkage rate to maintain accountability.
Build a Culture of Continuous Improvement:
Inventory control success depends on people as much as technology. Cross-functional ownership ensures all departments—from procurement to production—are aligned and proactive about inventory health.
Case in Point: A Transformation in Action
A mid-sized consumer products manufacturer we supported followed a phased improvement plan: installing RFID tracking linked to ERP and MES, deployed an optimization engine, implemented forecasting dashboards, and trained teams on new KPIs. Within six months, they cut average inventory levels by 17%, eliminated most stockouts, and improved inventory turnover by 40%.
The Bottom Line
Inventory control is no longer a back-office function—it’s a strategic lever that directly impacts cost, agility, and competitiveness. In the fast-paced manufacturing environment of 2025, those who master it will not just survive but lead their markets.
If you’re ready to turn inventory into a competitive advantage, the right mix of process, technology, and culture can get you there. At Design Systems, Inc., we help manufacturers build these capabilities from the ground up. Let’s start the conversation today.