Leaders Opinion

From Overflow to Optimization: Transforming Inventory Management in the High-Tech Industry

July 03, 2025 4 min read

Sachin Bajaj

AkzoNobel, Senior Supply Chain Design & Analytics Leader

Inventory

Turning Around Inventory Challenges in High-Tech Industry: A Case Study in Process and Governance Excellence

The high-tech industry is known for rapid innovation cycles, high product complexity, and intense pressure to deliver flawless service levels. However, this same dynamic environment can often lead to significant inefficiencies—particularly in inventory management. This case study highlights how one high-tech organization was able to address critical challenges associated with excessive inventory, working capital blockage, and poor inventory turnover, and outlines the steps taken to drive sustainable improvement through structured classification, forecasting, and governance.

The Problem: Inventory Overflow and Working Capital Lock-In

The business was facing a significant issue—inventory levels were dangerously high. In fact, stock was physically overflowing from storage bins, indicating severe overstocking and poor warehouse utilization. Not only was this tying up valuable working capital, but it was also affecting operational agility and service responsiveness. Inventory turns were at a concerning low, and this caught the attention of senior leadership who recognized the need for immediate corrective action.

Step One: Classification for Clarity

The journey to resolution began with a thorough classification of inventory parts. The objective was to separate inventory into Active, Excess, and Obsolete categories using clear, data-driven rules.

Active Parts were those with confirmed usage and forecasted supply within the next year. Additionally, parts deemed critical to operations where any shortage could cause significant disruption were also classified as active.

Excess Parts were those with anticipated use between one and three years.

Obsolete Parts were identified as having had no usage or expected supply for over three years.

This classification provided immediate clarity and enabled focused actions. While the initial activity was a one-time cleanup, leadership recognized the importance of embedding this as a recurring process to prevent recurrence.

Establishing Sustainable Processes and Governance

The classification exercise was followed by a series of structured process enhancements. One of the cornerstone initiatives was the development of a standardized order calculation tool. This tool leveraged historical consumption data, lead time, lead time variability, and target service levels to recommend optimal inventory targets. It provided planners with scientifically driven order quantities that aligned inventory with business needs.

To reinforce compliance, a governance mechanism was instituted to monitor adherence to inventory targets. Planners were expected to operate within acceptable deviation bands from the recommended levels. This approach not only brought consistency but also reduced the subjectivity in planning decisions.

Strengthening Supply Collaboration

Another key lever in this transformation was improved collaboration with Original Design Manufacturers (ODMs). A structured forecasting process was established to regularly share demand forecasts with ODMs. This allowed them to plan their own supply schedules more accurately, avoiding overproduction or shortages.

In return, ODMs were required to share their own inventory levels on a recurring basis. This bilateral visibility created a regular handshake mechanism between the business and its suppliers. This improved alignment reduced supply disruptions and enabled quicker response to demand fluctuations.

Tangible Results Over Time

The cumulative effect of these initiatives was significant. Over a period of two years, the company achieved a 35% reduction in inventory levels, directly easing the working capital strain. More impressively, this was accomplished while improving part availability by 6%, showcasing that efficiency did not come at the cost-of-service performance.

This transformation not only addressed the immediate issue of inventory overflow but also created a sustainable, process-led approach to inventory management. Through a mix of data-driven tools, clear business rules, and supplier collaboration, the company turned a chronic pain point into a competitive advantage.

Conclusion: From Chaos to Control

This case underlines the importance of taking a structured approach to inventory management—particularly in industries where complexity and pace can easily overwhelm traditional planning methods. By investing in process design, analytical tools, and collaborative governance, organizations can drive not just short-term results, but long-term resilience.

For companies struggling with similar issues—whether in high-tech or other industries—the key takeaway is clear: Inventory efficiency is not a one-time project, but a culture built through data, discipline, and partnerships.

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