Why do excess inventory and shortages coexist?

The total does not explain availability

A business can hold substantial inventory and still be unable to complete a customer order. The stock may be in the wrong location, awaiting inspection, allocated elsewhere or missing the complementary component needed to produce a finished item. An aggregate stock figure cannot resolve those operating questions.

Our proposed starting point is to connect the service commitment to the stock and replenishment decisions that support it. The aim is to understand where inventory is useful, where it is unavailable and where it no longer serves a clear need.

What the research contributes

The Kinaxis account of Celestica describes using component availability and build rules to identify possible uses for excess inventory. It illustrates a practical constraint: holding components does not necessarily mean holding the combination needed for an executable build. The account is vendor-published and identifies opportunities rather than independently verified realised returns. ^[1]

The World Bank’s LPI 2.0 uses shipment tracking to examine logistics speed and connectivity, with data covering 2023–24. That provides a useful reference for looking beyond a single assumed lead time. It does not prescribe safety stock for an individual product or show how much inventory a particular client should hold. ^[2]

Separate the reasons for holding stock

A review should distinguish stock protecting demand or supply variability from stock awaiting a decision, stock created by minimum order quantities, and stock associated with obsolete requirements. These are proposed diagnostic categories, not a conclusion about which dominates across all industries.

Begin with one site or product segment and reconcile the records. Examine usable quantities, reservations, units of measure, open orders, actual replenishment times and customer service definitions. Changing planning parameters before establishing those facts can make the apparent improvement difficult to interpret.

Test policies against the service requirement

Segment products using their demand patterns, supply constraints, economic significance and service need. A critical low-volume spare and a high-volume promotional line may justify different review routines even when their inventory values look similar.

Compare candidate policies against historical conditions, then agree a controlled operating trial. Record overrides and exceptions: an apparently sound parameter can fail because the information is stale or because the process does not follow the intended rule. Back-testing supports a decision but is not proof of future performance.

Measure service and cash together

• Availability or fill rate for the agreed product and customer population.
• Inventory value, ageing and days of cover, alongside quality holds and allocations.
• Expediting, write-offs and the effort needed to maintain the policy.
• Any effect on other products or customers when stock is reallocated.

Give the improvement an owner

Finance should distinguish a one-off working-capital release from recurring profit benefits. Planning and operations should agree who owns parameter changes, exception review and the next policy assessment. Reduced stock is not a successful outcome if the same change causes unacceptable service loss.

A focused Inventory and Service Discovery Workshop can select a useful segment and define the baseline needed for a scoped assessment. Benefits and targets would be established from client evidence rather than borrowed from another organisation’s case study.