Inventory & Working Capital Health Check – English

INVENTORY & WORKING CAPITAL HEALTH CHECK

Where is inventory tying up unnecessary cash – and why?

Which inventory positions tie up unnecessary capital, what causes them, and which decisions on portfolio, replenishment, service levels, procurement or ERP parameters can release working capital without putting service at risk?

36 questions7 dimensions10–15 minutesFree management summary

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MANAGEMENT IMPACT

Inventory is not a goal in itself. What matters is its economic purpose.

The Health Check connects inventory with service, portfolio economics, planning quality and ERP control parameters. It shows whether capital is being used deliberately or simply tied up.

CashWorking capital · DIO/DOH · cash release
ServiceService · service levels · shortage risk
PortfolioMargin · turnover · A/L · variants & phase-out
ControlReplenishment · ERP parameters · governance
WHAT THE CHECK ANALYZES

Seven dimensions – from targets to sustainable control.

The diagnostic connects forecasting, segmentation, inventory parameters, service levels, portfolio economics, procurement and governance into one working-capital view.

01Strategy & Financial Targets
02Demand & Forecast Quality
03Master Data, ABC/LMH & Planning Parameters
04Safety Stock, Service Levels & Inventory Control
05Excess, Obsolescence & Portfolio Economics
06Suppliers, Procurement & Lead Times
07Governance, KPIs & Improvement Control
INVENTORY CONTROL MODEL

From item portfolio to working-capital impact.

ABC / LMH→Portfolio→Disposition→ERP Parameters→Working Capital

The key lever is differentiated control: high-value low-turnover items require different rules from fast-moving standard items. Portfolio, service levels and ERP parameters therefore need to be managed together.

SAMPLE EXECUTIVE MANAGEMENT REPORT

See how 36 answers are translated into cash and management levers.

The sample uses fictitious company data and demonstrates the premium report logic: red flags, ABC/LMH, portfolio economics, ERP replenishment strategies, working-capital opportunity and a 30/60/90-day roadmap.

€8.4mInventory
€1.7mA/L inventory
€620kE&O
€1.2–1.8millustrative WC opportunity

Open full sample reportFictitious data · Muster Components GmbH · Industrial Manufacturing

FREE ASSESSMENT

Start the free assessment

Assess the actual practice in your company. Examples below each question support interpretation; “Not relevant” is excluded from scoring.

Assessment scale1 = lower maturity → 5 = higher maturity
1Not present2Mostly reactive / person-dependent3Defined, but not consistently applied4Standardized, measured and actively managed5Integrated, forward-looking and continuously improvedN/ANot relevant – excluded from scoring
INVENTORY & WORKING CAPITAL HEALTH CHECK

Where is inventory tying up unnecessary cash – and why?

36 management questions across seven dimensions. Assess inventory control, ABC/LMH, forecasting, parameters, E&O, portfolio economics and governance.

Rating: 1 = not in place · 2 = reactive · 3 = defined · 4 = standardized · 5 = integrated · N/A = not relevant
Dimension 1 / 7

Strategy & Financial Targets

Company context

Industry, size, footprint and operating model guide the interpretation. They do not change the core score.

Your company profile

Required fields are marked *. These details document your company context; the score is based on the 36 assessment answers.

1. Concrete inventory and working-capital targets are derived from company and supply-chain strategy.

Examples may include: Target inventory €, DIO/DOH, Inventory Turns, Cash Conversion Cycle, working-capital reduction target.

2. Inventory targets are differentiated across relevant categories such as raw material, WIP, finished goods, site or product segment.

Examples may include: Raw material, WIP, finished goods, trading goods, site, product group or customer segment.

3. Trade-offs between service, inventory, cost, capacity utilization and obsolescence are made transparent and decided by management.

Examples may include: Higher safety stock for a key customer, larger production lots versus cash, emergency sourcing versus shortage cost.

4. Responsibilities and decision rights for inventory, working-capital targets and improvement actions are clearly defined.

Examples may include: Clear roles across Supply Chain, Procurement, Operations, Sales and Finance, with defined approval limits.

5. Inventory and working-capital initiatives have a reliable baseline, quantified target, due date and benefit tracking.

Examples may include: Reduce inventory by €2m, lower inventory days by five days or reduce E&O risk by 20%.

Dimension 2 / 7

Demand & Forecast Quality

6. Sales and consumption history is complete, validated and cleansed for identifiable special effects.

Examples may include: One-off orders, promotions, shortages, stock-outs, project demand or exceptional customer calls.

7. Forecasts use a level of granularity and horizon suitable for inventory and procurement decisions.

Examples may include: Forecast by item, product group, customer or site, with rolling 6, 12 or 18 month horizons.

8. Forecast accuracy and systematic over- or under-planning are measured regularly by relevant segment.

Examples may include: Forecast Accuracy, WAPE, MAPE, Forecast Bias or Tracking Signal.

9. Promotions, launches, phase-outs, customer projects and other exceptional demand drivers are handled systematically in planning.

Examples may include: Promotions, launches, phase-in/phase-out, tenders, projects or seasonal demand.

10. Recurring forecast deviations trigger corrective actions and feed into inventory and planning-parameter changes.

Examples may include: Adjust safety stock, lot size, planning method, sourcing frequency or planning logic.

Dimension 3 / 7

Master Data, ABC/LMH & Planning Parameters

11. Inventory-relevant master data is checked against defined quality rules and corrected by named owners.

Examples may include: Lead time, MOQ, lot size, safety stock, shelf life, packaging unit or planning indicator.

12. Items are segmented by economic importance and turnover, and the classification is reviewed regularly.

Examples may include: ABC by consumption or inventory value and LMH by Low, Medium and High Turnover.

13. Appropriate replenishment and inventory strategies are defined for each ABC/LMH segment and reflected in the planning system.

Examples may include: Different safety stocks, replenishment methods, planning frequencies, service levels or approval thresholds.

14. Lead times, minimum order quantities, lot sizes and order cycles are regularly compared with actual conditions and updated.

Examples may include: Actual versus master-data lead time, MOQ, production lot size, ordering calendar or transport frequency.

15. Changes to planning parameters follow a controlled process with documented rationale, approval and effectiveness review.

Examples may include: Approval workflow, change log, four-eyes principle or three-month review.

Dimension 4 / 7

Safety Stock, Service Levels & Inventory Control

16. Measurable service-level targets are defined for relevant ABC/LMH, item or customer segments and reflect economic importance and shortage impact.

Examples may include: 95%, 98% or 99.5% availability, OTIF target or Fill Rate by customer segment.

17. Safety stocks are derived transparently from target service levels and variability in demand and replenishment lead time.

Examples may include: Statistical safety stock, forecast error, lead-time variation or differentiated service levels.

18. Inventory and replenishment decisions use a time-phased view of available stock, open receipts and expected demand.

Examples may include: ATP, Projected Stock, inventory projection, days-of-supply view or net requirements.

19. Potential shortages and breaches of inventory limits are identified early and trigger defined control actions.

Examples may include: Alerts, minimum coverage, excess thresholds or escalation lists.

20. Inventory and buffers are coordinated across sites and supply-chain stages to avoid duplicate buffering while protecting service.

Examples may include: Central versus local stock, plant buffers, distribution stock, postponement or inter-site transfers.

Dimension 5 / 7

Excess, Obsolescence & Portfolio Economics

21. Excess, slow-moving and unusable inventory is identified regularly using clear criteria and shown by quantity and value.

Examples may include: No consumption for 90/180/365 days, A/L items, coverage thresholds or E&O reports.

22. Root causes of problematic inventory are investigated systematically.

Examples may include: Forecast deviation, MOQ, customer cancellation, product change, quality issue, supplier lot size or planning error.

23. Concrete actions, owners and due dates exist to reduce problematic inventory.

Examples may include: Use in other products, supplier return, alternative use, sell-off or scrapping.

24. Product launches, changes and phase-outs are coordinated so residual inventory and open purchasing commitments are considered.

Examples may include: Phase-in/phase-out plan, last-time buy, stop new orders or sell-off plan.

25. Financial risks from excess and obsolescence are assessed with Finance, and physical reduction is separated from accounting write-downs.

Examples may include: E&O reserve, write-off, impairment, physical inventory reduction or scrapping.

26. Products and variants are reviewed jointly for contribution, demand trend, inventory exposure and operational complexity; unattractive items lead to portfolio decisions.

Examples may include: Low margin with high coverage, A/L items with low contribution, variant reduction, Make-to-Order, repricing or phase-out.

Dimension 6 / 7

Suppliers, Procurement & Lead Times

27. Actual lead times and delivery reliability of relevant suppliers are measured regularly and deviations from agreed terms are transparent.

Examples may include: OTD, OTIF, actual lead time or confirmed versus actual delivery date.

28. Price, MOQ and delivery-term decisions consider inventory, working capital and total cost impacts.

Examples may include: Price break versus MOQ, consignment, VMI, transport lot size or Total Cost of Ownership.

29. Open purchase orders and committed releases are reviewed against current demand and adjusted where contractually possible.

Examples may include: Push out, reduce, cancel, reschedule or reprioritize open orders.

30. Internal lead times and waiting inventory are analyzed across the material flow and unnecessary queues are reduced.

Examples may include: Queue time, WIP, internal transport, release time, inspection time or production waiting time.

31. Concrete improvements with relevant suppliers shorten and stabilize replenishment lead times and support demand-based delivery.

Examples may include: Delivery schedules, framework agreement, Kanban, VMI, consignment, smaller lots or higher delivery frequency.

Dimension 7 / 7

Governance, KPIs & Improvement Control

32. Inventory, coverage/turnover, service and obsolescence are viewed together through consistent KPIs and relevant ABC/LMH segments.

Examples may include: Inventory Value, DOH, DIO, Inventory Turns, A/L inventory share, OTIF, Fill Rate or E&O ratio.

33. Inventory development and target deviations are reviewed cross-functionally, with decisions and escalations documented.

Examples may include: S&OP/IBP review, Inventory Review, Working Capital meeting or monthly KPI board.

34. The economic impact of implemented actions is verified with Finance, including cash release, follow-on cost and service impact.

Examples may include: Cash release, lower storage cost, extra transport cost, service-level change or write-off risk.

35. People in planning, procurement and inventory control are trained for their roles and identified skill gaps lead to concrete development actions.

Examples may include: Training in forecasting, ABC/LMH, replenishment, MRP, inventory optimization, analytics or ERP/planning systems.

36. Successful improvements are converted into binding standards and checked for sustained application and impact.

Examples may include: SOP, Standard Work, process description, system rule, audit, KPI review or lessons learned.

RECOMMENDED DEEP DIVE

Go upstream when inventory is only the symptom

The next diagnostic should address the dominant cause behind the inventory exposure rather than optimizing stock in isolation.

Planning & decisions

If forecast quality, supply variability or missing management trade-offs are the main drivers of inventory.

S&OP / IBP Health Check →

End-to-end supply chain

If inventory exposure is linked to supplier risk, operations, logistics, data or governance across several functions.

SCM Maturity Check →