Inventory Management in Supply Chain Management: Are You Managing Parts or Managing Risk?
For an OEM, having the right part available is important. But carrying more inventory than production needs is an expensive way to create that confidence.
Effective inventory management in supply chain management is about finding the right balance. Material availability has to support production without consuming unnecessary working capital, manufacturing space and internal resources. Achieving that balance requires more than adjusting inventory targets—it requires greater control over the supply network that feeds production.
Inventory is Only One Part of the Equation
It is tempting to look at inventory as a number: how much is on hand, how quickly it turns and whether there is enough to cover demand.
Operations and supply chain leaders have to look further.
Consider everything that happens before a component reaches the production line. Suppliers have to be managed. Parts have to arrive at the right time. Material may need to be sorted, repacked, kitted or prepared for assembly. Quality issues and shortages have to be resolved.
When an OEM manages each of those activities separately, complexity builds quickly. Inventory often becomes the safety net.
The question is whether that safety net is costing more than it should.
Look at What Inventory Requires From Your Operation
The cost of inventory does not stop with the value of the parts sitting on the shelf.
It includes the space needed to store those parts and the time required to receive, move, organize and prepare them. It also includes the attention spent coordinating suppliers and responding when material does not arrive as expected.
For an OEM trying to increase throughput, those resources matter. Floor space committed to inventory cannot support additional production. Time spent managing routine material issues cannot be spent on engineering, process improvement or other priorities.
That total cost is easy to underestimate. Benchmarking data from APQC and the Association for Supply Chain Management puts annual inventory carrying cost, including capital, storage, insurance, taxes and obsolescence, combined at roughly 20% to 30% of average inventory value. A 2026 survey of 400 inventory operators found that more than half are already paying holding costs above 10% of inventory value, and nearly a quarter report costs of 16% or more.
Better inventory management in supply chain management therefore requires a broader measure of cost—one that considers what inventory demands from the entire operation.
What If More of That Work Happened Before Parts Reached Your Line?
This is where the structure of the supply chain becomes important.
Instead of receiving bulk quantities from numerous suppliers and managing the remaining work internally, OEMs can move more responsibility upstream.
WCI integrates supplier management, inventory, kitting, assembly and delivery around the customer’s production requirements. That can include consolidating suppliers, maintaining safety stock, preparing components for lineside use and delivering assemblies based on daily production triggers.
The objective is simple: make the material easier for production to use.
That means the factory does not have to be the place where every supplier, packaging, and inventory issue is resolved.
Factory Space Can Tell You a Lot About Your Supply Chain
Walk through a manufacturing facility and look at what occupies the space around production.
How much material is waiting? How much is stored because the next delivery is uncertain? How much still needs to be unpacked, sorted or prepared before an assembler can use it?
Those questions can reveal opportunities that inventory reports alone may not show.
For one global OEM, WCI shifted stock parts from prescheduled shipments to daily triggers and changed bulk repacking to smaller-scale repacking for lineside requirements.
The change recovered 12,000 square feet of facility space.
That is more than an inventory improvement. It is manufacturing capacity returned to the operation.
Working Capital is Another Measure
The same thinking applies to the balance sheet.
In another engagement, WCI helped an OEM remove more than $60 million in inventory from its balance sheet while increasing throughput to support rapidly scaling demand.
The important part is not inventory reduction alone. Cutting inventory at the expense of material availability would simply move the problem somewhere else.
The stronger outcome is reducing the amount of capital tied up in material while still giving production what it needs to meet demand.
Simplification Creates Control
Complexity is difficult to eliminate when an OEM still has to coordinate every supplier and every handoff.
WCI manages thousands of global suppliers and can serve as a single point of contact across a larger portion of the supply and production process. Rather than adding another layer for the OEM to manage, the goal is to take layers away.
That creates clearer accountability for material flow while reducing the coordination required from internal teams.
Rethink What Good Inventory Management Looks Like
Good inventory management is not defined by having the fullest shelves or the lowest possible inventory balance.
It is having the material production needs without carrying unnecessary cost and complexity to make that possible.
For OEM leaders, that makes inventory management in supply chain management a much bigger conversation than stocking levels. Supplier structure, material preparation, delivery frequency, floor space, working capital and production requirements all belong in the discussion.
If inventory continues to grow as protection against supply chain uncertainty, it may be time to address the uncertainty instead.
Talk with WCI about how an integrated supply and assembly approach can simplify material flow and give your operation greater control over inventory.
About the Author
Jenna Anderson
