Inventory has always been a difficult balancing act. Too much stock ties up cash, increases holding costs and can hide underlying planning issues. Too little stock exposes the business to missed sales, disrupted operations, expedited freight and, in asset-intensive environments, avoidable downtime.
That balance is becoming harder to manage. Senior leaders across industrial, retail, consumer goods and heavy industry organisations are facing sustained working capital pressure, rising customer expectations, supply volatility and demand uncertainty. In this environment, inventory can no longer be managed through static parameters, broad rules of thumb or “just in case” buffers. It needs to be actively optimised.
The challenge is not simply to reduce stock
Inventory optimisation is often misunderstood as an exercise in cutting stock. In reality, the objective is more nuanced: to hold the right inventory, in the right place, at the right time, for the right reason.
For retailers and consumer goods businesses, this means protecting service and availability while avoiding excess stock, markdowns and obsolescence. For industrial and heavy industry organisations, it means freeing up working capital without increasing the risk of operational disruption, maintenance delays or asset downtime. In both cases, the challenge is the same: balancing service, cost, cash and risk.
Why traditional approaches are no longer enough
In stable conditions, simple inventory rules can appear to work. But volatility exposes their limitations. Forecast error, lead time variability, minimum order quantities, production frequencies, capacity constraints, shelf-life requirements and service-level targets all influence the level of stock required.
When these factors are not understood together, businesses often end up with the worst of both worlds: excess stock in some areas and shortages in others. This is particularly important as finance teams look for cash release while operations teams remain accountable for service and resilience.
A more intelligent and dynamic way to make inventory decisions
Iris by Argon & Co’s AI inventory optimisation tool has been developed to support this more informed approach. It is not designed to replace business judgement or planner expertise. Instead, it provides a clear analytical view of current inventory performance, the drivers of safety stock and the levers available to improve outcomes.
The tool uses historical demand, future forecast, product-location lead times, MOQs, service levels and segmentation policies to build a baseline of current performance. It then enables scenario analysis across a range of key levers, including weighted service level segmentation, safety stock parameters and lead time assumptions, to highlight where the biggest opportunities lie.
From infrequent static reviews to sustained improvement
The value of inventory optimisation comes not just from the model, but from how quickly fresh and updated insights can be surfaced for a faster response loop. A rapid diagnostic can identify the size and location of the opportunity. More detailed modelling can validate the trade-offs between service, cost, cash and risk. From there, organisations can build an implementation roadmap, embed revised parameters into planning systems and establish governance to keep inventory settings current.
With a flexible range of options to visualise and surface the actionable outputs, Iris by Argon & Co’s AI inventory optimisation tool can easily link to its upstream and downstream systems within your business to remove manual and off-system inventory analysis tasks and ensure the data reviewed is the latest.
This is where cross-functional alignment matters. Finance, supply chain, procurement, sales, operations and maintenance teams need a shared view of what inventory is for. In asset-intensive sectors, this includes alignment between inventory and maintenance strategies. In retail and consumer goods, it includes alignment between demand planning, promotions, supply planning and customer service.
Building resilience without locking up cash
Volatility is unlikely to disappear. The organisations that perform best will be those that can make inventory decisions dynamically, based on evidence rather than habit. They will understand where stock protects service, where it protects uptime, where it creates resilience — and where it simply ties up cash.
For businesses under pressure to improve cash, service and resilience at the same time, the opportunity is clear: make inventory visible, understand the trade-offs, and optimise with purpose.
Get in touch today to discover how smarter inventory decisions can improve service levels, reduce excess stock and unlock working capital.
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Frans Verheij
Partner, APAC
