How I Reduced $32.9 Million in Inventory While Supporting 20% Business Growth

One of the most common assumptions I encounter in manufacturing is that growth requires more inventory.

More sales means more production. More production means more materials. More materials must mean more inventory.

It sounds logical.

But in many organizations, inventory growth is not actually supporting the business. It is compensating for weaknesses elsewhere in the operating system—poor planning, inaccurate parameters, unreliable suppliers, disconnected production schedules, weak inventory controls, excess safety stock, or a lack of visibility into what the business truly needs.

I experienced this firsthand while leading Materials at McNeilus Truck Manufacturing.

I had responsibility for the end-to-end Materials organization across a 175-acre, eight-building manufacturing operation. The organization included 109 people and inventory portfolios of up to $165 million, with approximately 3.8 annual inventory turns—representing roughly $600 million-plus in estimated annual material flow.

At the same time that the business was preparing for approximately 20% growth, we reduced inventory by $32.9 million.

We did not accomplish that by simply telling buyers and planners to order less.

We accomplished it by changing how the supply chain operated.

The first question wasn't "How much inventory can we cut?"

When companies launch inventory-reduction initiatives, they often begin with a financial target.

"Take 10% out."

"Reduce inventory by $20 million."

"Improve turns."

Those may be valid business objectives, but they are not an operating strategy.

My first concern is always understanding why the inventory exists.

Some inventory protects customer service. Some protects production from legitimate supply risk. Some supports long lead-time components or demand variability.

But some inventory exists because the organization does not trust its own systems.

That distinction matters.

If you indiscriminately remove inventory without correcting the underlying process, the problem usually reappears somewhere else—as shortages, premium freight, missed production, poor customer service, or eventually more inventory.

The objective should not be to have the lowest inventory.

The objective should be to have the right inventory, in the right place, at the right time, for the right reason.

Make the planning system trustworthy

A major part of inventory performance comes down to planning discipline.

ERP and MRP systems are powerful tools, but they only produce useful recommendations when the inputs and operating processes around them are reliable.

We used JDE MRP analytics to better understand requirements, stocking strategies, production needs, and inventory positions.

That meant challenging assumptions.

Are lead times accurate?

Are order quantities appropriate?

Are planning parameters reflecting current operating conditions?

Is demand being translated correctly into material requirements?

Are planners acting on system signals consistently?

Are we carrying inventory because the business needs it—or because someone remembers a shortage from two years ago and never changed the parameter?

Those questions can uncover significant working-capital opportunities without putting production at unnecessary risk.

Synchronize inventory with production

Inventory cannot be optimized independently from the production plan.

If production schedules are unstable, materials teams compensate.

If priorities change constantly, buyers compensate.

If capacity isn't understood, planners compensate.

And they frequently compensate with inventory.

One of the most important principles I've learned is that inventory is often the physical evidence of problems occurring somewhere else in the business.

Improving synchronization between production requirements, material planning, warehouse capacity, and inventory strategy allowed us to remove excess while continuing to support growth.

That is very different from an across-the-board inventory reduction.

We were not starving the operation.

We were improving the system that determined what the operation actually required.

Working capital and customer service are not enemies

Executives sometimes view inventory reduction and service improvement as competing objectives.

They don't have to be.

Poorly managed inventory can actually create shortages while consuming enormous amounts of cash.

A warehouse can be full and still not have the parts production needs.

That's why I focus less on total inventory alone and more on inventory quality.

How much is active?

How much is excess?

How much is obsolete?

Where are the shortages?

Where is inventory accumulating faster than consumption?

Which suppliers or planning parameters are driving abnormal positions?

Which materials represent genuine operational risk?

When those questions become part of the management cadence, working-capital improvement becomes an operational discipline rather than a periodic finance exercise.

Put accountability into the operating rhythm

Sustainable improvement requires visibility.

Teams need a common understanding of performance, priorities, and ownership.

Throughout my career, I have used structured operating systems—including KPI management, visual management, Gemba routines, SQDICP, standard work, and root-cause problem solving—to make problems visible and establish accountability.

The specific tools matter less than the discipline behind them.

People should know:

What is the target?

Where are we today?

What is preventing us from reaching the target?

Who owns the countermeasure?

When will we know whether it worked?

Once that cadence becomes part of the operation, inventory stops being something Finance discusses at month-end and becomes something the organization manages every day.

Growth doesn't automatically require more working capital

The result at McNeilus was a $32.9 million inventory reduction while supporting approximately 20% business growth.

That experience reinforced something I have seen repeatedly throughout my career:

Growth does not necessarily require inventory to grow at the same rate.

Sometimes the capital required to support growth is already sitting inside the business.

It is trapped in excess inventory, inefficient processes, poor planning parameters, unnecessary buffers, disconnected systems, or operating practices that developed over time but were never challenged.

Unlocking that capital requires more than a spreadsheet exercise.

It requires understanding how planning, procurement, suppliers, production, warehousing, logistics, inventory, systems, and people interact as one operating system.

What I look for when entering a new operation

When I enter a company struggling with inventory or supply-chain performance, I don't start by assuming I know the solution.

I start by understanding the system.

I want to understand demand, planning cadence, production constraints, supplier performance, inventory segmentation, ERP/MRP parameters, warehouse capacity, material flow, shortages, excess and obsolete inventory, premium freight, and the KPIs leadership actually uses to run the business.

Then I look for the few issues creating disproportionate impact.

That is particularly important in fractional or interim leadership.

A company isn't bringing in an experienced operator to spend six months studying the problem.

It needs someone who can learn quickly, distinguish symptoms from root causes, establish priorities, mobilize the organization, and begin producing measurable results.

The goal is also not to make the organization dependent on the fractional executive.

The best outcome is a stronger operating system, clearer accountability, better-developed leaders, and sustainable processes that remain after the engagement ends.

The takeaway

If your company is growing while inventory and working capital are growing even faster, don't automatically assume that's the price of growth.

Ask a different question:

What is our inventory compensating for?

The answer may reveal opportunities far larger than simply negotiating another percentage point from suppliers.

In our case, improving the operating system helped release $32.9 million in inventory while supporting 20% growth.

That's what effective supply-chain transformation should do.

It shouldn't simply reduce inventory.

It should make the entire business operate better.