Presentation Tips for Inventory Managers: Stock and Cash
By Daniel Harper · Career & Business
How should an inventory manager present stock levels to the business? Present stock as money and as service at once: what it ties up in cash, and what it delivers in availability. Split the problem items into too much and too little, with the cause of each. When orders swing more than sales, show both lines on one chart, because the gap between them is usually where the fix is.
Inventory managers have an awkward presentation problem: they are often asked, in the same meeting, why there is too much stock and why something important is out of stock. Finance wants less cash tied up in inventory; sales wants every item available; operations wants fewer emergency orders. Presenting inventory well means showing all three sides at once, so the business can make trade-offs knowingly instead of blaming each other.
Present stock as cash and as service
Two numbers belong side by side on every inventory review:
- What stock ties up in cash, in total and against target, and how many days or weeks of sales it represents.
- What it delivers in service: availability or fill rate against target.
Showing only one invites a one-sided decision. Cutting stock to free cash will look good until availability falls; buying more to fix availability will look good until finance sees the balance sheet. Together, the two numbers make the trade-off visible.
Split the problem: too much and too little
Rather than one total, split the problem items into two lists:
- Too much: slow-moving and obsolete stock, with its value, how long it has sat and what you propose to do (sell, return, write off).
- Too little: items below their safety level or out of stock, with the sales at risk and when supply will recover.
Most businesses have both at once, and the causes are different. A single total hides both problems.
Why orders swing more than sales
One of the most useful things an inventory manager can show other departments is that the orders they see often vary much more than the sales behind them.
Lee, Padmanabhan and Whang described this as the bullwhip effect: in a supply chain, orders passed upstream tend to vary more than the underlying sales, and the distortion grows the further upstream you go. They traced it to four sources: demand signal processing, rationing during shortages, order batching and price promotions.1
Inside a single company, you can often see a small version of it. Put weekly sales and weekly orders on the same chart. If orders swing much more widely, the cause is usually in how ordering works (batch sizes, reactions to promotions, panic orders during a shortage) rather than in customer demand. That chart is often the most persuasive slide in an inventory review, because it moves the conversation from "we need more stock" to "we need steadier ordering".
Presenting a write-off
Writing off obsolete stock is a presentation nobody enjoys. Lead with the value, the cause (a discontinued product, an over-forecast, a supplier minimum order), and what you are changing so it does not happen again. Finance accepts a write-off far more easily when it comes with a fix.
Cycle counts and accuracy
Stock accuracy underlies every other number. Present it simply: the share of locations or items where the system matched the physical count, the trend, and the main causes of errors. If accuracy is low, say so before anyone draws conclusions from the stock figures.
The questions you will be asked
Expect three. "Why can't we just hold more of everything?" Answer with the cash it would tie up and the space it would need. "Why did we run out of the item everyone wanted?" Answer with the forecast, the lead time and what you are changing. "Can we cut stock without hurting availability?" Answer with the slow movers, which is usually where the honest answer is yes.
Talking to sales
Sales teams want availability and are often frustrated by inventory decisions. Show them which items you are prioritising and why, how forecasts drive stock, and what they can do to help, such as giving earlier warning of large orders and promotions. A sales team that understands how its forecasts feed the stock levels starts sending better forecasts.
For the supply-chain version of these conversations in an interview, see behavioral interview questions for logistics managers, and for presenting numbers as trends rather than snapshots, presentation tips for operations managers.
References
- Lee, H. L., Padmanabhan, V., & Whang, S. (1997). Information distortion in a supply chain: the bullwhip effect. Management Science, 43(4), 546–558. https://doi.org/10.1287/mnsc.43.4.546