Inventory in logistics

Inventory in the modern supply chain

In the dynamic world of intralogistics, inventory is much more than just a lot of physical goods in a hall. It is the central buffer of every supply chain, ensuring that production does not come to a standstill and that customers are supplied on time. At the same time, it is a massive cost driver. The art of warehouse logistics is to find the perfect balance between supply security and capital commitment.

What is inventory? (Definition)

Inventory includes all physical goods – from raw materials to work-in-progress to finished end products – that are in a logistics property at any given time. It serves as a strategic balance between procurement, production, and sales.

After the experiences of recent years (such as pandemics and supply chain disruptions), a massive paradigm shift has taken place: Many companies have moved from a pure "just-in-time" strategy back to "just-in-case" and are building up strategic buffer stocks (reserve stocks) to maximize their crisis resilience.

Key figures: How inventory is managed

Uncontrolled inventory is dead capital. In order to manage it efficiently, logistics companies rely on specific key performance indicators (KPIs):

• Inventory Range: This indicates how long the current inventory will last to meet the expected demand without the need for new goods. The most common formula is:

Inventory Yield = Current Inventory / Average Consumption per Period.

• A practical calculation example: A contract logistics company has 5,000 pallets of consumer goods in its warehouse and ships an average of 125 pallets every day. The calculation is: 5,000 / 125 = 40 days range.
• Storage interest rate and capital commitment: Every item that is in a hall ties up capital. The storage interest rate quantifies the opportunity cost of this tied-up capital during the average storage period.

The logistics property: space for the existing building

The architecture of the logistics property largely dictates how efficiently and cost-effectively a warehouse can be managed. An optimal degree of space utilization in an excellently planned hall is around 60 to 65%, while the rest is reserved for driveways, fire protection and technology.

The following structural parameters are essential for a secure and scalable inventory:

• Clear height: The standard for modern logistics halls is 10 to 12 metres lower edge truss (UKB) in order to be able to store stocks vertically in high racks.
• Floor load capacity: For heavy racking systems and forklift trucks, an industrial floor with a load capacity of at least 50 kN/m² (approx. 5 tonnes per square metre) is mandatory.

Contract logistics: clever outsourcing of inventory management

Not every company wants to bear the risk and the high rental costs for their own commercial properties. In top locations, rents for new buildings are now scratching the mark of €7.50 to over €10.00 per square metre per month.

By outsourcing to a contract logistics provider (3PL) as part of a multi-user warehouse, companies can vary their fixed costs. Billing is often based on the "pay-per-pallet" model, so that only the actual stock is paid. A particularly clever solution is the consignment warehouse: Here, the goods are physically stored at the customer or service provider, but remain legally the property of the supplier, which effectively reduces the company's own capital commitment to 0%.

Strategies for inventory optimization in the hall

In order to compensate for the high rents and transaction costs, the inventory within the hall must be intelligently arranged. In classic warehouses, up to 50 to 60% of the working time is spent on pure walking and driving distances for the staff.

Strict zone planning according to the ABC analysis is the biggest lever here: A-items (fast-movers) have a very short storage period and are stored close to the picking zones or the outgoing goods area. C-items (slow-moving items), on the other hand, move to the rear areas of the reserve warehouse so as not to block expensive picking places unnecessarily.

FAQ: Frequently asked questions about inventory

Question: How can the error rate in inventory management be reduced?

Answer: By using modern warehouse management systems (WMS) and mobile spare parts management. Scanning barcodes directly on the shelf (scanning verification) typically reduces the error rate during picking to less than 0.1%.

Question: Is there an ideal benchmark for inventory?

Answer: No, the value is extremely industry-dependent. While in automotive logistics (just-in-sequence) stocks are often kept for a few hours, seasonal dealers or spare parts warehouses expect ranges of several weeks or months.

Question: What is more dangerous: too high or too low inventory?

Answer: Both carry immense risks. Too little stock threatens to lead to "out-of-stock" at the slightest supply disruption – production lines come to a standstill, customers migrate. Too much inventory causes massive capital commitment costs (OPEX) and blocks urgently needed storage space for fast-moving goods.

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