Inventory and working capital
FMCG Inventory Profitability and Working Capital
Inventory can report a positive gross margin and still trap cash, create expiry exposure or require discounting before it sells. Profit impact and cash release are related, but they are not the same measure.
Connect stock to commercial performance
An inventory snapshot shows what exists today. Movements, purchases, sales and batch or expiry data explain how it arrived there and how quickly it can convert to cash. Connecting the stock view to SKU and customer profitability prevents isolated inventory decisions.
The practical measures
Measures should reflect the available evidence and the product category. Shelf life, seasonality, minimum order quantities and supplier lead times affect what counts as excess.
- Stock value and ageing buckets
- Days or months of stock cover
- Sales velocity and demand variability
- Batch and expiry exposure
- Slow and non-moving inventory
- Gross profit attached to stock
- Potential cash release kept separate from profit
Turn exposure into decisions
Possible actions include targeted sell-through, purchase reduction, inter-branch transfer, supplier claim, range review or controlled discounting. Each action should include the expected cash effect, possible margin cost, operational constraint and owner.
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