In the fast-paced, ever-shifting world of technology, managing inventory effectively can make or break a business. As OEMs (Original Equipment Manufacturers) and EMS (Electronics Manufacturing Services) providers cross the halfway point of 2025, now is the perfect time to evaluate, adjust, and optimize inventory management strategies.
Mid-year optimization prepares businesses for the second half of the fiscal year and helps mitigate risks, reduce carrying costs, improve cash flow, and strengthen relationships across the supply chain. In this article, we’ll explore actionable strategies OEMs and EMS providers can implement right now to optimize inventory management, drive profitability, and enhance supply chain resilience.
1. Conduct a Mid-Year Inventory Audit
A mid-year inventory audit lets you compare your actual stock with what’s recorded in your system.
Key Steps:
- Reconcile Physical Counts with inventory records.
- Identify Slow-Moving and Obsolete Stock to determine liquidation strategies.
- Assess High-Value or Critical Components for availability and sourcing challenges.
- Cross-Check Inventory Classifications (A, B, C inventory items) for necessary re-categorization.
Why it matters: Accurate records enable better forecasting and strategic purchasing, and can uncover areas of waste or inefficiency that may have crept in during the year’s first half.
2. Reevaluate Safety Stock Levels
Safety stock is crucial, but outdated levels can tie up unnecessary capital or expose you to stockouts.
Mid-Year Actions:
- Adjust for Current Lead Times: Global events, supplier performance, and component availability can shift dramatically.
- Analyze Demand Variability: Compare historical forecasts against actuals from Q1 and Q2.
- Factor in New Product Introductions (NPI): Adjust safety stock to support new product ramps without overcommitting.
Pro Tip: Dynamic safety stock models (vs. static) offer more flexibility during periods of uncertainty.
3. Streamline Excess and Surplus Inventory
Surplus inventory drains capital, occupies warehouse space, and adds insurance and handling costs.
Strategies:
- Consignment Programs: Partner with third-party providers to sell excess inventory while retaining ownership until sale.
- Inventory Hubbing: Stage inventory closer to end-users to increase turns and responsiveness.
- Bulk Sales: Offer discounts to buyers willing to take larger volumes.
- Re-market Internally: Evaluate if surplus components can be redeployed across other programs or geographies.
Reminder: Dispositioning surplus proactively creates space for profitable inventory.
4. Tighten Supplier Collaboration
Mid-year is an ideal checkpoint to engage suppliers on inventory strategies.
Steps:
- Hold Supplier Reviews: Discuss supply chain performance, upcoming risks, and opportunities for consolidation or diversification.
- Negotiate More Flexible Terms: Push for VMI (Vendor Managed Inventory) agreements or longer commit windows.
- Collaborate on Demand Forecasts: Share rolling forecasts and get input from key suppliers on feasibility.
Bottom line: Strong supplier communication minimizes surprises and allows for more agile inventory management.
5. Upgrade Inventory Management Technology
Technology adoption is a game-changer for inventory optimization.
Options to Explore:
- Cloud-Based Inventory Management Systems: Real-time tracking and global visibility.
- AI-Driven Forecasting Tools: Predict demand shifts and automate reorder points.
- IoT Sensors: Monitor warehouse conditions for sensitive components.
- Blockchain Integration: For enhanced traceability and authentication.
Investment Tip: Even small improvements in inventory visibility and analytics yield outsized returns over time.
6. Implement Lean Inventory Practices
Lean principles minimize waste and maximize value — and they’re not just for manufacturing floors.
Tactics:
- Reduce Lot Sizes: Order smaller batches more frequently when possible.
- Standardize Components: Use common parts across multiple assemblies.
- Establish Kanban Systems: Trigger replenishment automatically based on actual usage.
Lean Results: Faster turns, lower carrying costs, improved cash flow.
7. Optimize Demand Planning and Forecasting
Accurate forecasts are the foundation of good inventory management.
How to Sharpen Forecasts:
- Incorporate Real-Time Sales Data: Don’t rely solely on historical trends.
- Factor in Macroeconomic Indicators: Consumer sentiment, global economic health, and market-specific news.
- Segment Forecasts by Customer Type: High-volume customers vs low-volume, predictable vs volatile.
Forecasting Tip: Collaborate with sales, operations, finance, and supply chain teams to balance optimism with realism.
8. Focus on Inventory Cost Reduction
Inventory optimization isn’t just about the number of parts but also the cost of carrying them.
Opportunities:
- Negotiate Bulk Purchases for High-Runners: But balance against carrying costs.
- Renegotiate Storage Fees with 3PLs: Particularly if you’ve shifted to a lighter inventory footprint.
- Consolidate Shipments: Reduce inbound and outbound logistics costs.
Impact: Small savings across multiple areas add up significantly over a full fiscal year.
9. Improve Reverse Logistics and Returns Management
Don’t overlook the impact of returned goods on inventory levels.
Action Items:
- Create Clear Return Policies: To minimize unwanted returns.
- Establish Refurbish/Repair Programs: Recoup value from returned goods.
- Track Return Data: Identify systemic quality or fit issues early.
Reminder: Every returned item efficiently processed means recovered dollars and less wasted warehouse space.
10. Align Inventory Strategy with Business Goals
Inventory management doesn’t happen in a vacuum. It must support broader organizational objectives.
Examples:
- Aggressive Growth Plans: Stock more inventory to support faster response times.
- Cost Reduction Mandates: Focus on turns, lean practices, and surplus liquidation.
- Sustainability Goals: Reduce waste and prioritize eco-friendly sourcing and disposal.
Best Practice: Regularly communicate with leadership to ensure supply chain KPIs align with corporate strategy.
Conclusion: Mid-Year Is a Strategic Inflection Point
Mid-year inventory optimization is not simply a “check the box” exercise — it’s a pivotal opportunity to adjust course, eliminate inefficiencies, and strengthen your competitive advantage for the months ahead.
OEMs and EMS providers that approach inventory management proactively — with data-driven insights, agile practices, and strong supplier relationships — are better positioned to handle the inevitable twists and turns of the global supply chain landscape.
At its core, effective inventory management is about balance: balancing risk with opportunity, cost with availability, and flexibility with discipline.
As you look ahead to the second half of 2025, the steps you take now will lay the groundwork for greater resilience, profitability, and success.
Remember: Inventory isn’t just a cost to control — it’s an asset to optimize.
Need help optimizing your supply chain strategy? Reach out to our team of supply chain experts today to discuss customized solutions designed to help you thrive in every market condition.
