Find the Right Inventory Balance

Find the right inventory balance

December 1, 2025
By John Gunderson

The wonderful thing about nostalgia is that it makes you forget about the not-so-nice things in the past. As I was writing this column, I was thinking of all those times we did weekend cycle counts in our warehouse, with a clipboard counting our actual vs. our system shown inventory. I was thinking, “Man, I kind of miss those days, but… the reality is I sure don’t miss the ‘Why do we show we have 6 in this bin, but we actually only have 2?’”

Those inventory mysteries were not fun then and are not fun now. As a distributor, the teams I was part of excelled at managing inventories back in the pre-digital days compared to our industrial and manufacturing partners.

As my first mentor in the business, Dick Schmid, liked to remind me about our role as distributors in the channel. “Manufacturers are great at making products; we need to be great at getting what they make to the end customers. Our pick, pack, and delivery services must be the best, otherwise, why do manufacturers need distributors?”

Syncing up your inventory for your business ... is crucial and needs to be "JUST RIGHT"

Inventory management on the plant floor is a difficult task. I like to think about inventory management in simple terms: I have recently been reading to my granddaughter the fairy tale of Goldilocks and the Three Bears. It is a fun analogy to use when thinking about your inventory.

You want your inventory levels to be “Just right.” If you have too much inventory on hand, the plant manager and CFO are going to be down to visit and looking to understand why your inventory level is “too hot.” If you are below your min levels and creating issues, your inventory levels are “too cold,” and you are causing another host of issues.

"Too hot" means less working capital and space issues from having too much inventory.

"Too cold" means higher risk, expediting fees for parts, and worst of all, a work stoppage.

How can you build an inventory mix that is "JUST RIGHT"

That is the big question: How do you get your inventory levels to match your consumption to have the right amounts in the right locations on time?

You have hundreds or thousands of parts to manage. You must account for lead times, how much is being used, production forecasts, indirect or direct, contingency planning, etc.

You also must manage the transactional supply chain side (procure-to-pay) and be on top of what inventory is in the bins and on your shelves.

Technology has changed everything since the cycle-counts on clipboard days. Now, industrial vending devices deliver real-time usage and inventory levels, and you can collect data from so many areas.

Do you have a CNC machine that consumes tools too quickly?
Is one part not performing like it should, and needs to be upgraded?
Are you using a certain type of safety PPE part more than expected?

How do you use data to set your bin and cage stock level, set and target your minmax SKU levels, and build the best “just right inventory mix” inside your walls? The list is endless.

To get "JUST RIGHT" levels you need to work with proven distribution partners

You have three sets of inventories to manage: 1) inside your walls, 2) next day, and 3) emergency. Depending on your unique business, the amount of inventory you need to manage/have access to in each of those three areas varies, but the risk for not managing/having access to great inventory in the next day and emergency buckets is high.

Distributors who can help you manage your inside-the-wall inventory with excellent vending, vendor managed inventory (VMI), and also on-site badged personnel are crucial to helping you get “just right” at the plant level.

The next day “back up” inventory is crucial and is often overlooked, and that is where the size and scale of your distributor partner is a huge advantage. Fastenal, for example, has a distribution system and inventory breadth and depth to deliver that next-day inventory you need, actually, the next day.

The third part of inventory management, which is often overlooked, is the unknown and unforeseen emergency inventory. This may be that one odd part on a machine that breaks for the first time, that odd SKU you didn’t know you even needed to have on hand, or a part that is so new it hasn’t been added to your replenishment system yet.

The emergency inventory is where the size-and-scale distributors like Fastenal, with a national distribution network, their own trucks, and regional distribution centers are crucial. They have access to their huge inventory in stock and the knowledgeable people backed with top technology to get those emergency inventory needs solved.

I like to say that a distributor partner delivers peace of mind for those emergency inventory needs that you did not know you even had until an emergency happens.

An engineer would call that contingency planning inventory, or as a manufacturing person at the production level might call it – panic inventory support.

How are you managing your inventory?

The goal is to increase your final good production and efficiency rates. That output is your revenue. Your entire business and team of experts are focused on output.

Distributors exist because they are experts at managing and delivering inventory to where you need it.

Choosing the right primary distributor partners to help you manage your in-plant inventory is step one.

Making sure that your inventory partners have the right systems, size, and scale to be your next-day and emergency inventory partner is just as crucial. The distributors with size and scale also have to have great technology, vending, VMI, and people to support you. So, choose wisely.

Finding that partner to help you write your own Goldilocks and the Three Bears “Just right” inventory story was key 25 years ago, and it is even more crucial today.