Best practices to uncover inventory inefficiencies: How to optimize stock levels, as part of your end-to-end operations, to free up working capital and streamline operations

In an industry defined by unpredictable schedules, stringent compliance regulations, complex multi-component inventories, and constant change, it's clear that optimizing inventory levels isn't just helpful—it’s critical to the success of any aviation company.

‍

Unfortunately, since 2018⁽¹⁾, we are seeing some alarming trends in the market that are costing aerospace companies millions of dollars, such as: 

• 29% inventory increase (some manufacturers saw 20% increase in 2024 vs. 2023)
• 15% increase in extended cash conversion cycles (the time it takes to generate cash from inventory investments)
• 5% increase of cost of holding inventory

To address these issues, aerospace companies invest in much-needed Inventory Management Systems. And although these platforms are fundamental in order to efficiently monitor and manage inventory levels, most of them lack a holistic view of the end-to-end supply chain flow. Because of this fragmented reality, where tools and data are disconnected from one another, teams face blind spots and are unable to easily identify and take proactive measures to optimize inventory levels when faced with inefficiencies. For example, this lack of visibility does not allow aerospace companies to quickly identify production shifts and readjust procurement plans accordingly, which results in parts arriving too early.  

‍

Why do healthy inventory levels matter?

Effectively monitoring and managing inventory levels is essential for aerospace manufacturers to strike the right balance—avoiding both overstocking and shortages. Excess inventory can drive up carrying costs, increase the risk of obsolescence, and tie up working capital that could be invested elsewhere in the business. On the other hand, insufficient stock may lead to part shortages, blocked production, WIP increase, delivery delays and penalties, and ultimately, a decline in customer satisfaction and revenue.

Beyond these immediate challenges, poor inventory management can also strain cash flow, reduce profitability, and undermine long-term financial stability.

‍

Turbulence Ahead: 5 common inventory inefficiencies that ground aviation performance

Many aviation companies unknowingly sabotage their own performance through a handful of common but costly inventory inefficiencies, which can quietly ground even the most well-run operations. Tackling these issues head-on is key to keeping operations efficient and agile, and maintaining a reliable supply chain.

1. Overstocking: Many times, driven by the fear of shortages, improper inventory management, lack of accurate demand forecasting, or supply chain uncertainties such as unreliable supplier lead times, aerospace manufacturers overstock inventory. However, ordering excessive aviation parts can create storage constraints, drive up holding costs, and increase the risk of items becoming obsolete. 
2. Stockouts: Supply chains are very complex, and aviation companies usually work with hundreds, and sometimes thousands, of suppliers, so if some deliveries are late, these have a cascading impact on the entire value chain. When faced with parts shortages, operations are interrupted, customer satisfaction takes a hit, and revenue is negatively impacted. 
3. Ignoring deadstock. Deadstock refers to items that do not sell or become obsolete. The lack of data synchronization across the supply chain can result in reordering parts that are no longer needed.
4. Manual processes. Due to the lack of interconnected tools and data that provide day-to-day insights, many aerospace companies use manually-generated reports and dashboards to review inventory on a monthly or quarterly basis. Relying solely on manual monitoring and reporting processes increases the chances of errors. 
5. Ignoring supplier relationships. Poor communication with suppliers affects timely and efficient replenishment.

‍

Flying Lean: how aviation companies can optimize inventory for growth

The good news? Here are some best practices that can help aviation companies promote healthy inventory levels in the context of them carrying out daily or weekly operational tasks. Putting these in place will help aerospace manufacturers more easily align inventory with actual demand, detect issues before they disrupt production, reduce costs, and unlock valuable working capital.

• Optimize inventory levels to meet financial targets: Gain financial control by dynamically identifying excess inventory, understanding root causes, and executing targeted supplier actions to release working capital and meet budgetary objectives.
• Align your Procurement Plan with your Production Plan to reduce inventory levels: Drive efficiency by synchronizing procurement and production plans, enabling informed & prioritized PO adjustments that reduce excess stock and improve cash flow without disrupting operations.
• Reduce WIP by continuously assessing plan feasibility: Continuously monitor and resolve production slowdowns by identifying material shortages early and optimizing work order scheduling—reducing WIP, improving efficiency, and unlocking tied-up working capital.
• Accelerate customer deliveries to secure revenue & unlock cash: Unlock revenue faster by identifying and executing full or partial deliveries, converting inventory into cash while maintaining high service levels and customer satisfaction.
• Ensure alignment on inventory actions across teams: Ensure strategic execution by fostering alignment across teams with real-time inventory insights, coordinated action plans, and clear visibility into the financial impact of every decision

‍

‍

An inventory solution aligned with the entire aerospace supply chain

‍

After months of detail-oriented hard work, we’re excited to introduce a new solution within Pelico’s supply chain orchestration platform — designed specifically to help aviation companies monitor, manage, and optimize their inventory levels. This solution enables factory teams to tackle all of the above best practices, and creates a shift from viewing inventory as a static figure to treating it as a dynamic, strategic lever for driving both operational efficiency and financial growth.

‍

To help aerospace manufacturers take control of their inventory and turn it into a strategic advantage, Pelico’s solution is built on 3 core pillars:

‍

1. Uncovering inventory inefficiencies – Connect every part, order, and process across the value chain

Because every change in supply or demand has a ripple-effect on your entire supply chain, the only way to accurately surface inefficiencies and efficiently manage inventory levels is by connecting all parts, orders, and processes across the value chain. With this end-to-end interconnectivity, Pelico helps aviation companies clearly identify areas of improvement — from preventing shortages and excess stock to reducing obsolescence — ultimately unlocking valuable working capital.

‍

2. From noise to clarity – Align all teams on impact-driven actions to optimize inventory levels

Over 90% of ERP exception messages are irrelevant (see attached case study)—either they don’t move the needle or aren’t actionable—leaving buyers overwhelmed and unsure where to start. As a result, most alerts are ignored. Pelico cuts through this noise, surfacing the critical 5% that drive 80% of your inventory outcomes. With AI-powered recommendations—push-out, split, or cancel—teams can easily collaborate, simulate scenarios, and act with confidence. The result: optimized inventory, freed-up working capital, and stronger customer delivery.

‍

3. Move beyond static & disconnected reports – Expose hidden costs to align with financial goals

Pelico provides a real-time control tower that provides strategic insights to bridge the gap between strategy and day-to-day execution. It enables top management to ensure teams are working on the right priorities—avoiding pull-ins driven by unrealistic plans, or wrongfully delaying critical parts. By seeing the true cost of material inefficiencies—not just in dollars, but in lost revenue and trapped inventory—Pelico empowers you to prioritize the actions that drive real impact.

‍

If optimizing your inventory could unlock hidden capital, boost efficiency, and future-proof your manufacturing operations, are you ready to take the next step toward transforming your supply chain? Learn how Pelico can get you there.

‍

(1) Source: AlixPartners