Supply Chain · CCC Series Part 2

Streamline Your Production & Inventory Cycle

Dead stock is not an inventory problem. It is a cash problem. Every pallet of unsold product sitting in your warehouse represents capital that was paid to your supplier, converted into product, and then frozen — unable to become revenue, unable to pay your next supplier invoice, unable to fund your next campaign. The inventory cycle sits at the center of your cash conversion cycle, and most Belgian SMB brands manage it on instinct rather than data.

Days Inventory Outstanding (DIO) measures how many days, on average, your inventory sits before it is sold. Compress DIO and you release cash from the warehouse back into operations. The techniques are not complicated. But they require discipline and a willingness to make uncomfortable decisions about your SKU portfolio.

If your COGS is €600K/year and your average inventory value is €120K, your DIO is 73 days — above the warning threshold. Getting it to 50 days means holding €82K of inventory instead of €120K. You just freed €38K of working capital without touching your revenue line.

1. ABC/XYZ Classification: Three Hours, Real Clarity

Before you can make intelligent inventory decisions, you need to understand which SKUs are driving your business and which are consuming your warehouse capacity and cash. ABC/XYZ classification gives you a two-dimensional view in a single spreadsheet session.

The ABC Dimension: Revenue Contribution

• A items: Top 20% of SKUs by revenue. Typically represent 70–80% of total sales. Never stock out. Safety stock is non-negotiable.
• B items: Next 30% of SKUs. Moderate revenue, moderate priority. Managed with standard reorder points.
• C items: Bottom 50% of SKUs. Often represent less than 10% of revenue. These are your cash traps.

The XYZ Dimension: Demand Variability

• X items: Consistent, predictable demand. Easy to forecast. Order regularly in tight quantities.
• Y items: Seasonal or trend-driven demand. Requires planning by period.
• Z items: Erratic, unpredictable demand. High risk. Order only against confirmed purchase orders.

To build this in a spreadsheet: export 12 months of sales by SKU, calculate revenue contribution as a percentage of total, rank and assign ABC tiers. Then calculate the coefficient of variation (standard deviation ÷ mean) of monthly sales per SKU. CV below 0.5 is X, 0.5–1.0 is Y, above 1.0 is Z. The entire analysis takes three hours if your data is clean. If your data is not clean, that is also useful information.

2. What Healthy DIO Looks Like in Belgian FMCG

DIO benchmarks vary significantly by category. Perishables (fresh food, refrigerated) run 5–15 days. Dry grocery and household products: 30–45 days. Cosmetics and personal care (Vilna Gaon's primary categories through OPALYA and distribution partners): 45–65 days is typical for brands with 20–50 active SKUs. Specialty tea and premium food (Teatower category): 55–75 days due to longer production runs and seasonal demand.

The key is not hitting a specific number — it is understanding your number relative to your category, your supplier lead times, and your retailer replenishment windows. A brand supplying Delhaize on weekly orders needs less safety stock than one supplying regional distributors on monthly cycles.

3. Demand Forecasting Accuracy: Bias vs. Error

Most SMB brands in Belgium do not formally track forecast accuracy. They order when they "feel" stock is getting low, or they run production once a quarter at the same volume as last quarter. Both approaches are inventory management by hope.

Two metrics matter:

Mean Absolute Percentage Error (MAPE)

How far off are your forecasts, on average? MAPE above 30% means your forecast is structurally unreliable and your safety stock is compensating for poor planning with extra working capital.

Forecast Bias

Are you systematically over-forecasting (leading to overstock) or under-forecasting (leading to stockouts and lost sales)? A brand with consistent positive bias — always ordering more than it sells — is creating DIO inflation that compounds over time. Track actual vs. forecast by SKU for three months and the pattern becomes unmistakable.

The fix is not sophisticated software. It is structured review: compare your order quantity to actual sales every four weeks, by SKU, and adjust the next order accordingly. Most brands that implement this simple discipline cut their forecast error by half within six months.

4. MOQ Negotiation as a Cash Lever

Minimum order quantities (MOQs) set by suppliers are often the hidden driver of overstock in small brands. Your supplier requires 1,000 units per SKU per production run. You sell 200 units per month. You are forced to carry five months of inventory — in a single order. That is a DIO of 150 days on that SKU, regardless of how well you manage everything else.

MOQ negotiation is a cash conversation, not a purchasing conversation. The arguments that work with Belgian and European suppliers:

• Volume commitment in exchange for lower MOQ. Offer a 12-month rolling purchase commitment at a fixed volume in exchange for reducing the per-order MOQ by 40–50%. Suppliers prefer certainty over large infrequent orders.
• Shared production run with another brand. If your supplier works with multiple small brands in your category, propose a coordinated production run. They hit their efficiency threshold; you get a smaller minimum.
• Packaging flexibility. Often MOQs are driven by packaging print runs, not manufacturing capacity. Switching to a generic outer carton with a label insert can cut MOQs dramatically.

5. Dead Stock Action Plan

Every brand has dead stock. The question is how fast you convert it back into cash. Letting it sit is not a neutral decision — it is actively costing you warehouse space, capital, and insurance premiums.

The action plan, in priority order:

1. Bundle with fast movers

Create a promotional bundle pairing the dead SKU with an AX item. The margin loss on the dead SKU is irrelevant — you are recovering cash and warehouse space. This works well with retail buyers who are always looking for promotional mechanics.

2. Flash sales and outlet channels

Platforms like eFarmz, Kazidomi, and Newpharma in Belgium regularly run flash promotions. They will accept short-dated or excess stock at 30–50% below your standard trade price. You recover 50–70 cents on the euro instead of zero.

3. Controlled liquidation to secondary market

Liquidators buy excess FMCG stock in bulk, typically at 20–40% of cost. It is painful, but it is better than a write-off. More importantly, it clears your balance sheet and improves your DIO ratio immediately.

4. Donation (tax-efficient write-off)

Belgian tax law allows a favorable treatment for donations of goods to certified food banks and social enterprises. The donation is deductible, the VAT is recoverable, and you clear the stock without the reputational risk of visible liquidation. Consult your accountant for the current conditions under the Belgian CIR.

Next Step

When Vilna Gaon evaluates a brand acquisition, DIO is one of the first numbers we calculate — and the ABC/XYZ map is one of the first analyses we run. A brand with a bloated DIO is not necessarily a bad acquisition; it is often an opportunity. Excess inventory means hidden value that operational discipline can unlock quickly.

If you run a Belgian consumer brand and want an honest read on your inventory position, start a conversation with us. We have seen enough P&L statements to know what is fixable and what is structural.