For an industrial or trading SME, inventory represents one of the most considerable assets on the balance sheet, and one of the least understood. How many executives can say precisely what their inventory costs per year, including capital tied up, depreciation, space occupied, handling, obsolescence and various risks? Very few. This opacity leads to suboptimal decisions, excessive capital tie-up, and a silent erosion of profitability. Mastering inventory is one of the most profitable projects a management team can undertake, and it starts with a detailed understanding of what each item in the warehouses really costs.
The hidden cost of inventory
The cost of inventory goes well beyond the value of the goods themselves. Industry studies show that the total annual cost of holding inventory is generally between fifteen and thirty percent of its value, depending on the sector and operating conditions.
This total cost breaks down into several elements. Capital tied up, which is the opportunity cost of the capital invested in inventory rather than elsewhere. Storage space, in rented or depreciated square meters. Handling and physical management of the stock by the teams. Insurance and various losses (theft, breakage, expiry). Depreciation of products that stay in stock a long time (outdated fashion, obsolete technology, commercial expiry). The indirect cost linked to management complexity (the more items you have, the more errors, duplicates and disruptions).
When these costs are consolidated, the economic picture of inventory becomes very different from its mere accounting valuation. An inventory of five hundred thousand euros that turns only twice a year really costs between seventy-five thousand and one hundred fifty thousand euros annually, up to thirty percent of its value. This information, rarely brought to executives’ attention, should be a regular topic for management committees.
Real-time accuracy as a modern requirement
Another dimension too often neglected is inventory accuracy. In many companies, the gap between the theoretical stock recorded in the system and the physical stock found in a count exceeds five percent, sometimes ten or fifteen. This gap, which may seem marginal, has considerable consequences.
A sale is promised to a customer based on theoretical available stock. At picking time, it turns out the goods are not there. The customer is told of a delay, sometimes several extra weeks to restock. The commercial promise is broken. The customer relationship suffers.
In Odoo, real-time stock accuracy is obtained through the traceability of every movement. Each receipt, each shipment, each internal transfer updates the stock instantly. Combined with regular cycle counts (monthly on the most critical items, quarterly on the others), this accuracy keeps the gap between theoretical and physical stock below one percent.
Traceability as a sector requirement
For regulated sectors or those exposed to traceability obligations (food, pharmaceuticals, chemicals, defense, aerospace), stock traceability is not just good practice. It is a legal or contractual obligation.
This traceability works in both directions. Downstream traceability: starting from a raw material, knowing which finished products it was incorporated into, and to which customers those products were delivered. Crucial in the event of a recall or investigation. Upstream traceability: starting from a finished product delivered to a customer, knowing where the raw materials used came from, through which process, on what date. Crucial in the event of an investigation into a malfunction.
Odoo natively manages this traceability by lots and serial numbers. For the items concerned, each movement records the lot or serial number, which makes it possible to reconstruct the complete chain in seconds. For industrial SMEs subject to customer or regulatory audits, this capability is now an unavoidable standard.
Multi-location and multi-warehouse
An underused dimension of modern inventory management is fine-grained location management. A warehouse is not a single box. It is a spatial organization with zones, aisles, shelves, precise locations. Knowing not only how many of a given item you have but also where exactly it is stored transforms operational productivity.
In Odoo, each physical location can be declared:
- zone, aisle, level.
- When preparing a shipment, the system tells the picker the optimal route between the locations to visit.
- Picking time falls by thirty to fifty percent compared with an unstructured warehouse.
This spatial structuring comes into its own in multi-warehouse setups. For companies with several sites (central warehouse, regional depots, consignment stock at customers, technicians’ stock on call-outs), consolidating and coordinating all these locations becomes a strategic topic. Odoo handles this complexity with configurable routing rules: where to pick the goods to deliver a given customer, how to balance stock between sites, how to manage internal transfers.
Optimizing working capital
For finance departments, controlling inventory is one of the most direct levers for optimizing cash flow. Every euro tied up in inventory is a euro not available for investment, distributions or growth.
Reducing inventory without degrading the service provided requires detailed analysis. Which items are dormant and could be cleared through promotional operations. Which items have buffer stocks oversized relative to their real criticality. Which items can move to purchasing to order rather than permanent storage.
These analyses, fed by Odoo data, can release working capital of ten to thirty percent on the inventory of a standard SME. For a company whose inventory represents several million euros, this release is a major operation that can fund other strategic initiatives.
Turnover as a health indicator
A valuable summary indicator is inventory turnover:
- how many times the total stock is renewed during the year.
- A turnover of twelve means the stock turns over every month.
- A turnover of four means it turns over every three months.
- A turnover of two means six months.
Target values vary by sector. Food distribution:
- typical turnover of twenty to fifty.
- General distribution: six to twelve.
- Manufacturing: three to eight.
- Specialized distribution: four to ten.
- These orders of magnitude let you position yourself and identify room for improvement.
A low turnover is not bad in itself. It may reflect a service strategy (a wide range available immediately). But it must be owned and quantified. If it is not, it is endured rather than chosen.
A management discipline to build over time
Fine-grained inventory management is not a one-off project. It is a management discipline to build over time. Indicators tracked monthly, semi-annual policy reviews, continuous adjustment of parameters. For French SMEs and mid-sized companies that want to professionalize their supply chain, it is a project to place at the top of the executive agenda.
ANOR supports this structuring by combining an economic audit of inventory, Odoo configuration, and change management.