Your Warehouse Is Full. Your Bank Account Isn't. That's the Problem.

25-40% of working capital in a typical Indian SME is tied up in inventory at any given time

3x businesses with disciplined inventory management generate three times more cash from the same revenue

1 number — your reorder level — is the difference between a warehouse that works for you and one that quietly drains you

Harish Panjwani took over his father's business in 2012. Women's ethnic wear — unstitched fabric and ready-made garments. Turnover at the time: 3.2 crore. Last year: 80 crore. Target this year: 104 crore.

That journey is not about better products or more salespeople. It is about systems. And one of the most critical systems in any business that deals in physical goods is inventory.

Because inventory is not a storage problem. It is a cash problem. Every rupee sitting in your warehouse is a rupee you have already spent — that is not yet working. The longer it sits, the more it costs you.

What Inventory Is Actually Doing to Your Cash

Most SME founders think of inventory as necessary. You need stock to sell. So you buy it, store it, use it. Simple.

It is not simple.

Every rupee of inventory sitting in your warehouse is a rupee you cannot use anywhere else. It is not paying salaries. It is not funding the next order. It is not earning interest. It is sitting — and while it sits, it is costing you. Storage. Insurance. Deterioration. Obsolescence. The capital you borrowed or could have deployed elsewhere.

One business owner in our CBL group — a business coaching programme for SME founders — discovered that an entire category of fabric had not moved in eight months. Not a single unit. By the time someone noticed, the markdown needed to clear it had wiped out the margin on six months of sales in that category.

The problem was not the original purchase. The problem was that nobody was watching.

Three Problems. Same Root Cause.

Too much of the wrong thing. Fast-moving items run out. Slow-moving items pile up. This happens because purchasing is driven by instinct, not data. The sales team orders what they think they need. The purchase team buys what they can get. Nobody is tracking what actually moves.

No reorder system. Reordering happens two ways — either someone notices the shelf is empty and panics, or someone orders every Monday out of habit. The first creates stockouts — lost sales, delayed deliveries, unhappy clients. The second creates overstock — dead capital and cluttered space.

No visibility. The owner does not know, at any given moment, how much stock they have, where it is, how old it is, or how long it will last at the current rate of sale. Without visibility, every inventory decision is a guess.

Three Numbers That Fix This

A functioning inventory system does not need expensive software. It needs three numbers for every item in your business.

1. Reorder Level

The quantity at which you place a new order. Not when you have run out — when, given your supplier's lead time, you will run out if you don't order now.

Supplier takes 10 days to deliver. You sell 50 units a day. Reorder level: 500 units.

When stock hits 500, the order goes automatically. Not when someone remembers. Not when the shelf is empty.

2. Reorder Quantity

How much you order each time. Not "as much as possible" or "whatever the MOQ is."

Calculated from your monthly consumption, your storage capacity, and your cash position. Order too much — capital gets locked. Order too little — constantly reordering, paying freight, risking stockouts.

3. Maximum Stock Level

The ceiling. Beyond this, you are over-purchasing and tying up cash.

When your warehouse hits this level, the order stops — regardless of what the supplier is offering.

Three numbers, tracked for every significant item. The system tells you when to buy, what to buy, and how much.

Without it, you are buying on instinct. And instinct, in inventory, is expensive.

Dead Stock: The Conversation Nobody Wants to Have

Every warehouse has it. Stock that has not moved in 90 days. Sometimes 180. Sometimes longer.

Most founders avoid looking at it because looking means admitting a mistake. The fabric bought because it looked like it would sell. The components ordered in bulk for a customer who cancelled. The finished goods that went out of season.

Dead stock does not become less dead by being ignored. It becomes more expensive. And at some point the markdown needed to clear it wipes out months of margin.

Every quarter, run an aging report on your inventory — the same logic as AR aging.

• What has not moved in 30 days?

• 60 days?

• 90 days?

• Over 90 days?
  

For anything over 90 days, make a decision. Discount it. Return it to the supplier. Bundle it with something that moves. Write it off. Do something.

Because doing nothing is always the most expensive choice.

Harish's business at 80 crore runs on this discipline. Dead stock happens — it does in every garment business. But it is caught fast, acted on fast, and cleared before it compounds.

Plan the Purchase. Don't React to the Sale.

The most important shift in inventory management: your sales plan should drive your purchase plan. Not the other way around.

Most SMEs do it backwards.

Sale comes in. Order goes to purchase. Purchase scrambles. Every month is a firefight.

When you have a sales target for the month — even a rough one, an assumption — you can build a purchase plan from it.

• What do you need?

• In what quantities?

• By when?

• From which supplier?

The gaps become visible before they become crises.

An assumption-based purchase plan is not perfect. But it is far more useful than no plan at all.

When you plan, you can see the gaps. When you don't, you find out in the worst possible moment.

The Bottom Line

The businesses that scale — from 3 crore to 80 crore, from 80 to 104 — are not the ones with the biggest warehouses.

They are the ones who know exactly what is in their warehouses, why it is there, how long it will last, and what to do when it stops moving.

Inventory is cash in a different form. Manage it like cash — with the same discipline, the same visibility, the same willingness to make a hard decision when something isn't working.

Three numbers. An aging report. A purchase plan that follows the sales plan.

That is the system. Start with one item. Build from there.

Ready to get your warehouse working for your business instead of against it? Connect with us at Unnati Unlimited or reach out to explore how CBL — our business coaching programme for SME founders — can help you build the systems your business needs to scale.