February 10, 2026 • 5 minute read
Author: Phyllis Jackson, Senior Manager, US Marketing, UPS

Key Points

• Inventory optimization ensures you have the right products available to reach your customers when they want or need them.
• Inventory assessments can identify nonperforming products, help to refine footprint and time in transit, and reduce overall costs.
• A phased approach to optimization allows your business to test and learn.
• Emerging technology, such as robotics and artificial intelligence, will be integral when planning for inventory and supply chain optimization.

How did a U.S.-based chemical product manufacturer with 10 distribution centers (DCs) reduce inventory by 11.7%, save $1.32 million and improve inventory turns by 21.6% — while maintaining a customer fill rate above 97%?

It began with an inventory analysis that helped the business see how it could improve coverage — and also better control inventory management and transportation costs.

Smart inventory management ensures your business has the right number of products available to reach your customers when they want or need them. A logistics partner that understands intelligent inventory systems can be a champion for your business — and your customer service capabilities.

See Your Business Clearly With an Inventory Analysis

When UPS conducted an inventory analysis for the chemical product manufacturer, we focused on SKU performance (to determine demand, proximity, profitability and more). The findings revealed the business could gain significant savings opportunities by sunsetting non-performing products. The inventory data also helped identify which DC locations to keep (and which ones to close) to best support the growth. As a final step, the business worked with our team to develop optimal inventory policies — including safety stock levels, reorder quantities and total average inventory level — for each product and DC combination.

Once the analysis was complete, a clear picture emerged, and the customer could see how to lower costs and boost efficiencies.

By working with UPS, manufacturers of all kinds* can identify ways to:

• Streamline stock: Identify low-performing products that are contributing to higher fulfillment costs.
• Meet demand: Determine demand patterns and the classification of products to help avoid stockouts or overstocks.
• Deliver on time: Align product distribution with your customer base to improve service times.

While inventory optimization is an ideal and ongoing goal, you can get there with a flexible and agile strategy focused on continuous improvement. Start by looking at the building blocks of your business: the data.

“Just as we did for the chemical manufacturer that wanted to optimize its footprint, we conduct a business assessment to learn as much as we can — from where DCs are located to what types of products they’re producing — to get a road map for streamlining inventory levels,” says Carlos Roman, Director of Marketing, UPS.

Next comes drawing the connection between production distribution and customer base.

“For example, if a business selling parkas knows there’s more demand in New York than in California, we can adjust the inventory to be more robust where the customers are. This allows the business to move inventory effectively — and greatly improve delivery and service times,” Roman says. “Optimization is an ongoing process. We can calculate the return on investment and help manufacturers put solutions in place to meet those business goals. Then, months or a year later, we reevaluate and make changes where necessary, and the process continues to iterate.”

Modernizing the Warehouse

Would it surprise you to know that 80% of warehouses in the U.S. are still manually operated?² Many manufacturers expect the cost of automation to be sky-high, but changes can happen with small steps. Phased automation — which invites businesses to test and learn — can keep costs and disruption in check.

For example, warehouse robotics such as autonomous pallet jacks, conveyor systems and drones for inventory management represent a big range in terms of price and applications, but the upside is that businesses can customize their applications. A logistics partner can help you determine how robotics and automation will increase efficiencies, improve accuracy and reduce costs.

Evolving warehouse operations from end to end — which can encompass solutions such as layout and design changes, process improvements, new technology and equipment, advanced automation and scalable inventory planning — can help you make the most of your space to reduce extra inventory and expensive carrying costs.

Tech That Can Help You Get There

Your business may not be running with robots or collaborative robots (better known as cobots) today, but the future of inventory management will likely include them. The innovation and animation that keeps these tools moving advances every day, pushing the technology to become more adaptable, precise and effective.

Technology such as radio-frequency identification (RFID) and digital twins (virtual replicas of physical assets) will also soon become the norm. As artificial intelligence (AI) and advanced analytics boost forecasting and predictive insights, businesses will have more insight to guide decision-making for optimization.

In fact, 50% of leaders say implementing AI solutions in manufacturing is critical to business success, and among those who have already implemented solutions, 84% say they see value.³ AI is being used for supply chain management, product design, quality control and more.

Because AI tools can be used to aggregate customer data sets — like online transactions, historical sales, and seasonality and trends — manufacturers can use the information to better forecast inventory needs and production priorities so they can deliver exceptional service.

“AI has a place in inventory management and helps with quality control and machine maintenance,” Roman says. “UPS sees the importance of AI too, and we apply it to our business in many ways, such as delivery route optimization. When we’re more efficient and reliable, the positivity trickles down — and manufacturers can become more efficient and reliable as well.”

Better Inventory Means a Better Customer Experience

Efficiencies, cost control and product reliability are competitive differentiators in manufacturing — and lay out the pathway to service excellence.

Inventory management is an integral part of the equation and provides precise insight into how products perform and where improvements need to be made. With the right single-source logistics partner, your business gets the visibility and management to support production, control cost and ensure customers choose you for the long term.

¹ “The Power of Flexibility: Assessing Your Manufacturing Inventory Management,” Fidelis, accessed May 13, 2025.
² “North America Conveyors Market Size & Share Analysis—Growth Trends & Forecasts (2025-2030),” Mordor Intelligence, accessed May 13, 2025.
³ “2024 State of Manufacturing Report,” Fictiv, accessed May 13, 2025.

*Individual results and options will vary. UPS makes no promises of any specific outcome in this document but instead provides only example outcomes based on certain UPS customer experiences.