As the first two quarters of 2025 come to a close, a clear trend is emerging: manufacturers are carrying less inventory across their networks. Inventory is turning faster, and “safety stock” levels are being reduced. This shift was predictable as a cost-cutting measure, especially after the post-COVID ripple effects that saw many food manufacturers carrying higher inventory levels to avoid stockouts.

During COVID-19, production disruptions led to shortages of household staples. Orders were slashed, penalties were paid for partial shipments, and labor was extremely difficult to find throughout 2021 and into early 2022. But once production caught up, inventory levels soared past pre-COVID norms. Fear of another variant disrupting supply chains drove manufacturers to overproduce, viewing higher inventory levels as a hedge against “the next big thing.”

At the same time, however, food inflation surged. Over a five-year span, cumulative production cost increases drove retail food prices up by more than 30%. This led to a new challenge: declining unit sales. Food categories and brands began competing for a limited pool of consumer dollars. In response, some manufacturers reduced package sizes to keep shelf prices stable, while others trimmed low-volume SKUs to reduce production crossover costs.

Savvy companies sought cost reductions in every area as labor, rent, energy, insurance, fuel, and facility repair expenses continued to rise. Meanwhile, consumers, exhausted by rising costs, turned to private label brands in record numbers. In fact, private label unit sales jumped 40% year-over-year, signaling a significant shift in consumer behavior.

Enter: Reducing Inventory on Hand

Reducing inventory is a strategy that improves cash flow and goes unnoticed by consumers, but it does come with challenges. If your team is working on this, you're not alone. Here are some best practices when managing reduced inventories:

Best Practices for Managing Reduced Inventory

1. Use the Right Cold Storage Metrics
   If you’re using a 3PL cold storage provider, ensure your reports distinguish between On Hand inventory and Available inventory. Available reflects what's ready to sell, while On Hand includes items on hold and inventory already allocated to purchase orders but not yet shipped.
   
   
2. Verify Every Received Purchase Order
   Someone on your team should validate every PO received into inventory daily. Don’t rely solely on the “shipped” amounts. Overages, shortages, and damages can occur, and often the shipper won’t be aware of them. Use the receiving report from your cold storage provider to reconcile expected versus actual quantities. If not addressed daily, discrepancies can result in picking errors, customer shortages, and penalties.
   
   
3. Be Cautious with Multi-Stop PO Shipping
   Multi-stop shipments are increasingly common, but they add complexity. Pallets must be loaded in the correct sequence while accounting for weight distribution and load security. Misplaced pallets can lead to costly reloading. Consider placarding each pallet with the stop number, consignee name, ship-to address, and contents. This helps prevent unloading errors, especially when pallets are placed side-by-side. Also, consider limiting multi-stop orders to even numbers to avoid odd-pallet pairings from different stops.
   
   
4. Track Lab Holds Diligently
   Products awaiting lab testing should be clearly marked in your system as “on hold.” These items must never appear as “available” to ship. It sounds basic, but this common oversight creates confusion and delays.
   
   
5. Respect the Pre-Staging Process
   Third-party warehouses often pick and stage loads a full day before they’re released. Last-minute additions or deletions, especially within 24 hours, are difficult and costly. In these environments, the focus is on safety, accuracy, and minimizing errors, not on flexibility. Consider enforcing a 24-hour moratorium on order changes to prevent added labor and fees.

With clear communication and transparency, running leaner inventory levels doesn’t have to be a headache. By applying smart practices, your team can operate more efficiently and free up working capital, without sacrificing service quality.

For more information, visit the Interstate Cold Storage website.

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