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Three ways to cut storage costs if you’re not ready to share data with your supplier

Byline: Yuri Bykoriz is the Managing Director CEE at Kormotech

In the second quarter of 2025, the value of inventory in the UK rose by around $7bn (£5.6bn). Meanwhile, US retail inventories reached approximately $809.8bn (£602.9bn) in July alone — $65.5bn (£48.8bn) higher compared to the same period in 2024.

On the one hand, this trend is a natural outcome of market growth, but on the other, it highlights the growing risk of warehouse overstocking. Last year, surplus inventory at some businesses rose from 40% to 44%. For a company holding $50m (£37.2m) in stock, that represents $2m (£1.5m) of tied-up capital.

As a manufacturer and supplier of pet food products, we’ve seen firsthand that one of the most effective ways to reduce storage expenses is through transparent data sharing. Below, I’ll outline different operating models and tools that can help cut storage costs.

Why excess inventory builds up

Surpluses don’t only arise from seasonal or situational demand shifts. Sometimes shelf space is allocated based on supplier agreements rather than actual demand. As a result, slow-moving products end up in prime spots, where they remain unsold and eventually pile up in storage.

The issue is further complicated by the rigidity of retailers’ automated inventory management systems. Even when an item sells out within hours, the systems can’t quickly adjust order volumes to match demand. This creates a double imbalance: shortages of fast-moving products and surpluses of items that don’t sell.

How do large distributors tackle this issue? They integrate their accounting systems with suppliers’ digital inventory management platforms. This allows suppliers to see daily stock levels, new store orders, and shipments. Using sales trend data, they develop forecasts, plan production, and schedule deliveries. For distributors, the benefits are clear: fresher products, inventory levels aligned with actual needs, and more efficient use of warehouse space.

Retailers also have similar systems, giving suppliers access to secondary sales data through POS or CRM platforms. In practice, however, two barriers often stand in the way of full integration: concerns over data security and a lack of digital maturity within companies.

How to optimise storage costs

There are alternative approaches to inventory management that can improve supplier collaboration, though they vary in implementation complexity. Here are a few examples:
AI-driven demand forecasting systems. Unlike traditional methods, these algorithms can account for a wider range of factors — from consumer behavior and seasonality to marketing campaigns and even weather conditions. Based on this, they generate demand forecasts for each product category and even specific SKUs. This helps retailers redistribute products more quickly across warehouses and stores, reducing both surpluses and shortages.

Using AI solutions, storage costs for unsold goods can be reduced by 10–15%. According to The Economist, businesses are expected to gain between $1.3tn (£0.9tn) and $2tn (£1.5tn) over the next 20 years by applying AI in supply chains. At the same time, the effectiveness of these tools depends heavily on data quality and the willingness to invest in IT infrastructure. If sales data is updated with delays, the system cannot adjust forecasts in time, leaving retailers exposed to the same risks.

Vendor Managed Inventory (VMI). In this model, the supplier gains access to the retailer’s inventory data and independently decides when to restock, guided by predefined minimum and maximum stock levels. Monitoring can be handled either by supplier staff or through automated systems such as weight sensors.

One study on VMI effectiveness shows that this model can reduce inventory levels by 7% and stockouts by 31%. The drawback, however, is that it requires a high degree of trust and technical integration between both parties. Retailers also give up part of their control over inventory management, and any supplier errors directly affect product availability on shelves.

At Carlsberg, I had experience working with VMI in partnership with an international hypermarket chain in Ukraine. We tracked sales daily and delivered products in the exact volumes in which they were sold. As a result, the chain didn’t increase its inventory levels, while sales grew because the product was consistently available on shelves.
Regular sales reports. Even without full automation, a retailer can share weekly sales and stock reports by SKU with the supplier. This helps track demand trends and enables more accurate production and delivery planning.

The main advantage of this approach is its simplicity — it doesn’t require significant IT infrastructure investments. The downside is that report preparation takes additional effort from retailer staff, and suppliers receive the data with a delay, limiting forecast accuracy. Based on Kormotech’s experience, this is an acceptable compromise when a retailer is not yet ready for full data transparency. Regular reporting helps build trust, establish joint processes, and reduce the risk of excess inventory even at this early stage of collaboration.

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