---
title: "Inventory Management for Manufacturers: Turns, Obsolescence and Cash | Capstone CFO"
description: How manufacturers and distributors can free up cash by managing inventory turns, reducing obsolete stock and improving demand planning.
image: https://capstonecfo.com/hubfs/capstone-2026/insights-covers/inventory-management-manufacturers-turns-obsolescence-cash.png
---

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Insights

# Inventory Management for Manufacturers: Turns, Obsolescence and Cash

Capstone CFO

**Short answer:** Inventory is often a manufacturer's largest use of cash. Too little and you miss orders; too much and cash sits on shelves, slowly losing value. Tracking turns, aging and obsolescence by product, and linking purchasing to a realistic demand plan, frees up cash without hurting service.

## Key inventory metrics

| Metric | What it tells you |
| --- | --- |
| Inventory turns | How many times inventory is sold and replaced in a year |
| Days inventory outstanding | How many days of sales are sitting in stock |
| Aging by item | How long each item has been on hand |
| Slow-moving and obsolete stock | Inventory at risk of write-down |
| Fill rate | Whether you are meeting customer demand |

## Where cash gets trapped

- Raw materials bought in bulk for discounts that never pay back
- Finished goods built to forecast that did not materialize
- Engineering changes that leave old components unused
- Safety stock levels set once and never revisited
- Weak cycle counts, leading to inaccurate records and over-ordering

## A practical improvement plan

1. Classify items by value and velocity
2. Set reorder points and safety stock based on actual demand and lead times
3. Review aging monthly and act on slow-moving items
4. Improve cycle counting and system accuracy
5. Link purchasing to a sales and operations plan

## How Capstone CFO helps

- Build inventory reporting by item, category and location
- Connect inventory to your cash flow forecast
- Identify and quantify slow-moving and obsolete stock
- Support sales and operations planning with financial data
- Work with lenders on inventory-based financing

## Frequently asked questions

### What is a good inventory turn rate?

It depends heavily on industry and product mix. Track your own trend and compare with similar businesses.

### How should obsolete inventory be handled?

Identify it, reserve for it in your financials, and decide whether to sell, rework or dispose of it.

### Can better inventory management improve borrowing?

Yes. Accurate inventory records support asset-based lending and give lenders more confidence.

*Want to free up the cash sitting on your shelves? See [how we support manufacturers and distributors](https://capstonecfo.com/manufacturing-and-distribution) or [book a call with our CFO team](https://capstonecfo.com/meeting).*

### Ready when you are.

Talk with our CFO team about your goals.

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- [CFO & Accounting](https://capstonecfo.com/cfo-and-accounting-plans)
- [Special Projects & Transactions](https://capstonecfo.com/special-projects)

#### Problems We Solve

- [Cash Flow Problems](https://capstonecfo.com/solutions/cash-flow-problems)
- [Late or Inaccurate Financials](https://capstonecfo.com/solutions/late-or-inaccurate-financials)
- [Forecasting & Planning](https://capstonecfo.com/solutions/financial-forecasting-and-planning)
- [KPIs & Board Reporting](https://capstonecfo.com/solutions/kpis-and-board-reporting)
- [Fundraising Readiness](https://capstonecfo.com/solutions/fundraising-readiness)
- [Exit & M&A Readiness](https://capstonecfo.com/solutions/exit-and-m-and-a-readiness)

#### Who We Serve

- [SaaS & Software](https://capstonecfo.com/saas-and-software-companies)
- [E-Commerce & Digital Retail](https://capstonecfo.com/e-commerce-and-digital-retail)
- [Professional Services](https://capstonecfo.com/professional-services)
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