Stocked out on the fast movers, drowning in the slow ones

It is the signature inventory problem of Brazilian operations, and it is usually caused by a single blanket coverage rule applied across items whose supply behaves nothing alike.

Written for operations leaders running or evaluating manufacturing in Brazil.

A plant carries months of coverage in aggregate and still stops production waiting for parts. Finance sees the total and asks why inventory is so high. Production sees the shortages and asks why inventory is so low. Both are looking at the same number and both are right.

The cause is almost always that coverage is set as one rule — a uniform number of days across everything — applied to items with completely different demand patterns and completely different supply reliability.

Why Brazilian supply breaks textbook sizing

Lead times are long and, more importantly, variable

Average lead time is the less useful number. What sizes safety stock is variability — the spread between best and worst case. Brazilian inbound supply, particularly anything imported or moving long domestic distances, tends to have a wider spread than the planning parameters imported from a European or Asian operation assume.

Distance is a real constraint

Brazil is continental and road freight dominates. A supplier two thousand kilometres away is a genuinely different supply proposition from one two hundred kilometres away, regardless of quoted price.

Nobody owns write-off

Holding obsolete stock is invisible; writing it down is visible and appears on someone’s results. So it accumulates. This is a governance problem wearing an inventory costume.

The commission structure shapes the stock profile

Where distribution runs through commercial representatives paid on revenue rather than margin — common in Brazilian industrial distribution — the channel pushes whatever sells easiest, not what the business needs to move. The inventory profile follows the incentive with complete reliability.

What to build instead

1. Segment by value and by variability. Classic ABC on consumption value, crossed with a variability classification. An item that is high value and stable needs a different policy from one that is high value and erratic.
2. Size safety stock on observed variability, using your own receipt history — not on the supplier’s quoted lead time and not on the parameter inherited from another site.
3. Set differentiated coverage by segment, and write down the rule so it survives the person who set it.
4. Measure supplier delivery variability as a named indicator. Suppliers whose variability is the real cost driver are usually not the ones purchasing is arguing with about price.
5. Create an owned route for stagnant stock — a scheduled review, a named decision-maker, and defined recovery options.

On recovering stagnant stock

Dead stock is not one problem. Segment it by realistic recovery route: liquidation through an alternative channel, repricing, bundling, return negotiation, or write-off. Treating it as one undifferentiated pile is precisely why it stays put — the decision is too large to make, so nobody makes it.

And recovering it without changing the policy that created it guarantees it comes back. If the coverage rule and the commission structure stay as they were, you will run the same exercise in two years.

The measure that matters

Not total inventory value. Track coverage by segment against target, service level on the items that actually constrain production, and capital released. Aggregate inventory value is the number that hides both halves of the problem at once.