Flexible inventory management is the best defence against ongoing disruption

In 2026, wholesale distributors continue to operate in an environment shaped by ongoing supply chain disruptions and demand fluctuations. The complexity of managing inventory levels has intensified as businesses cope with the economic fall out of the Middle East crisis. Margin pressure is an ongoing issue while trying to meet customer demand across traditional channels and ecommerce.

Findings from the Phocas Inventory Trends in Wholesale Distribution Report highlight just how imbedded these challenges have become. Distributors are managing increasing complexity, with around 70% handling more than 5,000 SKUs and working with over 50 suppliers. At the same time, many are holding more stock to protect sales, even as this increases exposure to excess inventory and cash flow issues.

While inventory management is at the heart of wholesale distribution businesses, persistent gaps remain in how inventory is understood and managed. Flexible inventory management is emerging as a response to these conditions, shaped by improvements in visibility across data, planning and collaboration. These areas reflect three underlying gaps that continue to define inventory performance across the industry.

Not all data is available to understand inventory performance

Inventory decisions are only as strong as the data behind them. While many distributors review inventory regularly (according to survey results 45% review daily or at least once a week), consistent access to the right metrics and confidence in the data is uneven.

The Phocas survey highlights this clearly. While confidence in inventory data is improving, only 31% of distributors report high trust in their data, even though 87% acknowledge that better data improves supplier management. This gap between perceived importance and actual confidence reflects how fragmented data environments still are.

In practice, many distributors continue to operate across disconnected ERP, sales, purchasing and POS systems. This limits the ability to create a single, reliable view of stock levels, performance and financial exposure. Without standardized definitions and measurement of core benchmarks, inventory control becomes inconsistent across the business.

These visibility gaps most often appear in excess stock, aging inventory and discounting. Stock buffers introduced to avoid stockouts can become long-term overstocking, while discounting obscures underlying inefficiencies in pricing and purchasing. Over time, inventory costs rise and cash flow becomes constrained as capital is tied up in slow-moving goods.

Flexible inventory management addresses this by connecting data across the supply chain into a consistent and trusted view. It enables real-time visibility into inventory levels and service levels. This view supports the use of shared benchmarks such as Days of Supply and gross margin return on investment at the SKU level. The emphasis is on consistent KPI measurement, allowing operational activity to be directly linked to financial impact.

Demand planning is inconsistent

While data visibility highlights current performance, the Phocas report shows that demand planning is an underdeveloped yet valued capability in distribution.

Demand planning is identified as the number one performance differentiator, yet it is also where the largest gaps exist. The survey found that many distributors face an “accuracy gap due to limited access to the right data,” limiting the effectiveness of forecasting. At the same time, 54% of distributors are actively looking to introduce new demand forecasting approaches, reinforcing that current planning methods are not sufficient.

Without accurate planning, purchasing decisions are hit and miss. Reorder activity is often disconnected from actual demand patterns, particularly where lead times are volatile. This leads to instability in inventory levels and stock outs are common. Safety stock may be set conservatively to protect service but without alignment to demand variability it contributes to rising inventory costs.

The survey also shows that distributors are increasingly prioritizing stock availability over efficiency, with many holding two to three months of stock. This reflects the challenge of planning in uncertain conditions, where protecting revenue often outweighs optimizing cash flow.

Flexible inventory management introduces more structure into planning by connecting sales expectations, current stock levels and purchasing decisions into a single view. It incorporates variables such as lead times and demand variability and enables continuous comparison of planned versus actual outcomes.

Inventory insights are not consistently shared across teams and suppliers

Even where data and planning exist, the Phocas findings show that collaboration remains uneven across the industry.

Inventory management is still often siloed, with purchasing, sales and finance operating from different perspectives. As noted in the Phocas Inventory Trends in Wholesale Distribution Report, effective inventory management requires these teams to work closely together, yet this alignment is not consistently achieved.

Although progress is being made, only 55% of distributors report sharing inventory updates across sales, finance and operations. This means that nearly half of organizations are still operating without consistent cross-functional visibility. In these environments, sales forecasts and purchasing decisions can drift apart and finance lacks clarity on operational decisions.

The impact extends beyond internal teams. Supplier collaboration is also affected when inventory data is not shared effectively. The Phocas report highlights that data sharing improves supplier performance and even contributes to better lead time accuracy and joint planning, yet this is not universally adopted.

Without shared visibility, responses to supply chain disruptions remain reactive. Teams interpret data differently, decisions are delayed and coordination across the supply chain becomes more difficult. This fragmentation limits the effectiveness of both data visibility and planning processes.

Flexible inventory management is what wholesalers strive for in 2026

Flexible inventory management addresses this by positioning inventory data as a shared operating asset. It enables consistent access to inventory dashboards and standardized metrics across all functions. It also extends visibility to suppliers, supporting more coordinated replenishment and alignment across the broader supply network.

The Phocas Inventory Trends in Wholesale Distribution Report reinforces that the challenges in inventory management come from gaps in how data, planning and collaboration are structured across distribution businesses.

Limited trust in data, inconsistent demand forecasting and fragmented collaboration continue to shape how inventory levels are managed. At the same time, more SKUs, more suppliers and greater demand volatility compounds the impact of these gaps.

Flexible inventory management directly aligns with these findings by addressing visibility across all three areas. It connects data into a consistent view, structures planning as an integrated process and enables shared use of inventory insight across teams and suppliers.