In the world of steel, inventory is both your greatest asset and your biggest financial trap. It’s what keeps production moving and customers happy—but it’s also what ties up capital, racks up storage costs, and quietly eats into margins. For controllers, understanding and controlling the real cost of inventory is one of the most critical levers for protecting profitability.
And we’re not just talking about the obvious numbers. The true cost of carrying inventory goes deeper—and if you’re only looking at what’s on the books, you’re missing the full picture.
More Than Just a Line on the Balance Sheet
When most people talk about inventory cost, they’re referring to the purchase price of steel. But the real cost includes much more:
Storage costs: Warehousing space, equipment, and labor add up quickly.
Insurance and taxes: The more you store, the more you pay.
Obsolescence and damage: Inventory that ages or rusts loses value fast.
Opportunity cost: Capital tied up in steel can’t be used elsewhere—like for expansion or hiring.
These hidden costs often go unnoticed because they’re spread across multiple departments. Controllers are the ones who can connect the dots and surface the true picture.
The Controller’s Role in Inventory Management
Controllers aren’t responsible for stocking shelves—but they are responsible for ensuring those shelves aren’t undermining profitability. By working closely with operations, purchasing, and finance teams, controllers help define what “smart inventory” really means.
Set targets for inventory turns: Slow-moving steel should raise red flags.
Identify dead stock: If it’s been sitting for six months, ask why.
Recalculate carrying cost regularly: Don’t rely on outdated assumptions—run the real math.
And most importantly, controllers should challenge the status quo. Just because “we’ve always kept X months of coil on hand” doesn’t mean it still makes sense.
Systems That Reveal What’s Really Going On
Modern ERP systems can help controllers track not just what’s in inventory—but how it’s behaving. Look for:
Inventory aging reports
Item-level margin contribution
Alerts on reorders for slow-moving SKUs
WIP visibility and reconciliation
Paired with business intelligence dashboards, these tools help you ask better questions. Is that high-value coil earning its keep? Or is it just tying up cash?
Forecasting to Prevent Overstock
One of the best ways to cut inventory cost is to avoid overstock in the first place. This is where controllers can partner with sales and demand planning to ensure forecasts are realistic and grounded in actual behavior—not just hopeful projections.
If demand slows, does your procurement process adjust? Or does it keep feeding the warehouse like nothing’s changed? Controllers can be the voice of reason when optimism outpaces logic.
Better Vendor Agreements, Better Cash Flow
Another area where controllers can have an impact is vendor terms. By negotiating smaller, more frequent deliveries—or working with vendors that offer consignment or delayed billing—companies can reduce inventory levels without risking supply.
Controllers should work with procurement to explore:
Consignment inventory models
Blanket POs with staggered release schedules
Payment terms that align with cash conversion cycles
This reduces the need to keep large volumes of steel on hand “just in case.”
What Gets Measured Gets Managed
Most companies track inventory. Few track inventory performance. Controllers can shift the conversation by introducing metrics like:
Inventory carrying cost as a % of revenue
Days of inventory on hand (DOH)
Gross margin return on inventory investment (GMROII)
When these metrics are reviewed monthly, they drive accountability across departments—and they make it clear when something’s out of balance.
Final Thought: Inventory Should Work for You, Not Against You
Steel inventory is necessary—but it should be strategic, not excessive. Controllers are uniquely positioned to uncover the hidden costs, guide smarter decisions, and keep the balance between availability and efficiency.
If your steel operation is sitting on more inventory than you need—or if your carrying cost hasn’t been recalculated in years—it’s time for a reset. Not just for the sake of accounting accuracy, but for the health of your cash flow and your long-term margins.
Because at the end of the day, every ton sitting in your warehouse is capital that could be working somewhere else. And it’s the controller’s job to make sure it does.
