--- title: "Case Study: Cutting Inventory Costs with Shorter Lead Times and Local Machining" description: Discover how a manufacturing company reduced inventory costs and improved cash flow by shifting to local machining and shorter lead times. image: https://tkd2group.com/hubfs/f9e76a0c-966f-4bef-8492-99b0d9326a2d-1.png --- [Skip to content](https://tkd2group.com/blog/case-study-cutting-inventory-costs-with-shorter-lead-times-and-local-machining#main-content) [![TKD2 Group, LLC](https://tkd2group.com/hs-fs/hubfs/logowname.jpg?width=150&height=152&name=logowname.jpg)](https://tkd2group.com/) - [Home](https://tkd2group.com) - Our Company Show submenu for Our Company - [Team Spotlight](https://tkd2group.com/the-team) - [FAQ](https://tkd2group.com/faq) - [Testimonials](https://tkd2group.com/clients) - [LinkedIn](https://www.linkedin.com/company/tkd2group) - [8 Bit Sprint](https://tkd2group.com/game-code) - [2026 Calendar](https://tkd2group.com/2026-events-calendar) - Our Services Show submenu for Our Services - [Business Development](https://tkd2group.com/businessdevelopment) - [Localization Consulting](https://tkd2group.com/localization) - [Nemawashi](https://tkd2group.com/nemawashi) - Product Portfolio Show submenu for Product Portfolio - [Products](https://tkd2group.com/portfolio) - [Gallery](https://tkd2group.com/product-gallery) - Markets We Serve Show submenu for Markets We Serve - [Automotive & Transportation](https://tkd2group.com/automotive-transportation-market) - [Defense & Firearms](https://tkd2group.com/defense-firearms) - [Consumer & Industrial Goods](https://tkd2group.com/consumer-industrial-component-sourcing) - [Aerospace & Drones](https://tkd2group.com/aerospace-drone-component-sourcing) - [Medical & Contract Manufacturing](https://tkd2group.com/medical-component-sourcing-manufacturing) - [Humanoid & Industrial Robotics](https://tkd2group.com/humanoid-industrial-robotics) - [BLOG](https://tkd2group.com/blog) Open main navigation Close main navigation - [Home](https://tkd2group.com) - Our Company Show submenu for Our Company - [Team Spotlight](https://tkd2group.com/the-team) - [FAQ](https://tkd2group.com/faq) - [Testimonials](https://tkd2group.com/clients) - [LinkedIn](https://www.linkedin.com/company/tkd2group) - [8 Bit Sprint](https://tkd2group.com/game-code) - [2026 Calendar](https://tkd2group.com/2026-events-calendar) - Our Services Show submenu for Our Services - [Business Development](https://tkd2group.com/businessdevelopment) - [Localization Consulting](https://tkd2group.com/localization) - [Nemawashi](https://tkd2group.com/nemawashi) - Product Portfolio Show submenu for Product Portfolio - [Products](https://tkd2group.com/portfolio) - [Gallery](https://tkd2group.com/product-gallery) - Markets We Serve Show submenu for Markets We Serve - [Automotive & Transportation](https://tkd2group.com/automotive-transportation-market) - [Defense & Firearms](https://tkd2group.com/defense-firearms) - [Consumer & Industrial Goods](https://tkd2group.com/consumer-industrial-component-sourcing) - [Aerospace & Drones](https://tkd2group.com/aerospace-drone-component-sourcing) - [Medical & Contract Manufacturing](https://tkd2group.com/medical-component-sourcing-manufacturing) - [Humanoid & Industrial Robotics](https://tkd2group.com/humanoid-industrial-robotics) - [BLOG](https://tkd2group.com/blog) - [Contact us](https://tkd2group.com/contact-us) [Contact us](https://tkd2group.com/contact-us) [All posts](https://tkd2group.com/blog/all) May 26, 2026 # Case Study: Cutting Inventory Costs with Shorter Lead Times and Local Machining ![Picture of Duane Spurling](https://app.hubspot.com/settings/avatar/d41d8cd98f00b204e9800998ecf8427e) By  [Duane Spurling](https://tkd2group.com/blog/author/duane-spurling)  ·  2 minute read For one local manufacturing company, buying custom machined parts in large annual batches had become standard practice. On paper, it looked efficient: lower piece prices, fewer purchase orders, and less worry about running short. In reality, it was creating a different set of problems. The company used a mix of custom-machined aluminum and stainless steel components across several assemblies. To keep costs down, many of those parts were sourced in large overseas production runs, typically 2,000 to 5,000 pieces at a time, with lead times stretching from 12 to 16 weeks. That approach helped secure a lower quoted unit price, but it also tied up a lot of cash in inventory, made engineering changes harder to absorb, and added strain on warehouse space. At any given time, the company was carrying between $750,000 and $1.2 million in machined component inventory, with turns of just over two per year. That meant a significant amount of working capital was sitting on the shelf instead of being used for equipment, staffing, or product development. Even using a conservative cost of capital, annual carrying costs were estimated at more than $80,000. The inventory problem became even more expensive when designs changed. Because so many parts had already been ordered, even a modest revision could leave a large quantity of inventory obsolete. In one case, a bracket redesign changed hole spacing and material thickness, which turned 1,800 finished parts into scrap and created a direct write-off of $42,000. Storage was another issue. Large batch orders took up valuable warehouse space, increased handling time, and made it harder to keep inventory aligned with what production actually needed. At the same time, forecasting was never perfect. Some parts sat too long, while others still had to be expedited when demand shifted. To address this, the company moved a portion of its work to a regional CNC machine shop that could support much shorter lead times, smaller runs, and more flexible replenishment. Instead of placing one or two large orders per year, it shifted to orders in the 100 to 300 piece range, with weekly or biweekly releases, along with blanket orders and vendor-managed inventory for selected items. Within 12 months, the results were hard to ignore. Machined parts inventory dropped from roughly $1 million to about $275,000, a reduction of more than 70 percent. That freed up approximately $725,000 in working capital. Obsolete inventory write-offs fell from more than $65,000 per year to under $8,000. On-time delivery improved from 89 percent to 97 percent, and the company was able to respond much more quickly to production changes and engineering updates. Piece-part pricing did go up slightly, by about 6 to 9 percent on average. But the bigger picture improved. Lower carrying costs, less scrap, reduced storage pressure, fewer expedites, and better cash flow more than offset the increase. Total annual savings were estimated at $180,000 to $250,000. The takeaway is straightforward: the lowest quoted piece price is not always the lowest total cost. For this manufacturer, shorter lead times and local machining did more than reduce inventory. They improved flexibility, lowered risk, and gave the business better control over cash and operations. In the end, responsiveness turned out to be just as valuable as price. ![f9e76a0c-966f-4bef-8492-99b0d9326a2d](https://242652217.fs1.hubspotusercontent-na2.net/hub/242652217/hubfs/f9e76a0c-966f-4bef-8492-99b0d9326a2d.png?width=1200&length=1200&name=f9e76a0c-966f-4bef-8492-99b0d9326a2d.png) Disclaimer: Images, excerpts, links, trademarks, and referenced materials included in this post are used for commentary, education, news reporting, and informational purposes under the fair use doctrine. All rights remain with their respective owners. If you believe any material has been used improperly, please contact us and we will review it promptly. 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