How do you calculate true inventory carrying costs?

Add up your annual storage fees, insurance, spoilage and obsolescence write-offs, financing costs (if you're using credit to fund inventory), and the opportunity cost of capital tied up in stock (this can make or break early stage brands, particularly in an environment where investment capital is increasingly hard to come by). Divide that total by your average inventory value. Most CPG brands land between 20% and 30%. If you're higher, that's where to start digging.

What is a healthy inventory turnover ratio for a $10M CPG brand?

It varies by category, but most CPG brands should aim for an inventory turnover ratio between 4 and 8 times per year, meaning your average inventory sells through roughly every 6 weeks to 3 months. Perishable categories (refrigerated, fresh) should turn faster. Shelf-stable brands with long lead times might sit on the higher end. The key benchmark is whether your turns are improving year over year.

How does 'ghost inventory' impact my balance sheet?

Ghost inventory is stock that shows as available in your system but isn't actually sellable. It can be damaged goods, products that were miscounted, or items lost in a 3PL. It inflates your inventory asset on the balance sheet, understates your actual shrinkage costs, and causes you to under-order products you actually need. Regular physical cycle counts and 3PL reconciliations catch this early.

When should a brand hire a fractional COO for inventory control?

When inventory decisions are costing you more than the hire would. That usually shows up as recurring stockouts during promotional periods, out-of-control carrying costs, retail chargebacks you can't get ahead of, or a founder spending too many hours a week on supply chain problems instead of growth. A fractional COO or embedded ops team gives you senior-level oversight without the full-time executive cost.

How often should we conduct an ABC inventory analysis?

Quarterly is a solid cadence for most brands. If you're launching new SKUs or entering new retail channels, do it more frequently. Your 'A' movers change as your business evolves, and your safety stock and reorder points should reflect current velocity, not assumptions you made 18 months ago.

What is the difference between JIT and Safety Stock models?

Just-in-Time (JIT) means ordering inventory as close to when you need it as possible, minimizing on-hand stock. Safety stock is a buffer you hold above your expected demand to absorb forecast errors or supply delays. Most CPG brands need some version of both: lean on fast-moving, predictable SKUs, with a deliberate safety stock buffer on items where a stockout would be catastrophic (your top retail SKU, for example).

How do MOQs (Minimum Order Quantities) affect working capital?

MOQs force you to buy more than you might need in the short term, which ties up cash. If your co-manufacturer requires a 5,000-unit minimum but you're only turning 1,500 units a month, you're carrying roughly 3.3 months of stock from day one. Renegotiating MOQs is one of the most underutilized levers in CPG operations. Even modest reductions in MOQs can meaningfully reduce the cash you need to keep the supply chain running.

The Pallet Mistake Quietly Eating Your Margin

Thought Leadership

Jul 17

Written By Josh Leider

When a growing brand first starts shipping to retail, almost all the attention goes to the case. How does it look on shelf? How does it feel in a consumer's hand? That focus makes sense, and it matters. But when it's time to actually build the pallet, the instruction to the co-packer or warehouse is usually some version of “just stack as many as you can so it doesn't topple over.” No one's asking the next question.

How many pallets fit on a truck? What's your real average order size going to look like? Does your warehouse, or your customer's warehouse, have height or overhang restrictions you haven't checked? Pallet optimization gets treated as an afterthought, something the warehouse handles, when it's actually one of the cheapest levers a $1 to $20M brand has to protect margin. You don't need software or new capex to fix it. You just need to slow down and look.

I've watched this play out with brands at every stage of their journey, and here is a bit of what I’ve come to learn.

Your pallet configuration, not your freight rate, is often the real cost

Here's a real example. We joined an account and were told, flat out, that they could not double stack their pallets. When we asked why, there wasn't much of an answer. It was a conservative call made early out of fear of product damage in transit. No testing, no data, just caution that had hardened into a rule.

The instinct was to reach for double stacking, which on paper could nearly cut shipping costs in half. But when we dug in, double stacking wasn't actually the right solution here. The bigger issue was that the pallet itself was never optimized in the first place. This brand was heading into a major retailer with a max pallet height around 120 inches, and the existing setup left a lot of that height on the table.

So we worked backwards. If 120 inches is the ceiling, what does that mean for our configuration? How many cases does that put on a pallet? What happens to shipping cost as a result? The fix turned out to be minor. We added a couple of layers, going from roughly eight layers to ten. That got us about 20 percent more efficiency. Where we used to ship a thousand cases, we could now move twelve hundred on the same lane. More cases per truck automatically lowers your per-case shipping cost. No renegotiation, no new vendor, just a smarter build.

Retailer specs aren't suggestions, and the fines are profit centers

Every retailer has pallet specs, and every retailer enforces them differently. Some violations are minor. Some will genuinely hurt. If you go in and start racking up compliance violations, you land on a list you very much don't want to be on.

The worst case is a refused load. The retailer rejects the shipment, fines you for it, and now you're paying to pick the product back up, get it redelivered, or find secondary storage. That's a cost nightmare, and for some retailers the fines alone can eat your entire margin on that order. At that point it isn't worth shipping to them.

Then there's the stuff that feels too small to matter. Overhang, for instance. You might look at a pallet hanging half an inch over the edge and think there's no way anyone notices or cares. They notice. These fines are a revenue line for the retailer, and they will find every reason to charge you back. So build to the spec exactly. There's usually no mercy on this, and the fines rack up fast.

The rate card hides more than it shows

A founder looks at their 3PL rate card and feels like they understand their shipping cost. The rate card leaves out a lot.

Storage is the obvious one. A more efficient pallet means you store fewer pallets at a time, which lowers your overall bill. Less obvious is touches. Roughly every time someone handles that pallet, you're charged for it, so how you're picking and what your minimum order quantities look like both feed directly into fulfillment cost. Are your customers ordering by the layer, the half pallet, the full pallet? That choice moves your numbers more than most people expect.

Then there's truck utilization, inbound and outbound. If your product doesn't ride efficiently, you're paying for air. And if there's too much slack in a truck, or pallets stacked at the wrong height in the warehouse, you're also opening yourself up to damage. A poorly built pallet is often the root cause behind a whole cluster of problems you won't connect until they start showing up on an invoice.

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Where to find money this quarter with no budget

If you want to pull cash out of your palletization right now, using nothing but decisions, start with your biggest customer. Understand their allocation and compliance requirements, then ask whether you're maximizing your build against those requirements. Can you double stack, and if so does it fit on the truck and will the retailer take it? If not, how high can you go on a single pallet and still clear their height limit? That's usually the fastest place to find a win.

Next, look at your warehouse. Depending on the build, some warehouses can go five, six, seven pallets high, and some charge you for actual floor space rather than pallet count, or give you a better rate if they can stack taller. Make sure you're storing as efficiently as the building allows.

Then get into your order data. What's your average order size? Can you push customers toward full-pallet or at least layer and half-pallet quantities instead of onesie-twosie picks? Every partial pallet sitting around the warehouse is inefficiency you're paying to store. And if you want a starting point, there are free palletizing tools online. On onpallet.com, for instance, you can enter your case dimensions and get back different configurations, which at least tells you whether you're getting enough cases on the pallet before you refine it against what you know about your own business.

Pallet optimization is a secondary thing right up until it's the reason your margin disappeared. The brands that treat it as a real decision, not a warehouse chore, keep money that their competitors are quietly handing to freight carriers and retailer chargeback departments.

About Bravo CPG

At Bravo CPG, this is the kind of work we own for growth-stage food, beverage, beauty, and wellness brands. We're an embedded operations team, which means we combine hands-on execution with senior-level ownership across production, co-man and 3PL management, demand planning, wholesale orders, and freight. Pallet decisions like the ones above are exactly where we've helped brands recover margin they didn't know they were losing. The goal is straightforward: help you scale profitably without the operational chaos that usually comes with growth. If any of this sounded familiar, we're happy to talk it through.

Josh Leider