Agra’s footwear manufacturing cluster, which establishes the major part of the country’s footwear economy, is struggling with long-established operational inefficiencies, degraded by growing environmental pressures. This paper explores the possibility of addressing these twin challenges through strategic inventory management in circular economy. Taking a mixed-methods approach, the study shows that inventory mismanagement leads to excessive stock, stockouts, and waste stockpile—disrupts cost-effective and environmentally sound operations. Facts from the real world reveal that basic methods such as ABC analysis, EOQ model calculations, and green procurement can quite intensely affect holding costs, minimize waste. The research also provides a spotlight on systemic issues such as policy driven inventory shortages, low levels of digital uptakes and poor supply chain infrastructure. It presents a comprehensive plan for developing a circular economy hub in Agra and suggests a phased plan for MSMEs to switch from manual to smart inventory systems. The footwear industry can become more resilient, profitable, and environmentally sustainable by rethinking waste as a resource and inventory as a strategic asset.