What can you do in order to reduce inventory costs but still have a good service level? What's the best way to forecast the demands?

Implementing the pull system.

Maintaing proper relation with customers and suppliers to understand the market demand.

Analysing pervious year records.

Insisting the customer to send rough three month schedule and their last three month sales.

If possible discuss with end user about the current market situations.

Reading journals, goverment tenders, goverment flexibility, country infrastructure plan etc.

Developing  dual suppliers.

Procuring items from local suppliers for slow moving items etc