The Wall Street Journal has a new article entitled “Glut of goods is easing” (registration required) that discusses how inventory reductions continue to ease the glut of goods that dampen prospects for any increased manufacturing production.

According to the article, “the latest survey by the Institute for Supply Management, a group of purchasing managers, found that manufacturers’ inventories contracted in March at a faster pace than in prior months, a bullish sign for production. About 9% of firms said inventories were rising in March, down from 19% in February. Yet manufacturers still believed their customers’ inventories were too high, feeding an unwillingness to ramp up production quickly.”

Many believe that an inventory-related increase in production could propel the economy out of recession this summer or fall.  I won’t be so bold as to predict that, but I do believe that inventory plays a major role in the economy (see related posts below).

Of course, as any supply chain professional knows, while today’s focus is on inventory reduction, tomorrow’s focus will be on ensuring you have enough inventory to meet customer expectations when growth returns.  This is the tricky balance that all supply chain managers deal with daily.  What is unique right now is the unprecedented  challenges in meeting this objective.  Historical perspectives used to drive demand planning are basically irrelevant – and they will be when growth renews as well since the past will not be an accurate predictor then either.

Is your company still in inventory reduction mode, or have you transitioned yet to thinking about growth?

Related posts:

• Inventories decline as supply chains seek equilibrium
• Inventory control plays critical role in economic recovery
• Inventory rationalization and right sizing strategies
• Top 10 signs of an inventory problem at work (for fun!)

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