It’s March 2020. Store shelves sit empty, without any toilet paper or cleaning supplies in sight. Tablets and electronic devices are out of stock. Consumers are clamoring for the basics they need to suddenly work and learn from home and live under quarantine. Meanwhile, on Zoom calls and in email threads, company leaders around the world are racing to put in giant orders with their suppliers to speed up supply-chain lags and get products to customers. In the supply-and-demand equation, demand seems infinite.
The Next Supply-Chain Challenge Isn’t a Shortage — It’s Inventory Glut
Strategies for reducing excess inventory, stemming the rate of inventory change, and preventing the situation from happening in the future.
September 29, 2023
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Summary.
Inventory challenges aren’t new. Electronics littered shelves in 2001 after the dot-com bubble burst. In 2009, the financial crash left manufacturers with excess inventory when consumer buying power suddenly dropped. And now, the high-tech industry is feeling the weight of a volatile market that has led to excess component inventory. Measuring inventory momentum can help leaders address the problem. It’s a forward-looking metric based on the classic momentum equation: current inventory x rate of inventory change. Once leaders understand their inventory momentum, they can take actions to reduce excess inventory, stem the rate of inventory change, and prevent the situation from happening in the future.