The Oregon Biz Report - Business News from Oregon

Read about accutane journal moderate acne here

Inventory Swings: Watch Your Ultimate Customer

May 22, 2009

By Bill Conerly, Businomics, Conerly Consulting

An excellent Wall Street Journal article, “Clarity is Missing Link in Supply Chain,” accentuates a point made in my favorite economics book, that inventory swings are tremendously destabilizing.  Here’s a stunning macroeconomic impact:

“In March, Best Buy Co. said it could have sold more electronics equipment in the three months ended Feb. 28, but its suppliers’ deep cuts made it tough to keep shelves stocked. Suppliers “all decided to build a lot less,” says Best Buy merchandizing chief Michael Vitelli.

The reason for this problem is explained:

“Companies all along the supply chain live in mortal fear of piling up inventory. Profit margins are razor thin, and unsold inventory only loses value as newer technologies hit the market.”

The article highlights how difficult it has become for companies to always know where their products are going.  In Businomics, I emphasized the need of an upstream supplier to understand the ultimate users of the product.  So the company making computer chips needs to understand how those chips are being used.  One company thought their chips were going into computers, only to learn later that they were destined for electronic picture frames.

OK; it is hard to know how your product is being used.  That does NOT mean it’s less important to know how it’s being used.  You still have to understand ultimate users, at least if you want your company to survive this business cycle.

If you have a copy of Businomics on your desk, re-read pages 54-58 for a basic explanation of how de-stabilizing inventory swings are, then all of Chapter 7, “Managing Through the Business Cycle” for how to manage your own inventories.

— Bill Conerly is principal of Conerly Consulting LLC, chief economist of abcInvesting.com, and was previously Senior Vice President at First Interstate Bank. Bill Conerly writes up-to-date comments on the economy on his blog called “Businomics” and produces a monthly audio magazine available on CD. Conerly is author of “Businomics™: From the Headlines to Your Bottom Line: How to Profit in Any Economic Cycle”, which connects the dots between the economic news and business decisions.

  
Print This Post Print This Post    Email This Post Email This Post

Discuss this article

no comments yet

Leave a Reply

Your email address will not be published. Required fields are marked *

Recent Articles

Press Releases



Top Business News

 

Top Women's News

 

Top Natural Resource News

 

Top Faith News

 

Copyright © 2016, OregonReport. All Rights Reserved. | Terms of Use - Copyright - Legal Policy | Contact Oregon Report

Stay Tuned...

Stay up to date with the latest political news and commentary from Oregon Business Report through daily email updates:

Delivered by FeedBurner

Prefer another subscription option? Subscribe to our RSS Feed, become a fan on Facebook, or follow us on Twitter.

RSS Twitter Facebook

No Thanks (close this box)