Fat
Isn’t Respectable
This economy is
making me question some long-held business beliefs. When the heck did fat
inventories become respectable? Take a look at the following excerpt from a
recent Boston Globe
business story:
“Yesterday,
the Commerce Department reported that stockpiles of goods on shelves and back
lots edged up to a seasonally adjusted $1.1 trillion in May, a 0.2 percent
increase from April’s level.”
A few years ago
that would have been considered bad news — a sign of poor logistics
discipline. Today, with knees jerking faster on Wall Street than at a Rockettes
show on Broadway, fatter inventories are now, apparently, justifiable. In the same
article, economist Clifford Waldman of Waldman Associates was quoted as saying
this was a hopeful sign, that companies may be feeling a little better about
the recovery, which has lost steam since the beginning of the year.
Of course
inventories could have gone up because of weak sales, or because suppliers just
don’t know how consumers are going to react to the economy du jour, so
they feed a little more stuff through the supply chain.
Just-In-Case
inventory practices seem to be today’s state of the art. That’s
leaving new supply chain technology on the shelf — for now. But if
economists choose to take the “glass is half full” approach to
market analysis, maybe you and I have good reason to join them.
I just saw the
results of MHM’s
most recent Reader Profile Study. One of the key findings is that your fellow
readers (and you may be among them) plan to invest more than $6 billion in
material handling equipment, systems and related software in the next 18
months. This statistic is supported by other material handling market studies.
For example, the Cleveland-based Freedonia Group, in its most recent Industry
Study of Material Handling Systems, projects that the overall U.S. market for
material handling systems and equipment will increase 5.2 percent per year through
2006.
The researchers
tie economic recovery to new generations of systems offering performance and
productivity advances over earlier products. But do you know who gets the
credit for spurring this investment in material handling? Not the industrial
sector. They’re still waiting for a sustained recovery.
The consumer is
the hero. Freedonia says material handling demand associated with consumer
spending — especially in retailing and distribution — is holding up
better than in the industrial sector.
Maybe that
explains why one of the bright spots in supply chain information technology is
point-of-sale (POS) information systems. Allow me to cite one more bit of
research. According to Venture Development Corporation’s new market
study, Retail Automation Equipment: A Vertical Market Analysis of Usage and
Plans for Wireless, Emerging, and Traditional Technologies, shipments of retail
automation hardware are expected to increase by 5.8 percent annually, reaching
more than $3.2 billion by 2006. This growth will be bolstered by
increased shipments of emerging POS technologies such as self-checkout
terminals, RFID devices and electronic shelf label hardware.
This is good news
for inventory managers. With a clear view of consumer activity at the store level,
a logistics execution system will be better able to help you melt fat from your
Just-In-Case inventories.
Let’s hope
this news makes the papers soon.
Tom Andel, chief editor, tandel@penton.com
