Inventories Still Dropping

I’m catching up on the ISM  Manufacturing Report on Business for November and looking at inventory levels, which are on a 43-month trend downward. The index is 41.3, a 5-point drop from October and in the range that often aligns with a stagnant economy. Since other indicators suggest a slowly recovering manufacturing sector, the inventory numbers are more evidence that companies are creating “planned scarcity.” The cost of credit to carry inventory outweighs the risk of lost sales opportunities because of shortages, and there could be a hope that shortages will support higher prices.

From a buyer’s perspective — that analysis keeps us watchful for inflationary pressure. It’s been a buyers’ market generally for more than a year. It’s time to lock in prices for key categories if you can.  Low inventories also increase risk — especially if parts are coming long distance.  The winter winds are whipping around our office in Ann Arbor, Michigan today — a reminder that weather is not an insignificant risk factor in the supply chain.

Here’s the link to the ISM news release about the November Report on Business.

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3 responses to “Inventories Still Dropping

  1. Good article.

  2. A timely comment on inventory and supply chain risk as the Business Continuity Institute recently reported that 58% of 200 manufacturing companies surveyed experienced disruption to their supply chains in the last 12 months. Low inventories increase risk particularly in longer global supply chains. risk.

  3. Great observation and insight into the perspective of the buyer.

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