Aberdeen survey says inventory reduction is top action taken by companies in response to recession

BOSTON—According to a new report from Aberdeen Group, during these times of economic uncertainty, companies are actively seeking best practices for reducing inventory holdings throughout their multi-tiered supply chain networks.

 

In fact, reducing inventory is the top action companies have taken in response to the recession, as reported by 54% of survey respondents. The study, “Inventory Management: Three Key Strategies to Freeing Working Capital,” is co-sponsored by Supply Chain Consultants, a provider of supply chain software solutions.

 

“For many companies, especially with global supply chains, inventory is the biggest lever impacting their working capital position,” says Nari Viswanathan, vice president and principal analyst with Aberdeen. “Due to increased global complexity, companies are experiencing long lead times and high demand volatility. This has resulted in an increased emphasis on managing inventory. Identifying the best practices and the best tools to accomplish this become critical.”

 

Companies are looking for practical initiatives that can unlock working capital while also maintaining high levels of customer satisfaction. With 62% of companies reporting a drop in customer demand over the past year, focusing on inventory is critical if a company wants to avoid a spike in write-offs as a result of a build-up of stock that can’t be sold.

 

Findings in the Aberdeen study show that 91% of companies indicate that they are involved in reviewing opportunities for improving inventory performance through process change. Another 61% of respondents say they have made, or have been asked to make, inventory-related technology recommendations within the past six months.

 

The study also examines how Best-in-Class companies are able to continuously manage inventory throughout their supply chain to improve customer service levels, forecast accuracies and perfect order metrics using the principles of closed loop inventory management. Best-in-Class companies are also more likely to use a technology enabler in key inventory management events, including demand analysis, inventory segmentation, inventory optimization, inventory replenishment, extended inventory visibility, event management and responsive execution.

 

“Inventory management and the information technology supporting it are critical in weathering the economic recession so many organizations are facing today,” says Sujit Singh, Supply Chain Consultants’ chief operating officer. “The Aberdeen report reinforces what so many of our customers are already putting into practice – that effectively managing their inventory levels and using the right technology to help them do so, helps provide them with a competitive advantage during an economic down turn and the ensuing rebound.”

 

 

(Source: Logistics Management)