In a time filled with deep uncertainty, the way businesses operate, especially those with revenues over a billion dollars, is being closely examined. The pandemic has highlighted the issue of too much inventory, which, according to a 2023 study by Kearney, has expanded into a problem worth more than $250 billion in the U.S. alone. In the past, the technology industry’s reaction to spikes in demand has resulted in warehouses being filled with now-obsolete semiconductors and other parts. These items, once highly sought after, have turned into excessive surplus, affecting financial reports.
A crucial lesson here is the necessity to question the story of “endless” demand. Every increase in demand will inevitably lead to an overflow of inventory. Businesses must moderate their demand forecasts with a touch of realism. For example, if suppliers only aim to maximize revenues and OEMs order beyond their sales ability, contract manufacturers end up stuck in an unsustainable situation. This emphasizes the importance of alignment throughout the value chain, from OEMs to suppliers, in optimizing inventory. Suppliers should have mechanisms to redistribute excess but still usable components, ensuring products get to those who really need them.
Additionally, as we see the development of new industries, it’s vital to prioritize building healthy ecosystems from the start. The emerging AI sector offers a significant opportunity for tech manufacturers. However, it’s crucial to approach it without the viewpoint of “endless” demand for AI-driven applications. Similarly, in the electric vehicle field, overproducing parts carries a risk. These components could become outdated before actual demand arises.
In conclusion, as we move through this new operational age, a sustainable, collaborative, and forward-thinking approach to inventory management is crucial. It’s not only about meeting immediate demands but also ensuring the long-term health and vitality of industries in fluctuating markets.