During COVID, companies ramped up inventory to mitigate against supply chain distributions. With costs coming down, delivery times improving, and manufacturing capacity opening, several consumer products sectors are now reducing inventory with the hopes of better margins in the short run.
Additionally, implementation of smart factory elements such as automated inventory planning and predictive analysis for data driven inventory optimization are allowing companies to further reduce inventory and more aggressively chance demand utilizing "just-in-time" strategies.
This approach is particularly relevant as inflation, interest rates, and student loan payments continue to dampen consumer spending and keep inventory turnover down. As uncertainty in upcoming holiday spending comes to the forefront with consumer spending remaining surprisingly resilient, companies are reducing inventories to avoid being stuck with excess product. Is that the right approach?
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