Inventory carrying rates last peaked in 1989, at 28.1 percent, hitting a low of 20.1 percent in 2003, before accelerating to 24.1 percent in 2007. Inventory as a percentage of GDP was 5. 4 percent in 1985, the first year CSCMP started keeping track, hit its low of 2. 8 percent in 2003, and rebounded to 3. 5 percent in 2007.

“Inventory optimization is again a key issue,” said Rosalyn Wilson, the independent researcher and author of the CSCMP report. A bellwether of the new regime — the absolute volume of wholesale inventories exceeded that of retail inventories for the first time in December 2007, while inventory turnover rates that year began to fall.

“It seems like the more we evolve this (supply chain) industry, the more problems come back to the same key areas,” Wilson said in presenting her report in June. “Inventory optimization was paramount in the 1980s and 1990s, and we conquered it. Now it is at the forefront again, but the issues are much more complex and difficult to solve.”

The causes of the reversal in inventory
management fortunes are not hard to find.

Fuel costs have more than tripled since the 1990s. Price and wage inflation in offshore production markets, especially but not exclusively in China, have eroded the competitive advantage shippers used to get by sourcing outside North America. A weak dollar and faltering U.S. economy mean unsold freight has accumulated across lengthy and increasingly brittle supply chains.

Obviously there is no alternative to reasserting control over supply chains to bring inventory costs back down, or at least to slow their advance. Yet technology vendors said the next steps in inventory management — already undertaken by savvy shippers and a small but growing cadre of logistics providers — will require participants to collaborate in an increasingly uncertain and even hostile macroeconomic environment.

from the production process.

These systems and technologies were very efficient at cutting works-in-progress and finished-goods inventory inside the factory, Hill said. But as glo-balization took hold in the 1990s, and supply chains dragged in participants across borders and oceans, companies “probably had more inventory in the world than you have within your own four walls,” he said.

For a growing number of
multinational corporations, and
^{even for smaller companies that} Standards are outsource only part of their efforts or that _{market to global customers, Hill said, like t} “_{The scale has shifted from being inside – eve}“_{oothbrushes ryone knows your own four walls … to being mostly in the world today.}”
^{they need one, but The growth of global trade and the} xtension of transportation supply chains
no one wants to complicates the inventory management
equation. Everything is happening faster,
use the said Razat Gaurav, senior vice president
^{other guy’s. of global logistics at i2 Technologies. Shippers are advised to establish inventory management policies and} ly on the technolo”gy of pencil and paper. review them periodically, Gaurav said. _{Smaller, local manufacturing enterprises But instead of re-evaluating strategic sometimes still rely on those low-tech decisions annually, volatility in produc-}
means, and sometimes for good reason. tion sources, demand and costs now

“It was always inaccurate,” said Jerry are forcing shippers to review quarterly, Hill, vice president of industry consulting monthly or even biweekly, he said.

for manufacturing in the United States Meanwhile, longer supply chains typi-at Teradata, an inventory and warehouse cally mean there are more participants in data management technology company. the transportation and logistics process.

Compilations from multiple ware- That means more uncertainty and risk at houses too often missed stored product; every level of the enterprise, even as logis-cycle times made reports out of date tics managers try to coordinate visibility before they were complete. As enterprises across multiple enterprises including sup-grew, he said, “Eventually you could not ply and dealer networks. do physical audits any more.” Further, global inventory management

Starting in the 1970s, companies began must take into account factors that local installing material resource planning and enterprise rarely had to deal with, from enterprise resource planning technologies congestion across multiple modes and that centralized and automated much of remote seasonal changes to strikes, earth-the inventory control process. They also quakes and floods. “Companies that excel imported factory-oriented inventory strate- at inventory management principles are gies such as the Toyota Production System the ones that are constantly monitoring (ancestor of Lean and Just-in-Time) that these changes and can very quickly adapt stripped out inconsistencies and waste to them,” Gaurav said.

4.00%

3.75%

3.50%

3.25%

3.00%

2.75%

2.50%

’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07

Until about about three decades ago, inventory management rested large-