There was a rather timely article in the Financial Times this week titled EU inventories low amid recovery doubt.  (free preview subscription sign-up may be required)  The article notes that European supply chains are still holding very low stocks of inventories because of lingering doubts by senior executives of the durability of economic recovery in 2010.  The cumulative effect is that any new orders are being placed at very short notice, seven days or two weeks maximum, forcing multiple dependent value-chains to have to be more responsive to unplanned demand. We all know that this phenomena is not just limited to Europe, but extends across global supply chains.

This article also reinforces Supply Chain Matters continuous commentary in noting that spot shortages are going to be a continuing challenge in 2010 since there is literally very little inventory in industry pipelines.  I coined the term Great Inventory Backflush in December of 2008 as we observed how rapid inventory was taken out to the lowest levels of industry value-chains. For most of 2009, that situation has remained with the exception of periodic required inventory replenishment cycles. U.S. and global retailers for the most part, have done a masterful job of holding lean inventories leading up to the 2009 holiday buying season, which is now paying dividends in increased profitability margins.

The takeaway remains that planning supply chain fulfillment needs for the bulk of 2010 will necessitate the ability to be more agile and responsive to demand events as they occur.  If your organization is still struggling to overcome this capability, you had better get this elevated in the project agenda.

Bob Ferrari