Reduction in inventories to avoid recession

The economy is threatening to collapse, at least in export-dependent Germany. The key indicator of economic development for economists, gross domestic product, fell by 0.1% in the last quarter. Brexit is just around the corner and the trade conflicts between the USA and China are threatening to intensify. We also have a fairly reliable economic indicator in our consulting business: the rate of inventory reduction projects.

In recent years, practically since the economy emerged from the dip following the global economic crisis of 2008/2009, the goals of “increasing delivery readiness” and “automating planning and scheduling processes” have become increasingly important. The previously central goal of reducing the number of employees took a back seat to the other goals. The picture has been changing again for around nine months. We are increasingly being called in to systematically and sustainably reduce inventories. Most of our customers are still doing well, but they are already battening down the hatches in view of the impending economic storm.

That’s right, because tightly managed inventories in supply chains, as a study by Goldman Sachs shows, make a significant contribution to reducing economic cycles. A company that does not tie up unnecessary capital has more liquidity and can react more moderately than a company that is financially strapped because it has money tied up in inventory. Fast braking and fast acceleration not only lead to sudden traffic jams in heavy traffic on the highway, but also in our supply chains and thus in the entire economy.

Image rights: Gerd Altmann/

Picture of Prof. Dr. Andreas Kemmner

Prof. Dr. Andreas Kemmner

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