What now for supply chains?  Inflation, e-commerce and over-stocking are all driving change

The Inventory Bounce

Reconstituting inventories right now may have surprising impacts on the long, and still sluggish, global supply chains. The restocking is in fact a form of “inventory bounce”. The increased production that enabled the increase in inventory levels in turn surely increased demand from upstream supplies, their upstream suppliers, and so on. The demand signals moving up the stream may be very difficult to identify and distinguish from genuine increases in demand. The risk for confusion is higher knowing that demand for goods is at an all-time high, as consumers spend less on services during the COVID-19 omicron wave.

This is a classic root cause for the bullwhip effect: the obscuring of true demand signals with changes in inventory holding policy. Surely not helping is the light being shone on just-in-time supply chains. Some companies may be looking to increase their baseline safety stock levels after the painful experience of the last few months of…