at least to the wholesale channel.
The current inventory-to-sales ratio—a measure of a
company’s on-hand inventory relative to its net sales—
would seem to bolster the argument for greater ordering
velocity. According to the U.S. Census Bureau, the retail
ratio stands at about 1. 28, which is at or near all-time lows.
The ratio has been trending downward since 2000, but
began to drop in earnest in the wake of the 2008–09 recession. The ratio spiked during the worst of the downturn
due more to collapsing sales than to any other factor.
That the ratio has stayed at these levels since mid-2010
even with a pickup—albeit modest—in retail sales activity
indicates that either sales remain sub-par or retailers are
doing a better job of calibrating supply and demand—or a
combination of the two.
BETTER TOOLS
The advent of high-tech forecasting tools has clearly been a
boon to inventory management. Retailers and manufacturers alike have greater visibility into their demand patterns
and can adjust supply flows quickly and precisely. This
reduces the need for guesswork and the inventory over-ordering that comes with it.
This is particularly true with e-commerce orders, where
an estimated 98 percent of sales data are generated at the
point of transaction. Leveraging that data, retailers can do
a superior job of gauging customer demand. They then
return that information to manufacturers and their sup-
pliers, enabling them to better plan their production
schedules.
