Choosing Inventories when Economy Recovery is Uneven

A Wall Street Journal article (January 27, 2011, B6) describes the challenges associated with choosing the right level of inventory given uncertainty in the US economic recovery. The article claims that Kimberly Clark managers cut production in the fourth quarter of 2010, but stronger than expected demand meant a potential $ 20 million hit in profits.  Harley Davidson is described as having seen a 20 % increase in revenue in Q4 2010 but dealers cut inventory to its lowest level in many years.  Other companies such as 3 M anticipate increasing demand in Q1 of 2011 and are thus building inventories.  Yet others claim they plan to build up stocks now to hedge against increasing prices.  The building block of supply chains in choice of inventory in the presence of demand uncertainty. Has that decision become more complicated in recent years ? Or is the inventory decision closely linked to firm level risk tolerance ? The overall US inventory levels are increasing – does that suggest a recovery around the corner or continued slowdown ?

About aviyer2010

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