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Supply Chain Graphic of the Week: US Inventories Now Trending Down after Pandemic Spike


Long Term Trend of Declining Inventory Levels was Reversed Coming Out of the Great Recession


Dec. 2,  2020


What's going on with US inventory levels?


Every now and again, SCDigest checks the numbers on the US Inventory to Sales (ITS) ratio, which tracks the level of US business inventories, measuring company inventories in aggregate compared to one month's worth of sales.


As can be seen in the graphic below, based on data through September, inventory levels declined steadily from the early 1990s until the start of the Great Recession in mid-2008. The ITS usually jumps in recessions, as businesses are caught at first with lots of inventory in the face of suddenly falling demand.


Coming out of the Great Recession, inventory levels started heading back up, rising to about 2000 levels in 2016, before being mostly flat until the start of the pandemic-induced recession in Q2 2020.


US Total Business Inventory to Sales Ratio



But inventories have now once again dropped back to near 2014 levels. Will they hold, drop farther, or start rising again?


What will be interesting to understand is the impact of the torrid rise of ecommerce on total inventories. They may rise, as businesses move more inventory to more locations close to customers to enable rapid deliveries.


Any reaction to our Supply Chain Graphic of the Week? Let us know your thoughts at the Feedback button below.


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