U.S. firms improve inventory turns

By Staff -- Logistics Management, 5/1/2000

A new study says that United States-based technology companies improved their performance from an average of 4.8 inventory turns per year in 1997 to 5.4 inventory turns in 1998.

Manufacturers in other parts of the globe didn't fare as well. According to PRTM, the Waltham, Mass.-based management consulting firm that conducted the study, European technology companies improved only slightly, from 3.8 inventory turns in 1997 to 3.9 in 1998. Japanese companies decreased from 4.6 turns in 1997 to 4.4 turns in 1998.

According to PRTM, the inventory performance trend in the United States is driven by efforts to improve margins. "Due to strong price pressures, most U.S. technology companies are on the offensive to lower costs through improved inventory management," says PRTM Principal Todd Bargman.

Inventory-reduction efforts in Europe, on the other hand, have been hobbled by companies' failure to adopt a pan-European focus. The economic downturn in Japan, meanwhile, has hurt that country's efforts to streamline inventory.

Despite the slow pace of change, progress is inevitable, says Bargman. "The movement of inventory upstream in the supply chain is being enabled through the use of advanced information-management tools and techniques, such as e-commerce, as well as redesigned business processes oriented toward an integrated supply chain."

PRTM's annual study tracks inventory performance of 350 companies worldwide in eight industry segments: aerospace and defense, chemicals, components, computers, equipment, pharmaceuticals, diversified, and telecommunications.