Overcapacity leads to business risk

Companies continue to stockpile inventory despite only slight increases in consumer sales. According to a new report by the Commerce Department, inventory levels rose 0.3 percent to a record high of $364.1 billion. Inventories of manufactured durable goods have gone up 26 of the last 28 months, leading to the risk of putting supply chain networks above capacity.

Having too much inventory can reduce the effectiveness of a supply chain, bogging down the system to create delays. Warehouses overflowing with product make it difficult for companies to properly keep track of merchandise, causing some items to become lost or damaged as goods are moved through the network.

Working with a logistics company can help businesses minimize the risk of overloading their distribution network. Proper warehouse management could allow firms to balance inventory to appropriate levels, reducing overhead and improving delivery times.

Unless consumer purchases increase, companies will eventually be forced to cut back on their orders, which will slow down factory production and delivery even further. This can make it difficult for businesses to receive additional product if the economy begins to improve. Third party logistics specialists can help organizations improve their ordering process to maintain a more effective supply chain.

Related Information





    File Under: Distribution & Warehousing