January 4, 2010
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The November NFIB Small Business Economic Trends report shows a continuing malaise among small business owners relative to sales, profits, and inventories. But the chart below, taken from the NFIB data, suggests inventory levels may be close to stabilizing.
In October, small business inventories declined modestly. Specifically, net negative 26 percent of all owners reported gains in inventory stocks, two points worse than September. SMB owners are almost satisfied with their inventory levels, however. A net-negative three percent (down three points) reported their stocks as too low – in other words, we’re close to “neutral,” or inventories in balance with demand. But reflecting poor sales expectations for the next three months, owners’ plans to add to inventories are still in negative territory, albeit up three points to a negative three percent of all firms (seasonally adjusted).
In other words:
- inventories are down
- sales projections are soft
- no plans to add to inventories
- but owners are close to satisfied with their inventory levels
Does this set the table for a period of growth: inventories are cut as low as they can go, from there it’s all upward? Or is this a new normal? How do you see inventory plans for your business?
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Julie Rains 2 years 4 months and 22 days ago
Hopefully, low inventory levels mean that it's all growth from here but can also mean that inventory is being well-managed (also a great thing). And, owners may be doing well to have serious, effective controls on cash flow. Some, though, need to make sure that they are looking not just at the bottom line but also at the front line (speaking to those who deal directly with customers): are sales being lost or delayed because of lack of inventory? are service levels slipping below agreed-upon delivery dates? This is the tricky part of managing in the recession, being ready to capture sales but not know when the sales will be coming.