Commentary: Caution—Bullwhip Effect Ahead
Even though global supply chains are regaining their footing as the Covid-19 pandemic begins to ease in much of the industrialized world, recent data suggests that many businesses are about to be knocked off their feet again. Uncertainty surrounding the demand predictions needed to drive supply-chain decisions-making increased markedly during the past 15 months as the ripple effects of the pandemic disrupted traditional supply-and-demand patterns around the world. Toilet paper shelves were empty in most stores, and the construction and travel industries ground to a halt. Now, pent-up demand, the dissemination of pandemic relief checks and vaccinations are spurring spikes in consumer spending, triggering shortages of many products that were overabundant a year ago. From lumber to semiconductors, markets are experiencing price run-ups and stockouts, stoking inflation fears. The overall ratio of business inventories to sales fell to 1.23 in March, the lowest level in U.S. government records dating back to 1992. This measure is on a steep downward trend from a high of 1.68 in April 2020.