What: the Economist reviews how logistics is a moving field in these troubled times.

Why it is important: Want resilience? Forget about just in time and start stockpiling products.

Supply chain disruptions have continued in 2023, from a collapsed bridge blocking the Port of Baltimore to earthquakes in Taiwan impacting chip production. These issues, while not as severe as the COVID-19 pandemic, serve as reminders for companies to build more resilient supply chains.

The simplest way to do this is to hold larger inventories of raw materials and finished products. However, this comes with significant costs. Higher interest rates make the short-term financing needed for these larger inventories more expensive. Limited warehouse space also means higher storage costs. Major companies now have billions more tied up in working capital compared to pre-pandemic.

This inventory buildup reflects a longer-term trend. Retailers had been able to push more inventory onto their suppliers through the 1990s and 2000s, as globalization made supply chains more efficient. But now the balance of power is shifting back, with retailers regaining control.

Retailers now have better data and insights into consumer demand, putting pressure on suppliers to deliver "on time in full" (OTIF). Manufacturers have two options to meet this - either make products in advance based on forecasts, or build excess production capacity to react quickly. Both options come with financial costs.

As inventories build up further down the supply chain, it creates a ripple effect. Channel inventory (goods sitting with distributors/retailers) is 30-110% higher than pre-pandemic in many industries. This makes retailers and distributors reluctant to order more, causing further inventory accumulation at factories.

To ease the strain, manufacturers are trying tactics like reducing product variety. Hasbro, Coca-Cola, and others are paring down their product ranges. This makes inventory management easier, though it comes with the risk of losing out on consumer trends.

Overall, the article suggests that inventory challenges and the shifting balance of power in supply chains have become a chronic condition for manufacturers. The ability to dictate terms is highly dependent on having the "hot" products that consumers demand at any given time. Maintaining the right inventory levels and production capacity remains an ongoing challenge.

Supply chains: who is the boss?