Could Supply Chain Overcorrection Result in Excess Inventories?

Abstract

Global supply chains operated under historic levels of stress in 2021. Despite inefficiencies and shortages, production and the volume of goods moved exceeded pre-pandemic levels during the past year. Supply chains have lacked the flexibility to meet the surge in demand for goods from advanced economies. To mitigate disruptions, firms have generally responded by increasing inventories, rather than taking more dramatic measures like moving production closer to home markets. Supply chain stress should abate during 2022, but firms may face excess inventories and declining prices when the boom in consumer demand for goods eases.

Author:

Erik Roos