2. Technology has revamped inventory management

How Technology Has Revamped Inventory Management

Technology isn’t just transforming the consumer story. It’s having a similarly dramatic influence on industry, resulting in efficiency gains not reflected in traditional productivity measurements.

For instance, based on corporate capital expenditure data accessible via Bloomberg, it’s clear that U.S. investment is generally accelerating. However, the cost of that investment is going down, allowing companies to become dramatically more efficient in order to better compete. Similarly, with the help of new technologies, many corporations have refined inventory management practices, or have adopted business models that are purposefully asset-light, causing average inventory levels to decline over the past few decades. As the chart above shows, among the top 1500 U.S. stocks by market capitalization over the past 35 years, the percentage of companies reporting effectively zero inventory levels has increased to more than 20 percent from fewer than 5 percent, an extraordinary four-fold rise.

How Technology Has Revamped Inventory Management

Market Realist – Technology has revamped inventory management for companies in a big way. More and more companies are carrying less and less physical assets even though they’re churning out tangible, physical, marketable goods. Alibaba (BABA) is one of the world’s largest retailers, but the company doesn’t hold any inventory—unlike its peers. The same applies to Uber, which doesn’t maintain its own fleet of cars but nevertheless is a leader in its sector. Technology (VGT) and innovation (XT) have enabled companies to generate value without heavy inventory carrying costs.

Tesla Motors (TSLA) is another prime example. The company, known for its innovation, offers an extraordinarily simple buying experience by making factory-direct sales. Tesla doesn’t have any dealerships, cutting out middlemen entirely. Customers can build, customize, and order cars through the company’s website. The company produces more value with fewer employees and capital than its peers. For example, General Motors (GM) creates $1.85 of market value per dollar of physical assets and $240,000 market value per employee. On the other hand, Tesla creates $11 of market value per dollar of physical assets and $2.9 million of market value per employee (Sources: Geoff Colvin, fortune.com).

The above graph shows how more companies are becoming less reliant on physical assets to generate value. Apple (AAPL) generates $30.2 of market value for every dollar of physical assets, while the metric stands at $30.8 for Twitter (TWTR), $53 for Facebook (FB), and $101 for Visa!

This game-changing trend isn’t accounted for in any of the productivity and consumption metrics. The current statistical tools are unable to measure the rise in efficiency and cost-saving through the advent of a sharing economy. In fact, the US economy may actually be a lot stronger than we think because of this very factor.

Latest articles

This year, Pfizer (PFE) stock has fallen 0.34% and Bristol-Myers Squibb (BMY) stock has fallen 6.48%. Both companies are focused on strengthening their position in the high-growth oncology and immunology markets. Let's take a closer look at each.

Walt Disney’s (DIS) latest movie, Toy Story 4, has reportedly broken records in the opening weekend with $118 million in sales. However, the opening weekend collection was behind analysts’ expectations of at least $150 million in the first weekend.

24 Jun

Will Home Depot’s Upward Momentum to Continue?

WRITTEN BY Rajiv Nanjapla

As of June 21, Home Depot (HD) was trading at $209.39, which implies a rise of 9.7% since the announcement of its first-quarter earnings on May 21. Also, the company was trading at a premium of 32.4% from its 52-week low of $158.09 and a discount of 2.8% from its 52-week high of $215.43.

On June 21, Aurora Cannabis (ACB) made an announcement that indicated that it will move towards higher margin vape products. In addition, the company also believes concentrates and edibles will command higher margins. In anticipation of this development, the company announced the expansion of its facility to capitalize on growth related to these segments.

Shares of Mondelēz International (MDLZ) are scaling new heights thanks to its stellar gains so far this year. Mondelēz stock is up 38.0% on a YTD (year-to-date) basis, and it closed at $55.25—just a shade lower than its 52-week high of $55.71—on June 21.

24 Jun

How Long Will Facebook's Libra Fuel Bitcoin Rally?

WRITTEN BY Mayur Sontakke, CFA, FRM

Ever since the news about Facebook’s (FB) cryptocurrency project broke, Bitcoin has rallied on the hope that Facebook’s entry in the space will help make cryptocurrencies mainstream. Facebook’s cryptocurrency will be called Libra and will be governed by an association with 28 founding members across industries.

172.31.59.107