Tuesday, January 29, 2008

Digital Doom and 0 Days Inventory

In reponse to

Backseat Driver
Riders Of The Storm
Jerry Flint 01.29.08, 6:00 AM ET

In this industry, preparing for bad times means reducing inventories of unsold cars and trucks and cutting production. If manufacturers are not overstocked, they can ride out the bad months without losing as much money in sales incentives to lower those stocks. Having fewer cars and trucks to sell when business falls is that "ounce of prevention" mother used to talk about.

Overall stocks are lower for some automakers, and not in bad shape for a few others.

The days’ supply number is the inventory divided by the daily sales rate from the previous month. When things are worrisome, lower is better. As a rule, manufacturers don't fret too much about inventories if the supply on a vehicle is 60 days or lower.

I left the following post at

Comments for Comments 1-2 of 2
Riders Of The Storm
Jerry Flint
When a hurricane comes, we board up the windows and batten down the hatches. The same goes for Detroit.

Posted by johnmba | 01/29/08 11:16 PM EST

Excellent metric to focus in on Flint! In fact, most digital industries have thrown out inventory all together. Think of oil LPs vs. plastic CDs vs. bits on an iPod with a waiting list and no inventory. As the auto industry struggles just like every other industry (consumer electronics, TVs, radios, media, music, etc.) facing a digital transformation, inventory will continue to go away as JIT or the Dell or should we say Prius or Tesla pre-order model takes place. How much profits are earned from 0 days of inventory?

I've read that Dell has its supplier's trucks backed up to it's warehouse and almost through the door and then sells you a computer and finally puts things like the CPU into inventory for only during the assembly process. Now if the auto industry can narrow things down to a commuter car and light truck platform just like a desktop and laptop plastic case with everything inside customized for the end user, the digital transformation will finally turn pain into profits.

The bottom line is, "did Hollywood save music and movies with an iPod?" Nope, a hi-tech company from a related industry...

In other words, "will the digital iPod for the auto industry come out of Detroit's hurricane?" Probably not... I imagine after many startups and failures, we might see the digital car with the new interface come out of the West and/or Asia.

Detroit might want to study the demise of companies like Zenith in TVs and the slew of bankruptcy in Hollywood as music and movies went digital...


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