**London**: A recent report from Baxter Planning highlights how rising inflation is prompting companies in the service supply chain to refine inventory strategies and maintain service levels, amidst a backdrop of significant cost increases and shifting demand patterns expected to influence 2025.
Increasing inflation within the Service Supply Chain (SSC) has prompted companies to adopt strategies aimed at reducing inventories, enhancing inventory velocity, and sustaining service levels, according to a recent report from Baxter Planning. The report, titled “Service Supply Chain Industry Insights: 2024 Year in Review & 2025 Projections,” highlights critical trends and challenges affecting the industry.
The report indicates that standard part costs surged by over 10% throughout 2024, with expectations that this trend may continue into 2025, potentially exacerbated by impending tariffs and ongoing macroeconomic pressures. Despite this inflation, demand within the SSC grew by 14.5%, reflecting the complexities of various businesses involved, but when adjusted for inflation, the actual demand growth was under 5%. This suggests that while there is notable growth, it is tempered by the effects of rising costs and customer expectations.
An emphasis on inventory optimisation has become increasingly apparent, as the report notes a modest inventory growth of 3.7% in 2024. However, once adjusted for inflation, inventories actually saw a decline of more than 5%. This indicates a concerted effort by businesses to maintain cost efficiency and address any leftover inventory from the post-COVID era.
Customers of Baxter Planning experienced a remarkable increase in inventory velocity of 20.7%, which contributed to enhanced operational efficiency despite a challenging market environment. Yet, service levels, measured through fill rates, remained relatively unchanged, with minor fluctuations of -0.7% in fill rates and -0.1% in service levels.
Looking ahead to 2025, expectations for inflation appear to be somewhat moderated, with forecasts predicting levels below 5%. However, concerns regarding tariff impacts remain prevalent, with a significant portion of participants anticipating only minor effects on their operations.
Chad Hawkinson, Chief Innovation Officer at Baxter Planning, commented on the findings, stating, “These metrics highlight the Service Experience Storm our customers are navigating. With inflation exerting significant pressure, companies are finding ways to improve efficiency, control costs, and continue delivering exceptional service.”
Baxter Planning continues to monitor these trends, aiming to provide clients with vital insights that could assist in navigating the evolving landscape of the Service Supply Chain.
Source: Noah Wire Services
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