That old saying "All bets are off" seems to apply in more than a few situations these days, especially when it comes to predicting anything with any certainty in business. Due to the recession's effects on most all industries, inventory management is like walking the razor's edge.

Demand is a concept that even the most seasoned supply chain managers must guess at in many circumstances. In part, this is due to consumers' unpredictable purchasing habits and the US government's economic stimulus getting placed into savings accounts instead of being used for purchases as intended.

Inventory costs money to have on hand. As a way of managing those inventory costs, some companies slashed inventory as the recession's impact grew deeper and deeper in the past two quarters of this year and late last year.

For suppliers during this recession, having enough raw material, works in progress, or finished products on hand to fill customer orders has been difficult and potentially costly, especially as demand was tougher than ever to predict. Buyers who purchase inventory from suppliers found that there wasn't enough available to stock their retail shelves.

Sectors that are starting to recover from the recession – such as necessities like pharmaceuticals, food and beverage, and inexpensive consumer electronics – are finding that although customers are coming in the door, their inventories and the inventories of the partners they buy from don't support the demand due to its unpredictability. And often, what consumers are finding is that the shelf is empty when they are ready to buy.

Now as signs are pointing to an economic recovery, I wonder if it's not time for a refresher on inventory management? Every once in a while in this blog, I choose a piece of jargon we use in our lives every day and look at its true meaning, which can get lost from over-use and misuse over time. "Inventory management" is my pick this month.

Examining the meaning of the phrase 'inventory management' might be revealing of the state this economic mess has left some companies' inventories in and what can be done to plan ahead for even more changes that are on the way. We know what the phrase means now, but how is the meaning going to change as the unpredictable markets affect demand planning?

In the immediate past, the recession created a situation where "inventory management" seemed to be spelled "cut, cut, cut." Cutting costs, through the reduction of inventory and other means, was being done across the board without enough forethought.

In the face of the economic downturn, the advice we gave our clients was to maintain talent, maintain business strategy, and cut all other costs. Doing so strengthens the company and helps with recovery, along with growth and prosperity once the recession ends. In terms of inventory cost reduction, we recommended that companies consider selling inventory sooner, holding less of it, owning less of what is being held, reducing inventory holding costs, planning demand more effectively, measuring all progress, and as a final effort, liquidating if needed.

Stocks are running low, and some companies are in a place to increase inventory now. As you plan inventory levels, consider that the question isn't, "When will the economy recover?" Instead, ask, "When will my industry recover?" Certain sectors are set to recover or are recovering now from the recession. Your inventory management techniques will be affected by the bottoming out of your industry. See the table below on when certain sectors will recover:

Inventory management will also be affected by the nature of the post-recession consumer. The consumer today is significantly changed and still uncertain. Reports show that people are putting more money into savings than they have since 1993.

Consumer confidence is still unsteady. Even the markets themselves are worried and distrustful of news of that the economy is rebounding, so you can imagine how the consumer feels. But this is not true of all sectors, as the table above shows, where the buying is already starting and where it’s set to start up in upcoming quarters.

Apply a fresh perspective to inventory management best practices and consider the new forces that will affect it. After all, it’ll be the holidays soon, and the last thing anyone wants then, consumers included, is the dreaded stock-out.

How is your company managing inventory differently these days? What are your plans in the near future?