Double-digit inflation in the Service Supply Chain is driving companies to reduce inventories, improve inventory velocity, and maintain service levels amid economic uncertainty.
AUSTIN, Texas, Feb. 25, 2025 /PRNewswire/ — Baxter Planning, the leading provider of Service Supply Chain (SSC) technology, today released its Service Supply Chain Industry Insights: 2024 Year in Review & 2025 Projections, offering critical insights into the impact of inflation, demand trends, and inventory strategies shaping the SSC industry.
Key Findings:
Inflation Continues to Surge – Standard part costs increased by over 10% in 2024, with consistent monthly growth throughout the year. Projections indicate this trend may persist into 2025, exacerbated by potential tariffs and broader macroeconomic conditions.
Demand Growth Outpaces Inflation – Demand continues to increase in the Service Supply Chain (+14.5%), reflecting strong inflation. When normalizing for inflation, demand grew less than 5% in 2024 with a large standard deviation reflecting the varied businesses within the sample population. The normalized demand reflects solid, if not overwhelming, growth in service businesses generally, as well as increasingly demanding customers and greater business complexity.
Inventory Optimization in Focus – Inventories experienced minor growth in 2024 (+3.7%). However, when normalized for inflation, inventories actually decreased >5%. This likely reflects continued focus on cost efficiency given the significant impact of inflation, as well as potential continued burndown of post-Covid inventory buildup.
Efficiency Gains Drive Higher Inventory Velocity – With an increase in demand and declining inventories, Baxter Planning customers enjoyed an increase in inventory velocity of an astounding +20.7%, resulting in improved operational efficiency.
Service Levels Hold Steady – Fill rates and service levels held flat in 2024, changing -0.7% and -0.1% respectively, even as inventory reductions became more pronounced.
Looking ahead to 2025, Baxter Planning customers anticipate somewhat lower expectations for inflation (