Although it is not typically the realm of small manufacturers, some companies are trying to link activity on their assembly lines to the blips of the grocery store scanners indicating the true demand for their products. Information exchanged Newell Rubbermaid Inc., the Freeport, Ill., owner of Mirro Manufacturing Co. plants in Wisconsin, increasingly is exchanging information with retailers over electronic networks. Although its information is not coming directly from the checkout stand, Jewel-Osco sends some manufacturers a daily electronic message when it ships cases of products from its warehouses to grocery store shelves. If we are selling something slower or faster, they may want to adjust their manufacturing. More companies are expected to follow in Jewel-Osco's footsteps, a move economists applaud.
Chain reaction escalates To economists, excess inventories are a classic cause of recession.
As unsold goods pile up, factory managers cut back on production. That ripples through the economy. Profits fall, taking stock prices with them. Worker paychecks either shrink as overtime dries up, or disappear through layoffs. As workers earn less, they buy less, and additional companies find themselves with unsold goods.