Journyx Project Management Blog

Here is an interesting little fact: Year to year GDP growth volatility for America has dropped from 3.5% in the early 80’s to .5% today. This means that back then you couldn’t predict from one year to the next how fast the economy would grow. Recessions were harder and booms were boomier.

In this day and age, however, things are more stable. Economists have termed this the “Great Moderation.” But what changed to cause the economy to become less bumpy?

A recent article in “The Economist” magazine (9/22 p. 35 – The Turning Point) summarizes reams of academic literature to deliver 3 causes.

Economic growth has become less volatile due to:

* Larger more flexible and diverse credit markets

* Smarter central banks – the fed has gotten much better at keeping inflation down.

Alan Greenspan recently argued that he was lucky and that his job was made much easier over the last 20 years by the globalization that was accelerated by the fall of the Berlin wall. Half of the globe got thrown into the free market economy and that helped keep a lid on wage pressures, even in the face of rapid economic growth and low unemployment in America.

* Improvements in managing inventory born of supply chain management software and the abilities of companies like Fed-Ex (one of our customers) and UPS.

Look at that last one again. To think that something as mundane as supply chain management software could make the world’s economy safer for billions of people. How is this possible?

50 years ago, warehouses were full of inventory that represented a huge capital investment, and slight changes in consumer demand could have large effects on the economy. Inventory levels were once much larger relative to the size of the economy and small changes in demand could blow up into recession.

Thanks to improvements in technology, firms now have better market intelligence on customer demand and they now produce things in smaller batches – sometimes batches of one – which allows them to match production to demand very precisely.

Some companies like Dell in my city (Austin, Texas) have no inventory at all other than that which is currently in transit via Fed-Ex or UPS.

And this sort of business is literally saving the world.

- Curt Finch, Journyx CEO