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Looking ahead to 2025, Baxter Planning customers anticipate somewhat lower expectations for inflation (<5%) while also having mixed concerns about the potential impact of tariffs. A 2:1 ratio expects tariffs to have a minor rather than major effect on their operations, according to Baxter Planning’s Service Supply Chain Industry Insights: 2024 Year in Review & 2025 Projections.
"These metrics highlight the service experience storm our customers are navigating," says Chad Hawkinson, chief innovation officer at Baxter Planning. "With inflation exerting significant pressure, companies are finding ways to improve efficiency, control costs, and continue delivering exceptional service."
Key takeaways:
- 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 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.
- 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-19 inventory buildup.
- With an increase in demand and declining inventories, Baxter Planning customers enjoyed an increase in inventory velocity of a +20.7%, resulting in improved operational efficiency.
- Fill rates and service levels held flat in 2024, changing -0.7% and -0.1% respectively, even as inventory reductions became more pronounced.
