The next time you walk through your local hardware store or building supply center, notice the variety of products for sale and the volume available. Try to imagine what it must be like to select, order, organize, and maintain such a large number of items. If the store is part of a national chain, think about the task that faces management every day. What sells, what doesn’t, what gets returned, how does it get there? All of these functions can be loosely described as supply management, and in large companies, many hundreds of staff are involved in this process.
The Institute of Supply Management (ISM) is a non-profit association based in Tempe, Arizona, in the United States. It was founded in 1915, and today, membership exceeds 40,000, making it the largest supply management association in the world. The institute has developed dozens of measurement tools and standard procedures for such things as purchasing, inventory control, material management, transportation and logistics, as well as warehousing, distribution, planning and forecasting. This evolution has created the supply management profession responsible for trillions of dollars worth of business transactions every year.
The report is an economic forecast arrived at by surveying 300 purchasing managers in the manufacturing sector in the U.S., once a month. The index is representative of 20 industries in 50 states, and is made up of 5 components equally weighted at 20% each. The information covers new orders, production, employment, supplier deliveries, and inventories. An index result of over 50 indicates growth or expansion, under 50 represents contraction, with 50 even indicating a balance between growth and no growth.
The report for October,2009, issued today, November 02, yielded a PMI of 55.7%. (PMI=Purchase Managers Index). This was the third consecutive month of expansion, and overall economic growth was up for the sixth month in a row. Of industries surveyed, 13 out of 18 reported growth, with all index commodities up in price.
The depth of this report, along with ease of understanding and straight forward presentation, make it a leading economic indicator. It can be a significant market mover.
