As the PMI Turns: A Tool for Supply Chain Managers

SUMMARY Supply chain managers use the PMI, an index of business activity and proxy for the general business cycle, to obtain valuable information important to strategic managerial planning. This research explores a methodology to provide managerial insight into the general business cycle by tracking and forecasting cycle turns in the PMI. A regression model is developed based on inherent cycles in the PMI between 12 and 65 months to forecast turning points for the index and anticipate changes in the business cycle, which is superior to the more commonly used Box‐Jenkins forecasting technique. Strategic planning using this knowledge allows management to optimally adjust long‐term levels of production, inventory, employment and orders as necessary.