Encouraged by Oyo Geospace's Investment in Inventory Management

| About: Geospace Technologies (GEOS)

A recent article at Automation.com notes that Oyo Geospace (OYOG) recently installed dcLINK for inventory management.

We’re able to keep everything real-time by using dcLINK, said Todd DeLoach, Warehouse Manager, OYO Geospace. Now we know immediately that needed items are available and that they have been committed to the work order or the sales order. That’s real-time for us, and it’s a great, great benefit.

The article goes on to note the efficiencies gained by using dcLINK. I’m not familiar with this inventory management system, but I find it encouraging that Oyo is focusing more on inventory management. When oil prices dropped and Oyo reported their first quarter earnings, I noted that ballooning inventories led to significant borrowings. Inventory was reduced somewhat in the second quarter, falling from $69.3 million to $66.3 million. Long production cycles at Oyo likely lead to high inventory levels, but if Oyo is investing in improved inventory controls, it should lead to lower inventory levels and increased cash flow.

With oil near $70 per barrel, up from lows near $40 per barrel earlier in the year, revenue and earnings should improve for Oyo Geospace in the coming quarters. If inventory and accounts receivable also improve, Oyo will have put their balance sheet issues behind them, ready to grow again with the rebound in oil prices.

Disclosure: No position in Oyo Geospace