Could Destocking Be Near An End?
While most people say that initial rounds of inventory reduction were probably a good thing, bringing on-hand inventories
more inline with demand, the question always was how far will it go and for how long.
Recent reports - including
the results
of the Baird Industrial Distribution Survey - say destocking may be coming to an end in the last half of this year. While
that may have some positive implications for sales, the end of destocking likely will not be the magic bullet to ramping up
stalled factories soon.
Why? According to the Baird Survey, in the second quarter: "Inventory levels continue
to decline with no restock expected in the near-term. Nearly 7 out of 10 ...
While most people say that initial rounds of inventory reduction were probably a good thing, bringing on-hand inventories
more inline with demand, the question always was how far will it go and for how long.
Recent reports - including
the results
of the Baird Industrial Distribution Survey - say destocking may be coming to an end in the last half of this year. While
that may have some positive implications for sales, the end of destocking likely will not be the magic bullet to ramping up
stalled factories soon.
Why? According to the Baird Survey, in the second quarter: "Inventory levels continue
to decline with no restock expected in the near-term. Nearly 7 out of 10 distributors continued to reduce levels during the
quarter; more than half expect to maintain current levels during the third quarter." The survey results go on to say
distributors are more hesitant about upping their inventory levels while the future remains so murky.
It's not
really surprising: The economy just provided a big incentive for distributors tobecome lean and enforced the idea in manufacturing.
In a recent investor call, 3M CEO George Buckley talked about how the diversified manufacturer is restructuring its plants
to do more with less, while keeping the flexibility to meet "x-factor" demands such as those that came up during
the H1N1 virus.
With inventory levels at new lows, now may be the time to implement policies that keep your company
efficient and adaptable to economic conditions while maintaining the levels of service your customers are used to.
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