News
News
Deep inventory crisis! European and American enterprises still have to endure the hard times.
Aug 15,2023
When huge inventories hit an economic downturn with sluggish demand, it means that many American and European companies may have to endure longer than expected.
After the neo-crown epidemic affected the supply chain chaos, as well as the Russian-Ukrainian war pushing up energy and raw material prices, from beer, DIY tools, chemicals, to clothing, retail, wholesale, and manufacturing industries are desperately hoarding goods to protect themselves, resulting in high inventory levels.
Serious excess inventory
Industry executives and analysts say it has become more difficult for companies to cut inventories as higher borrowing costs and inflation dampen consumer demand.
Now, with borrowing costs rising and global demand falling, companies are starting to de-stock, but progress is far below expectations and could drag on until next year.
Eurozone manufactured goods inventories hit a record high in August last year, and according to the latest Eurozone manufacturing data, inventories did not begin to decline until May this year.
In the United States, data show that 46% of retailers believe that excess inventory is the biggest challenge at present, and 53% of retailers believe that if they cannot clean up excess inventory, their business will face a serious crisis.
The survey also found that small retailers with annual revenues of $100000 to $1 million have an average of $48000 in excess inventory, which is 22 percent of overall inventory.
Large retailers with annual revenues of $0.1 billion to $0.5 billion are under greater pressure than smaller retailers. Currently, 59% of large retailers have excess inventory, compared with 45% of small retailers.
When further broken down by product category, 92% of retailers of baby and toddler products face excess inventory problems, followed by luxury goods (55%), household goods/DIY and gardening (50%) and clothing (44%).
Excess inventory means more storage space is needed, which increases storage costs for retailers. Therefore, it is urgent to solve the problem of excess inventory, and many retailers have launched discount activities in an attempt to attract consumers to shop.
The Harm and Measures of Destocking
Products are capital, and the biggest problem with high inventory is to take up capital and raise the cost of business operations.
High inventory often means low turnover, in addition to the erosion of cash flow, inventory that does not match customer demand can also lead to higher product storage costs, wear and tear, depreciation and other costs.
Products with a useful life may have overdue obsolescence, resulting in a direct loss.
Destocking is not simply to reduce the total inventory, but actually to improve the turnover efficiency of inventory. From the perspective of total inventory, there is no so-called high or low level, but the turnover efficiency. So some right measures are needed.
1. the front and back information to speed up the transmission and feedback efficiency of information.
In some enterprises, many products can no longer be sold, and the back end is still in continuous production. Some sales have led to high inventory based on not looking at inventory conditions, or wrong judgment or prediction of customer demand information, false demand or wrong demand.
The most effective way to get through the front and back ends is to establish a stable and periodic communication mechanism, such as the operation of the S & OP(sale and operation plan) mechanism. The front end is responsible for the quantity of customer demand and the accuracy of product models, and the back end is responsible for product production, inventory and delivery. S & OP can effectively reduce inventory problems caused by information transmission errors.
2. shorten the order cycle and improve the overall operation efficiency of the supply chain
From the formula of Inventory Turnover Days: Inventory Turnover Days = Cycle Days/[Sales Amount/Average Holding Inventory]. If the order cycle is shorter, the more amount can be sold, which will effectively reduce the turnover days.
Improve the efficiency of order flow: from customer demand to order, the shorter the cycle for enterprises to execute orders, the more favorable.
Improve the efficiency of production and stocking capacity: the more quantity of production or stocking per unit time, the higher the efficiency, the typical methods are automation program, capacity outsourcing strategy, improve production flexibility and elasticity, develop a good peak and trough plan.
Reduce the delivery time of suppliers: the preparation of orders is often more affected by raw materials. The delivery time of suppliers is very important to shorten the delivery time of the whole order. The typical solution is to establish a strategic relationship with suppliers.
Adopt the whole chain, one inventory strategy: the inventory of enterprises is often more than one place, which may be distributed in different countries, regions, warehouses, distributors, customer warehouses, etc.
Need to establish a co-ordinated overall, intelligent scheduling, short time can output the best solution of the whole chain, a plate of inventory management system, in order to improve efficiency, effective use of inventory, good customer service.
Disclaimer: where not marked "original" and other words are derived from the network in good faith reproduced, copyright owned by the original author! After being collected and sorted out by the editor, I will share my study with you! If there is infringement, please contact delete.
If you need professional freight forwarding service, you are also welcome to scan the two-dimensional code contact at the beginning of the article ~
Previous Page:
Make global trade unimpeded
Contact Phone
Contact Us
Copyright ©Guangzhou Hongdex International Logistics Co.,Ltd
Hotline: 020-84608598
Whatsapp: 18027165010
QQ：2853396538
Email: 2853396545@qq.com
We will provide you with timely feedback
