The Supplier Inventory Challenge - Part 2

A short time ago I blogged about inventory shortages that I personally had encountered with our suppliers - a trend that, to me, seemed to be occurring a lot more frequently than normal in recent weeks. Turns out I was definitely on to something. This past week, the President of Polyconcept, one of the larger suppliers in our industry (owner of Bullet Line) advised all its affiliated distributors that it has been having major issues with its supply chain and product inventory. He also said the situation will not be immediately rectified.

He alluded to reasons that I had cited in my previous post, but also noted a few more that I'm going to pass along, as I'm sure this will be affecting all industry suppliers if it hasn't already.

I had previous blogged about my belief that the continued tight credit market and the downturn caused by the Fall 2008 economic meltdown had forced suppliers to make hard decisions on inventory. Now factor in news that China's own domestic economy has recovered far more quickly than the U.S. and Europe -- in fact it's booming right now --and that recovery has caused a labor shortage in their factories. As a result, production timelines are longer and the costs of doing business over there are increasing. And since at present, 80 to 90% of all promo items are manufactured in China, this is all a recipe for inventory trouble.

My own view is that near term, I see prices increasing and more product shortages. However I also see an advantage here for the deeper pocketed suppliers because they'll be in a position to allocate more money to grab as much inventory as they can to meet their distributors ever increasing needs. Bullet announced that they're responding by pouring more dollars into inventory and adjusting their Substitute Item policy to one where they'll always offer either items of higher value or generous discounts on similar priced items for anything that's out of stock long term.

However, small supplier operations that rely on Chinese made product are in for a very rough go of it in the near term because they lack the resources to react the same way a Bullet Line would.

We at Geiger will continue to monitor this situation and will utilize our own resources to the fullest to help steer our clients through the rocky 'inventory road' that lies ahead.

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