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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The Supplier Inventory Challenge

I've noticed a little problem with supplier inventories recently. I actually blogged about this situation back in September. And it's been occurring a little too frequently as of late.

Yesterday I placed an order for some dress shirts only to find out that some tall sizes are out of stock for the next 3 months. Got a pen order this week -- no stock in any colors till late May. Jacket order last week -- no stock in my client's desired color till end of JUNE. Notice a trend here...?

My take is we're slowly but steadily emerging from the economic meltdown of the Fall of 2008. Clients have ramped up their marketing considerably vs. a year ago and suppliers are busy once again. That's the good news.

Unfortunately, the slowdown of 08/09 coupled with the subsequent tight credit market forced suppliers to make some tough decisions -- like limiting inventories. They tried to project -- as they've always done -- which products would sell the best and they ordered from Asia accordingly. But business has picked up and some suppliers have been caught short -- and maybe weren't in the best financial condition to begin with thanks to the recession.

So what we're dealing with now is an environment where many promotional items -- a lot more than usual -- aren't available. And we as distributors have to make a lot more phone calls checking stock because (and trust me when I say this) people in my business absolutely HATE having to call clients back after an order is placed and be forced to say 'you know those _ _ _ _ _ you ordered yesterday? No stock till _ _ _ _ _.' Ugh.

We will however, get through this. And it's my job to either find alternative sources for out of stock products or show you ideas - to begin with - utilizing items that ARE available right now. That's where my experience and the great support we get through Geiger come into play. We WILL make it happen for you.

However on the supplier side of our industry I think we're in a shake out phase -- one that to me and many others -- was an inevitable byproduct of the 08 economic collapse and resulting recession. There's a reset going on in our industry that's going to cause some weaker vendors to reevaluate their long term strategies and some stronger ones to gain market share. We've seen it with the recent Bic/Norwood merger and the Corvest collapse and sale.

And I think there's more to come..... But be assured that given our collective experience and Geiger's position of leadership in our industry, we'll make sure your business rests in the proper stable hands.

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Credit Crunch Impacting our Industry

Here's a little industry scuttlebutt I picked up this week while visiting with some decision makers on the supplier side of the promotional products industry. As we move toward the last quarter of 2009, we're now seeing the after effects of the credit crunch that has crippled so many companies over the course of this year. Suppliers have seen their credit lines reduced -- in some cases dramatically -- and where this affects us right now is with product inventory.

As America finally emerges from this awful recession, business is (finally) starting to pick up and products are now starting to sell out. A lot of these mugs, pens, hats etc have been sitting in supplier warehouses since last fall and because nothing had been moving, the suppliers stopped buying.

These products are finally selling, but now that credit has dried up, suppliers are finding their financial resources reduced and it's forcing them to make some hard decisions about which products they're going to restock -- at least for the short term. So this means some products which are now out of stock -- aren't going to be replaced anytime soon.

Over the past few days, I've been calling around to try to obtain the best pricing that I can for my clients on certain items, and what I've been hearing is certain colors - or in some cases all colors of some products - are out of stock with no replacement inventory due in at least until the end of the year. And based on what I've heard, expect this situation to continue for some time.

What does this all mean?

For me, it means I'm not placing an order until I check inventory levels first to make sure there's enough available to fill it. And if you're a buyer of promotional products, whether you work with me or someone else, get a confirmation that stock is available before committing to a project -- especially one with a deadline. Or at least have a plan B in mind if your top choice falls through.

Like the economy in general, this situation will correct itself over the long term. But from now through the end of 2009 be advised that stock on many items may well become an issue.