An interesting phenomenon has shown itself in this current recession… shrinking inventory levels. A reality we have been experiencing for a number of weeks now is that everybody has been cutting inventory levels because of this recession. According to the article, this has been continuing for many months.
Manufacturers have been cutting stock levels…and this has happened all along the supply chain…including the person making the signs. Obviously, when items aren’t selling, unused inventory represents cash! When so many lack confidence that normal sales levels will not resume any time soon, they look at this unused inventory and see an opportunity. As one author stated,
“Most businesses… tend to carry excess inventory during a normal business cycle. Examine your inventory levels and you will probably find some room to free up cash.
But there is a downside to ultra-lean inventory levels. When we come to a seasonal uptick in business, such as we have seen since late February and early March, there is not enough materials on hand to make signs. And this is true from the sign shop, to the distributors, and even the manufacturers.
Yup, that’s right…everything is now built to order, (instead of being built to stock) meaning we are seeing abnormal additional lead times in replenishing our (and, thus, your) stock. In the past, manufacturers would begin increasing their inventory levels in January, in preparation for the spring rush. The current recession has killed those normal business cycles. Lack of confidence has made everyone cautious. Lead times that were normal last year have doubled, or even tripled, this year.
What is the result? Supply disruptions, which create out-of-stock problems from top to bottom. Our prediction? Stocking levels should get better in the next few months or so, but it is best that we all plan ahead and carry just a little extra safety stock for those bread and butter jobs we all get. Right now, however, low stock levels are a real pain. For everybody!