According to the Commerce Department, wholesaler inventories decreased by 0.4% in March from the previous month. Another survey of business owners, the Logistics Manager Index, conducted in April found that inventory had barely increased. Management's decisions to increase inventory or keep shelves lean can say a lot about how they think about the economy.
Earlier this year, Pat Whelan decided to bring in a large amount of inventory to Sahadi Fine Foods, a grocery store and wholesale business in Brooklyn. He imports many products from the currently unstable region of the Middle East.
“Due to the local political situation, we had to build up a lot of inventory and put a buffer here and add a few extra months to the inventory cycle,” Whelan said.
But increasing inventory is an entirely different challenge because it requires borrowing money, he said. And with interest rates this high, “the cost of inventory is two to three times what it was a few years ago,” he said.
As a result, Whelan said he's trying to be a little smarter with inventory levels.
“We're going to continue to replenish, but we need to reduce the buffer a little bit,” he said.
Many other companies were building up inventories this year because they believed that if the Federal Reserve lowered interest rates soon, “consumers would start spending more.” said Dale Rogers, a professor at Arizona State University who is helping put together the policy. Index of logistics managers.
He said businesses are aware that it is uncertain whether the Fed will cut rates this year. As a result, “in some cases, we're making the decision to postpone purchases until they are absolutely necessary,” Rogers said.
This type of just-in-time inventory management has many benefits.
Cathrine Reynolds handles imports at Palmetto Tile Distributors in South Carolina. She also said she is currently ordering less inventory, which allows her to be more nimble.
“If you find something that doesn't sell, you don't have to worry about it because you can easily sell the rest. You don't have to worry about obsolete inventory, so to speak,” Reynolds said.
Reynolds said keeping inventory low allows for a little more experimentation. For example, if you're okay with not selling well, you can introduce a small amount of new, bold tiles. But if you do, that's great.
“We work with a lot of architects and designers, and it's always good to pique their interest and offer them the latest and greatest,” she said.
Reynolds said that will help increase sales even in times of economic uncertainty.
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