Since the 2009 recession, businesses have made many
improvements and upgrades to their supply chains in order to compete in a
changing global economy. Improving forecasting tools, leaner distribution
practices and changing modal transportation usage may be playing a role in
lower inventory levels. However, in all likelihood, caution is playing the
larger of the role.
After businesses replenished stock earlier this year due to
strong demand, there now appears to be growing concern over the economy, both
domestic and global, among businesses and consumers. Although retail sales grew
0.8% in March, sales slowed in April to 0.1%.
Still, the National Retail Federation reaffirmed its 2012 retail sales
forecast of 3.4%. Also, manufacturing activity increased 1.4% in April while
new orders increased 3.7%. This will lead to a need to replenish inventories as
manufacturers surveyed by the Institute of Supply Management, indicated that
inventories contracted 1.5%.
Current transportation data also indicates a rise in
inventory. For example, according to
Zepol, ocean containerized imports increased 8.65% in April compared to April
2011 and 9.77% from March 2012. Of particular interest, Asian containerized imports
increased 15.55% year-over-year during the month. Two ports that have already released April
statistics indicate containerized imports are indeed on the rise. The Port of
Los Angeles noted a 16.71% increase while the Port of Charleston noted a 5.2%
increase.
Barring any unforeseen global supply chain disruption, the
US economy is on track for continued, albeit, slow, economic growth this year.
Business and consumer demand will likely remain moderate at best thus resulting
in continued lean inventories. However, inventory levels may witness an
occasional spike but just for short-term.
