9JULY 2023Over the past 2 years manufacturers have fought to keep up with consumer demand, often using this simple calculation to purchase raw materials and plan future production. Another variable in this calculation is the uncertainty of the supply chain variation. If production is done overseas what data points are reliable to use in calculating how long, it will take to ship internationally? Congestion was felt at just about every global port in Asia as well as the U.S. were locked down at various points throughout the pandemic and many of them are just now seeing normal in transit times but still above pre pandemic timelines. U.S. manufacturers of finished goods have seen its own challenges with raw material price fluctuations and domestic freight companies who have been impacted from inflation and labor shortages. What does all this mean? Over supply is the result, many companies relied on the methods above to continue to produce and stock focusing on lead time swelling to meet consumer demand not knowing when the demand would soften and begin to normalize. As companies begin to transition into this new phase of supply surplus many should revisit stock calculation methods and narrow down merchandizing lines investing in advertising to support the inventory that needs to be liquidated. Look for international shipping rates to decrease as imports should slow down due to over supply closer to retailers. How this inventory is managed will depend on future consumer confidence. The playing field for short lead times will become every manufacture's advantage what will companies do? Focusing internally on service, support of product warranties and streamlined processes using technology will be the differentiator? Companies will enter into a new phase of demand planning making sure if supply disruption happens again what steps will be taken to stay closer to the demand curve? Partnering with retailers and their specific needs will be extremely important, making sure every PO placed has confidence in supply throughput. Import manufacturers will look to develop local finished good assembly shops to perhaps reduce the amount of finished goods that are imported allowing for the added flexibility to pivot and change based on need, maybe a finish change? or different fabric selection on an upholstered item? These are all common practices amongst some manufacturers and the ones who put emphasis on this strategy will ultimately be in a better position once supply levels decrease back to pre-pandemic levels. Scrutinizing MRP protocols (Materials Resource Planning) and how materials are acquired will be a focus of emphasis knowing that being the ultimate lead time winner may not be the best thing to withstand downed consumer demand and supply flooded markets. Many companies that produce consumer goods not just Furniture manufactures are beginning to realize that being somewhat competitive in a decades long battle not the best might just be enough to avoid falling victim to supply and demand volatility moving forward. Cash is King in uncertain and unpredictable markets and the ones who haven't tied that up in inventory will be the ones who will take advantage as the post pandemic supply landscape normalizes. Companies can utilize their cash assets to continue to invest in their own infrastructure. Companies should look inward, focusing on consumer touchpoints, improving processes, and associate experiences. Companies that invest in these aspects of the business will position itself for sustainability in this new era where supply is available and the race for lead time supremacy takes a back seat. Cash is King in uncertain and unpredictable markets and the ones who haven't tied that up in inventory will be the ones who will take advantage as the post pandemic supply landscape normalizes
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