Market Update: Increase In Inventory

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Uncertainty remains to play a major role in supply chains across the globe says Maersk.

  • Increase in inventory due to a shift in demand.
  • The market in the USA now faces the Bullwhip Effect.

Current Market Situation

Retailers are overstocked with inventory; reporting an increase of 40% in the catalogue as compared to last year. Demand has slowly recovered, especially, for products like groceries, beauty and cosmetics. However, warehouses are packed with pandemic goods that retailers need to get rid of. As products of new demand arrive the producers are taking steps to make space.  In order, to keep the inventory levels in line US producers have announced a short-term hit in profits. Change in customer habits is also leading to increased inventory levels. As normality is recovered, so do social life and services to the detriment of house and home office products. Spending on restaurants and bars raised nearly 20% in March, according to the Commerce Department of the USA.

Bullwhip Effect

These past years the world has seen that adaptability is crucial and the supply chain is not the exception. Sellers had witnessed demand shifts, inventory blows, and changes in shoppers’ habits. All this in a disproportionate manner makes the supply chain a strong world. This is now called the bullwhip effect and it is more common in the industry, causing big holdups. Logistics had been trying to keep on answering to the demand disruptions and businesses have faced revenue loss from out-of-stock items and reduced margins from discounts on overstocked articles.

Demand Spike

This bullwhip comes from the sudden demand spikes and dips. A lot of stakeholders are involved in the supply chain which opens opportunities for irregular reactions to demand changes. Inefficiencies, miscInvestigate and learn why the demand shifts happen. These actions won’t eliminate the bullwhip effect but will minimize it. It is impossible to predict a change in customers’ behaviour, and its impact on the market. The motivation is to try to make warehouses more efficient, agile and the most profitable as possible.

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Source: Maersk

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