As Inventories Swell, Companies Turn to Novel Strategies to Get Through Coronavirus Crisis
Logistics specialists that buy and hold goods for clients are increasingly in-demand as companies look to reduce costs.
Companies that have stockpiled more goods during the coronavirus pandemic are turning to creative strategies to put inventory to work and generate cash.
The tactics include tapping firms that specialize in buying and holding inventory for other businesses, as well as more traditional measures such as borrowing against inventory to stay afloat.
Companies “want to get as much liquidity as they can to get through this period and beyond,” said Steve Box, a senior adviser to Channel Capital Advisors LLP.
Inventories for retailers, manufacturers and distributors ballooned as factories and stores shut down and consumers stayed home during the extensive lockdowns in the early weeks of the pandemic. Adding to inventories, companies stocked up on goods and raw materials to ward against shortages caused by snarled transportation routes and other supply-chain difficulties.
Some stockpiles have thinned out, but many companies say they expect to keep more goods on hand as they navigate an uncertain economic recovery. A second-quarter survey of supply-chain executives by consulting firm McKinsey & Co. found that nearly half of respondents said they would increase their inventory of critical products owing to weaknesses laid bare by the pandemic.
Mei Yee Pang, who leads the global supply-chain practice at DHL Consulting, said transportation constraints have helped push companies to add more inventory. Companies are moving more goods by ocean as flight capacity has shrunk, adding to transport costs. Because it takes longer for goods to arrive by sea, companies need to order more per batch and store more products, she said.
The cost concerns have businesses looking at a variety of techniques aimed at turning the carrying cost of goods into cash until demand is more certain, stoking interest in firms that buy and hold inventory on behalf of their clients.
Inventories for retailers, manufacturers and distributors ballooned as factories and stores shut down and consumers stayed home during the extensive lockdowns in the early weeks of the pandemic. Adding to inventories, companies stocked up on goods and raw materials to ward against shortages caused by snarled transportation routes and other supply-chain difficulties.
Some stockpiles have thinned out,…
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