Big retailers are struggling to cope with large stockpiles

Big retailers are struggling to cope with large stockpiles of… Image transcription text. Summarize the article and describe how it is related to the ?eld of logistics. . Explain how the articledemonstrates a connection between logistics and another area of business that you are familiar with fromprevious courses, such as management, marketing, etc. – Conclude with a thought-provoking que… Show more… Show more Big retailers are struggling to cope with large stockpiles of furniture, apparel and workout equipment, yet broad measures show inventories at American companies remain exceedingly lean by historical standards. Supply-chain experts say the gap between big retailers and the rest of the sector is the result of inventory disruptions that have affected companies differently and left big retailers most exposed to changes in consumer behavior. Jason Miller, an associate professor of logistics at Michigan State University’s Eli Broad College of Business, said the surplus of inventory is largely hitting general merchandise stores, including retailers like Target Corp. , Walmart Inc., Kohl’s Corp. and Macy’s Inc., that turn over large amounts of goods based on seasonal patterns and consumer shopping trends.Inventory-to-sales ratios for all retailers and?for general merchandise stores “When you step back and look at the overall picture, we’re not drowning in inventories relative to where overall sales are at,” Mr. Miller said. “Inventories are still a little bit below pre-Covid levels.”The retail sector’s ratio of inventories to sales, a measure of how much companies have in stock compared with what they sell, remains very tight by historical standards. The most recent Census Bureau data shows the ratio was at 1.18 in April 2022, compared with 1.48 in April 2019. A lower ratio typically measures merchants’ efficiency in matching stocks to sales, but if the measure gets too low, say experts, there are greater chances of stockouts and lost sales, which was a problem early in the pandemic when shelves were stripped bare because of the sharp pivot in consumer demand for specific products. Among general merchandise stores, the level of inventories relative to sales has grown far beyond prepandemic levels, suggesting strategies to restock stores and warehouses have gotten out of step with consumer buying patterns, leaving stockpiles of unsold goods. At those stores, the ratio for inventories to sales was 1.58 in April, up sharply from 1.38 in April 2019, according to Census Bureau figures. Delivery delays caused by port backlogs, factory closures and other supply-chain bottlenecks have caused many retailers to extend their buying cycles to ensure goods get on the shelves. Nikki Baird, vice president of strategy at retail software firm Aptos LLC, said she has seen clients place larger orders than necessary as a way of planning for the worst-case scenario, part of the shift from “just-in-time” inventory management to a “just-in-case” strategy. Aptos works with clients such as Adidas, Bed Bath & Beyond and Sephora, according to its website. Retailers have in some cases ordered twice as much as they needed to get one-third of what they wanted, Ms. Baird said.She said retailers are seeing the impact of what is known in supply-chain circles as the bullwhip effect, in which companies rush to fill inventory gaps by ordering goods in large numbers only to see demand dissipate. In this case, she said, big retailers have reacted to the strong consumer demand for certain products during the pandemic by placing bigger orders to ensure they will have enough supply on the shelves. More orders are coming through now, Ms. Baird said, and the stores are ending up with more inventory than they had expected. Even if a retailer has struck a balance between inventory and sales, goods might still be out of alignment, she said.”You could look at an inventory-to-sales ratio and say, ‘Oh, they look like they’re doing OK,'” Ms. Baird said. “But what’s happening under the covers is they’re way overstocked in these categories, and they’ve sold out on these, and they still can’t get a lot more of the things that are moving fast.”                      Arts & Humanities Communications Marketing MGT 6342

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