If you’re a wholesaler experiencing a sudden increase in demand from your retail customers, you may want to think twice before investing resources to beef up production.
Businesses that cut back on inventory to free up capital during the past year may be panicking now and stocking up because their retail cupboards are bare, a recent study finds.
The recent bump in orders to suppliers may reflect a trend toward “coordinating inventory” or trying to stock up.
There is a perception that suppliers do not have enough inventory to meet demand because they let inventories dwindle during recent the economic downturn, the Syracuse University report found. Their customers want to order extra goods to make sure they have enough to meet their own customer’s demand. However, this trend is not expected to last.
Smart suppliers should avoid dedicating too many resources to these falsely inflated orders and should instead ride out the wave producing at their normal rate to avoid having too much stock on hand later, the report warned.