Manufacturers, merchant wholesalers, and retailers have been facing an extremely challenging economic and financial environment over the past few years. Key among their concerns: an unexpected decline in sales combined with an increase in the inventories-to-sales ratio. While this situation is typical during a recession, the nature of both of these conditions was qualitatively different than it was for previous post-World War II recessions.
An unexpected sales decline in combination with an increase in the inventories-to-sales ratio typically implies an unexpected inventory accumulation and a reduction in demand. This stems from the inability of businesses to adjust inventory levels and prices. ("Unexpected" sales or inventories-to-sales ratios are defined as the difference between the forecast and the actual.)
It's important to note that different types of companies have different capacities for dealing with unexpected inventory accumulations. Wholesalers and retailers usually are better able to manage them because they can initiate the cancellation of orders, implement price discounting, and get better and faster feedback from their customers. Manufacturers, on the other hand, have to be concerned about production cycles and assembly lines and therefore manage two different types of inventories: input inventories (work-in-progress, raw materials, and intermediate goods) and finished goods.
A different kind of recession
By examining the inventory and sales levels over the past 14 years, we can see how the two most recent recessions (2001 and 2007) differed from one another in terms of which types of business were affected as well as the severity of the downturn.
The 2001 recession (March 2001 through November 2001), also known as the "Dot-Com Recession," was driven by a downturn in business spending rather than by a drop in housing or consumer spending. Business investment adjusted for inflation suffered significant declines, however housing starts hardly moved and personal spending and retail sales, when adjusted for inflation, actually increased.
In the months leading into the 2001 recession, retail sales growth slowed and wholesale sales fell a bit, but manufacturing sales saw a relatively sharp decline as shown in Figure 1. This decline caused greater inventory accumulation (Figure 2) and a sudden rise in the inventoriesto- sales ratios (Figure 3). While manufacturing sales adjusted for inflation just barely surpassed its pre-2001 recession peak, wholesale sales, retail sales, and imports from China kept chugging along.
In contrast, the "Great Recession" (December 2007 through June 2009) and the subsequent anemic recovery have dramatically affected almost every aspect of the U.S. economy. This past recession was much more severe and qualitatively different than the previous post-World War II recessions. The impact on manufacturers was devastating, causing an almost 20-percent decline in real sales and an unprecedented spike in the inventories-to-sales ratio, as seen in Figures 1 and 3, respectively. While retailers and wholesalers fared relatively "better" leading up to and during the Great Recession, they did experience an approximate 12- percent decline in sales from peak to trough (see Figure 1). But they managed to reduce their inventory holdings through heavy price discounting and canceling orders of Chinese imports.
How strong a recovery?
Since the official end of the Great Recession in June 2009, the economic recovery has been relatively anemic by historical standards, with significant weaknesses in such key sectors of the economy as housing and household net worth. It has taken three years for retail sales and personal spending adjusted for inflation to finally surpass their previous peaks. Real wholesale sales are still slightly below their pre-Great Recession peak, while the manufacturing sector is struggling to make a full recovery.
The manufacturing recovery would be even weaker if not for a substantial increase in U.S. exports due to relatively strong growth in some emerging markets— namely China, India, and Brazil—and a weak U.S. dollar. In addition, business capital equipment and software spending has accelerated during the recovery period as businesses with healthy balance sheets focused on improving both productivity and inventory management without increasing payrolls.
What does all this mean for the near future? Currently inventories are lean, and as a result, we expect to see them increase. There should be a big bounce-back in automobile inventories—and therefore manufacturing—once the supply chain disruptions caused by the mid-March earthquake in Japan abate. We expect manufacturing inventory levels to surpass their Quarter 1, 2008 peak by early 2012.
Wholesale inventories will benefit from the same type of drivers as manufacturing inventories: exports, business equipment formation (capacity expansion), and replenishment. However, a significant portion of wholesale sales and inventory is targeted to the retail side of the economy, which has been showing considerable weakness recently.
The consumer side of the U.S. economy has softened considerably in the first half of 2011, with weakening retail sales growth and depressed levels of consumer confidence. Retail inventories are ultra-thin, and we expect the inventories-to-sales ratio to continue on its downward path due to technological innovations that help companies better match supply with demand together with increased efficiency in inventory management. The outlook for retail inventories remains relatively flat for the next couple of quarters with a slight pickup thereafter. We do not expect retail inventories to surpass their pre-Great Recession peak anytime soon since consumer spending has been very lackluster and the recent payroll numbers are not very promising.
The venture-backed fleet telematics technology provider Platform Science will acquire a suite of “global transportation telematics business units” from supply chain technology provider Trimble Inc., the firms said Sunday.
Trimble's other core transportation business units — Enterprise, Maps, Vusion and Transporeon — are not included in the proposed transaction and will remain part of Trimble's Transportation & Logistics segment, with a continued focus on priority growth areas following completion of the proposed transaction.
Terms of the deal were not disclosed but as part of this agreement, Colorado-based Trimble will become a shareholder in Platform Science's expanded business. Specifically, Trimble will have a 32.5% stake in the newly expanded global Platform Science business and will receive a Platform Science board seat. The company joins C.R. England, Cummins, Daimler Truck, PACCAR, Prologis, RyderVentures, and Schneider as a key strategic investor in Platform Science along with financial investors 8VC, Activant Capital, BDT & MSD Partners, Softbank, and NewRoad Capital Partners.
According to San Diego-based Platform Science, the proposed transaction aims to enhance driver experience, fleet safety, efficiency, and compliance by combining two cutting-edge in-cab commercial vehicle ecosystems, which will give customers access to more applications and offerings.
From Trimble customers’ point of view, they will continue to enjoy the benefits of their Trimble solutions, with the added flexibility of the Virtual Vehicle platform from Platform Science. That means Virtual Vehicle-enabled fleets will receive access to the Virtual Vehicle Marketplace, offering hundreds of new and expanded applications, software, and solution providers focused on innovating and improving drivers' quality of life and fleet performance.
Meanwhile, Platform Science customers will enjoy the added choice of Trimble's remaining portfolio of transportation solutions which will be available on the Virtual Vehicle platform, the partners said.
"We believe combining our global transportation telematics portfolio with Platform Science's will further advance fleet mobility and provide our customers with a broader portfolio of solutions to solve industry problems," Rob Painter, president and CEO of Trimble, said in a release. "Increased collaboration between the new Platform Science business and Trimble's remaining transportation businesses will enhance our ability to provide positive outcomes for our global customers of commercial mapping, transportation management, freight procurement, and visibility solutions. This deal will result in significant synergies along with tremendous opportunities for employees to continue to grow in a more-competitive business."
The acquisition comes just five months after Platform Science raised $125 million in growth capital from some of the biggest names in freight trucking, saying the money would help accelerate innovation in the commercial transportation sector.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
Economic activity in the logistics industry expanded in August, though growth slowed slightly from July, according to the most recent Logistics Manager’s Index report (LMI), released this week.
The August LMI registered 56.4, down from July’s reading of 56.6 but consistent with readings over the past four months. The August reading represents nine straight months of growth across the logistics industry.
The LMI is a monthly gauge of economic activity across warehousing, transportation, and logistics markets. An LMI above 50 indicates expansion, and a reading below 50 indicates contraction.
Inventory levels saw a marked change in August, increasing more than six points compared to July and breaking a three-month streak of contraction. The LMI researchers said this suggests that after running inventories down, companies are now building them back up in anticipation of fourth-quarter demand. It also represents a return to more typical growth patterns following the accelerated demand for logistics services during the Covid-19 pandemic and the lows of the recent freight recession.
“This suggests a return to traditional patterns of seasonality that we have not seen since pre-COVID,” the researchers wrote in the monthly LMI report, published Tuesday, adding that the buildup is somewhat tempered by increases in warehousing capacity and transportation capacity.
The LMI report is based on a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
That hiring surge marks a significant jump in relation to the company’s nearly 17,000 current employees across North America, adding 21% more workers.
That increase is necessary because U.S. holiday sales in 2023 increased 3.9% year-over-year as consumer spending grew even amidst uncertain economic times and trends like inflation and consumer price sensitivity. Looking at the coming peak, a similar pattern is projected for this year, with shoppers forecasted to drive a 4.8% increase in holiday retail sales for 2024, Geodis said, citing data from Emarketer.
To attract the extra workforce, Geodis says it will offer competitive wages, peak premium pay incentives, peak and referral bonuses, an expedited payment option, and flexible schedules. And it’s using an AI-powered chatbot named Sophie to serve as a virtual recruiting assistant.
“We acknowledge the immense responsibility we have to our customers to deliver exceptional service every day, and this is especially true during peak season,” Anthony Jordan, GEODIS in Americas Executive Vice President and Chief Operating Officer, said in a release. “Because peak season is the most business-critical sales period of the year for many of our retail clients, expanding our workforce is vital to ensure we have a flexible, dynamic team that can handle anticipated surges in demand.”