Nike has an over-inventory problem, and other retailers should be worried too!What's going on:Nike's inventory rise is not an isolated incident! Most retail firms have a large pipeline of in-transit inventories (yet to reach their warehouses, given the long lead times at the time of order placement).
This was done primarily due to an anticipated consumer demand increase which never happened!This is going to the industry's performance over the next 2-3 quarters.
Result:Nike's inventory rose 44% YOY, directly impacting the balance sheet! 💰💰💰💰
This is exactly what we have been anticipating on Supernegotiate since last year! Many firms, including Nike in this case, went on a spree to build up inventories to counteract Supply chain shocks!
IfNike can share what went wrong in their demand forecasting; it will be super helpful (but I guess this won't happen, and that's sad!)But I won't blame Nike here 100%. Improvement in the Supply chain (especially shipping) is happening faster than anticipated, and all retail firms are witnessing record-level inventories, especially in-transit inventories!
This has impacted and will impact the balance sheet of many retail companies in Q4 2023, Q1 and Q2 2024.What it means for you as CPO!
1.) Ask your Procurement Excellence team to study the inventory levels of your competitors and the biggest customers of your suppliers
2.) Your competition will decrease the buying to deplete inventorySimilarly, the largest customer of your suppliers will do the same in case they have high inventories.
3.) Do not expect strong consumer demand to offset the inventory! Hence, read my point 2 again.
4.) Use this as additional leverage during negotiation. With the slowdown in commodity prices and decrease in consumer demand, do not commit all your volumes upfront. Rather spread your buying and get double-dipping discounts on your subsequent negotiations!
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