In general one of the surest signs of a potential industry downturn is the continued inventory problems of some of the largest suppliers. The web is alive with complaints about vendors being unable to deliver on promises and maintain even the most basic levels of ad specialties inventory.
So what is causing the problem? In our view an over reliance on overseas production and too much trust in the old "just in time" principles. Vendors were Leary of the potential and now present recession and cut back on inventories and orders at the end of last year. These goods arrived from China in January and some of the hotter promotional items were immediately sold out. Four months later and in many cases no new inventory has been acquired and orders remain unfilled. This is leaving distributors in a lurch and it will come back to bite the suppliers currently unable maintain inventory. It causes distributors to look elsewhere and potentially find new sources and customers to lose faith in the underlying distributor and perhaps move to another distributor promoting other brands. It takes a distributor one bad incident to lose all trust in a vendor and this is happening across the industry right now. Some of the long line vendors like Bic have continued to be reliable as always, others have become notorious for having almost no stock.
There is absolutely no excuse for poor inventory management in 2008. Some of the premier brands actually have guarantees in place of free upgrades if an item is not in stock. That is how confident they are in having stock. Others have entire product lines that are basically out of stock. There is nothing worse than distributors - particularly in a sharp recession, dedicating time, money and energy promoting products that they can not sell. It angers customers, costs reps and owners money. What is worse is the apparent trend of orders allegedly "filled" not being available prior to shipping. A few distributors are reporting on one of the forums that vendors have taken orders and deposits for orders only to say the items are "out of stock" months later when they are supposed to ship. This has to be infuriating and is dangerous as once the word gets out that orders are not shipping distributors may refuse to front the money for orders for fear of problems like those that hit a very famous vendor a year ago. A deposit should secure and guarantee the order but that does not seem to be the case right now.
Hopefully these problems clear up over the next few months but our speculation is they will grow worse. It is almost May now, vendors can no longer use the excuse that they did not know items were going to sell or that business would remain solid. Their inventory problems may soon become a lack of sales if the situations are not remedied and ill will spreads.
