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Thoughts: A Positive Economic Effect of COVID-19? Inventory hoarding is now good business

Its no doubt that the much feared coronavirus that sprung up from Wuhan, China late last year has created some serious waves with product supply all over the world. With the constant delays and lengthy factory reactivate times, product availability for all Just In Time (JIT) inventory has been significantly affected. Earlier in the week, I saw that MGA CEO Isaac Larian had made a video explaining how the production delays in China will ultimately result in holiday toy shortages all over the world as not only production, but also raw material curation has been hampered. This single point of failure was unlikely to happen, and for it to occur so suddenly, it left manufacturers and retailers scrambling.

For most efficiency based company’s, it does seem like 2020 will be chocked up as a break even in a best case scenario, but all might not be lost. For any companies who stock inventory on shelves in warehouses around the country, here’s your chance.

A big no-no in the modern age of manufacturing, shelved, aging inventory was seen as one of the biggest losses in most company P&L’s. Most have evolved and did away with this method adopting precision inventory counts on an ‘as needed’ basis. Some just couldn’t let old habits die and have stocked to the brim, and this moment is the opportunity they’ve been waiting for. With units available, warehouses can now pump up the price on anything that was once on burn out fire sale (I’m looking at you, Funko) in order to leverage the shelf emptiness that’s expected to hit mid this year.

It must burn Funko’s soul to know that they took a $16M inventory dump right before the coronavirus became big news. It definitely would have got me gritting my teeth.

So, what can be done going forward to mitigate this from happening again? Due to China’s highly evolved methods of production over the past 20+ years, manufacturers there have become masters of strong craftsmanship on a mass scale. I remember talking with one of my old bosses in a previous job that did a lot of production in China, and he mentioned it would take 20 years before any other country could even match the skill in precision and timely efficiency that China is able to do. Some product types that are easier to manage such as textiles, can be moved over to Vietnam, Pakistan, and Cambodia, but items that take tooling craftsmanship like toys and electronics are way out of reach for any other place.

A country that could be a sleeping giant would be the Philippines. While working with my previous collegues, it was mentioned that most production was done in China with the exception of one brand that was exclusively produced in a factory in the Philippines. I did remember when there looked to be a dip in quality some years back when getting a few batches in my retail store days some 5-6 years ago. Things have changed since then. When looking at the products now, they were just as good as anything that came out of China. Definitely a place worth considering for anyone looking to diversify country production.


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The Keep

Organically grown nerd of things

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