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Too much inventory?

Distribution has experienced more than its fair share of pain during the last couple of years. Business plummeted accross the board at the first signs of recession and the sector has been inching its way back since.

The latest figures from franchised distributors association afdec suggest things are picking up well. Billings in June, it says, were up 24% over the previous month and 38% up on June 2009. But hidden within these figures is a worry that some of the sales boost is down to double ordering - apparently, orders for semiconductors rose by 87% over June 2009.

Many components remain in short supply as manufacturers continue to keep a tight rein on production, which pushes companies to order more than is needed 'just in case'.

Manufacturers react to this by making more product. But if demand isn't there, that will mean oversupply and too much inventory.

Author
Graham Pitcher

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