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Jul. 9, 2021

Restock Before You Run Out: Smaller Shipments Could Move Crucial SKUs

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With all the shipping chaos, companies face a real threat: running out of inventory. If you can’t get goods on a vessel for a month or more and airfreight rates are out of reach, what happens to your stock levels?

Eventually, you’d sell out of goods and have to turn away business. Before that happens, small-batch shipments could bolster restocking efforts. The strategy is simple: Ship smaller amounts of goods via priority ocean services to help preserve business continuity. Let’s break it down.

Smaller, Faster Shipments

Low inventory can quickly become an urgent situation. In these cases, Flexport’s new LCLPriority service may be able to rescue your company from dwindling down to nothing.

It’s not going to solve the capacity crisis, but it could be a quick fix just when you need it.

  • Start by making a crucial decision: which SKUs you need ASAP.
  • Book your shipment from and to designated LCLPriority ports. These are high-traffic ports throughout Asia, the US, and Europe.
  • Communicate with suppliers to plan for cargo-ready dates.

Most LCLPriority shipments cap at approximately 15 CBM. That’s up to a dozen or more refrigerators or around 100 mattresses, thousands of t-shirts, or tens of thousands of yoga mats.

There’s no minimum volume, either. LCLPriority is designed to be just the right amount of capacity to carry companies out of the danger zone when inventory is low.

Flexport expects this space—like all space these days—to get snapped up quickly, so if your business can benefit, take action to book.

What’s Happening to Inventory

We continue to see US business inventories running lower by the month.

According to Federal Reserve Economic Data (FRED), the latest inventory-to-sales ratio was 1.25 in April 2021, down from 1.26 in March—and way down from 1.73 in April 2020.

The ratio represents a balancing act for most companies. In a perfect world, inventory and sales would be closely matched with new inventory arriving just as previous inventory sold.

That would drive an inventory-to-sales ratio down from current US levels.

That would also require a perfectly stable supply chain, and—spoiler!—it’s not a perfect world. It's possible to lose in either direction. Too much inventory? Your capital is tied up. Too little? You miss out on sales.

As the ratio drops in the US, it’s not an indicator of higher profit margins or wiser capital allocation (although it could be, under radically different circumstances).

In this case, it’s an indicator of depleting inventory. As companies sell, the value of their inventory isn’t keeping pace. Goods demand may be great, but shipping is frenzied, and it’s starting to hold up restocking.

If you can find a way to circumvent the delays, even if it’s one small shipment at a time, it could make the difference between business continuity or collapse.

For more on LCLPriority, sign up for Flexport.

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