Guide to Warehousing and Industrial Real Estate
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Chemical and allied product wholesalers have likewise seen sharp declines in inventories-to-sales ratios , which likely stemmed from sharp rises in inflation-adjusted sales that may have been better than anticipated , hence why inventories declined more than expected .
More drawdowns needed
Other key sectors of merchant wholesaling , while seeing relatively unchanged inflation-adjusted sales volumes , continue to display persistently higher ratios of inventories relative to sales than before the COVID-19 pandemic , suggesting more inventory drawdowns will be needed .
Case in point : household appliances and electrical and electronic goods wholesalers ’ inventories-to-sales ratio remains over 10 % higher than before COVID-19 . This sector includes wholesalers of cell phones , the largest lineitem import by value that enters the US from Asia by air or in shipping containers .
Machinery , equipment and supplies wholesalers ’ inventories-to-sales ratios appear to have finally reached a peak that is about 14 % higher than in 2018 and 22 % higher than 2021 , suggesting an extended period of destocking is likely in the cards for 2024 .
Sales at apparel wholesalers remain weak , having fallen more than 7 % from corresponding 2022 levels on inflation-adjusted terms , and inventories-to-sales ratios remain 25 % above pre-COVID levels , suggesting an extended period of destocking lies ahead . The same holds for wholesalers of alcoholic beverages , who effectively have flat inflation-adjusted sales yet have inventories-to-sales ratios 19 % above pre-COVID levels .
Across the board , merchant wholesalers are entering 2024 in a better position than at this time in 2023 , when most sectors were seeing inflation-adjusted sales decline in conjunction with inventories-to-sales ratios that were well above pre-COVID levels .
This is good news for logistics providers , because even if inflation-adjusted wholesale sales remain unchanged , the fact that wholesalers will be drawing down inventories less in 2024 than in 2023 will mean stronger freight
The fact that wholesalers will be drawing down inventories less in 2024 than in 2023 will mean stronger freight volumes .
volumes . Replenishment orders relative to sales will be closer to a 1:1 basis for sectors that have brought inventories-to-sales levels back in line with historical norms .
That said , industry-level data can obscure substantial differences within a given industry ; for example , some toy wholesalers may see increasing sales , whereas others may see decreasing sales . As such , it will be critical for logistics providers to communicate with key customers to plan for this year ’ s freight volumes .
Jason Miller is associate professor of logistics at Michigan State University , and Journal of Commerce analyst .
email : mill2831 @ broad . msu . edu
16 Journal of Commerce | March 25 , 2024 www . joc . com