The world is getting crowded with products that people don’t want or can’t afford. After two years of having to deal with the shortage caused by the pandemic, companies now face another problem: excess inventory.
The trauma of Covid – which has disrupted global supply chains – coupled with the expectation of increased sales after the economic reopening has caused some companies to rush to accumulate goods. However, the consumption pattern changed and, in the face of rising inflation, the high demand simply did not materialize.
In Brazil, according to Sheet found, stock levels are not far from expectations. In countries that suffered more heavily from logistical chaos, the scenario is different.
FactSet data compiled by the Japanese newspaper Nikkei shows that the values ​​of products stocked around the world have reached a level never seen before.
According to the survey, the inventory of 2,349 global manufacturing companies reached a record US$1.87 trillion at the end of March, a difference of US$97 billion (R$ 5.2 trillion). compared to the previous quarter.
That would be the highest level in the last ten years, which is when the data first became available.
Another survey, carried out by Bloomberg, shows that some of the largest retailers in the United States – such as Walmart, Home Depot and Target – have almost US$ 45 billion (R$ 243 billion) in excess products. The value represents an increase of 26% compared to last year.
In May, US business inventories rose sharply, outpacing sales growth. According to the US Department of Commerce, an increase of 17.7% was recorded compared to the same period in 2021.
The abundance of goods has even hurt profits. If for some retailers the issue is paying more for storage, for others the issue is figuring out a way to sell — which often means lowering prices.
The scenario is very different from just over a year ago, when some countries suffered from shortages of a wide variety of goods, from clothing to electronics.
In the US, for example, after a period of low sales in the first few months of the pandemic, government financial aid stimulated purchases, to the point that some e-commerce companies struggled to meet the avalanche of orders.
High demand, however, coincided with logistical disruptions. As a result, shelves were empty at one point in the health crisis.
The fear of a new shortage caused some retailers to increase their orders in the middle of last year, as a way of anticipating possible worsening in transport and being able to meet demand. But the context has changed.
Although supply chains still remain complicated, the reality of consumption is different. In May, for example, US retail sales fell, reflecting, among other problems, the change in the spending profile – which tends to migrate from the consumption of goods to that of services with the relaxation of sanitary restrictions.
By all indications, sales should still remain weak, as the Fed (Federal Reserve, the US central bank) has been raising interest rates as a way to cool demand and reduce the highest inflation in 40 years.
It is against this background that the excess of goods becomes a problem. According to a Bloomberg survey, Costco, the American supermarket giant, had a 26% jump in inventories, which it attributes to the decision to replenish goods after last year’s high demand and prevent further deterioration in the chain.
The department store chain Macy’s saw this level rise 17%, while Walmart, 36%.
But the problem is not restricted to the US. With inflation spreading around the world, companies in other countries also have too many products to sell. According to data from FactSet, South Korea’s Samsung saw its inventory rise to US$39.2 billion in March, up 13% from the end of last year.
In mid-June, the South Korean technology portal The Elec showed that the company had almost 50 million smartphones sitting in distributors’ inventories.
Demand for new devices is lower than expected, involving factors as diverse as Chinese restrictions to contain Covid-19, the Ukrainian war and rising raw material prices.
Low demand for electronics products also made Samsung temporarily stop buying LCD panels used in the production of televisions.
Excess inventories can be a bad sign.
In a scenario of excess merchandise, the immediate observation is that there is a mismatch between demand and supply. However, it could also be indicative that an economic downturn is looming.
Although the economic context around the world already points to a concrete risk of global recession, excess inventories contribute to this result.
As Samsung did with LCD panels, other companies will also be forced to slow down their production — and a general manufacturing adjustment could lead to further slowdown.
Brazil suffered less from scarcity and also from excess
Brazil also felt the effects of the logistical chaos of the pandemic, but with less intensity than in other countries. Currently, if there is an imbalance in inventories, it is in the sense of scarcity — and only in certain sectors.
According to retail consultant Alberto Serrentino, from Varese Retail, the Brazilian scenario is of reasonable stability in relation to the supply of inventories.
In his opinion, the fact that Brazil has a vertical, diversified and little internationalized economy makes the country suffer less from disruptions in the supply chain.
“What is sometimes a weakness of ours, of being a very closed economy and even a little inefficient, in situations like these they become great strengths”, he says.
Although Brazil has gone through some input bottlenecks, he recalls that there was not a chronic shortage like in the United States. “Disruption levels in stores [americanas] It was scary,” he says.
Magalu, for example, one of the largest retailers in the country, says that its stock levels are within normal limits. According to Vanessa Rossini, the company’s investor relations manager, the results for the first quarter of 2022 show that inventory levels have been adjusted, with a balance reduction of more than BRL 1 billion compared to the end of 2021.
“Our inventory adjustment comes from the end of the year, which puts us in a very comfortable position”, he says.
According to her, the company anticipated the risk of shortages of the pandemic and had no difficulties with the products. “We did not only prepare the stock, but also logistics and technology,” she says.
​In the industry, some segments reported a high level of inventory, such as automobiles. According to Anfavea (association of automakers), although the supply of parts is still irregular, the sector started the month of July with the highest level of stock in the last two years.
However, the entity says that the situation is not due to a lack of consumers, but due to a punctual increase in production.
The last industrial survey carried out by the CNI (National Confederation of Industry), in May this year, shows a small reduction in inventories compared to the previous month. The index that follows the evolution was 49.7 points – values ​​above 50 points indicate growth in inventories, and below, a fall.
Observing the satisfaction of the sector, the survey indicates that the level is a little lower than planned by the entrepreneurs.
Some specific industries have been working with lower than desired stocks, as is the case of pharmaceuticals.
Rafael Cagnin, economist at Iedi (Instituto de Estudos para o Desenvolvimento Industrial), recalls that there was a moment of scarcity in inventories of final products in the industry, especially at the turn of 2020 to 2021. “Since then, we have eased this situation general”, he says.
In the industry as a whole, he says, the scenario is one of relative stability, with some sectoral vulnerabilities. “The indicators are very close to the equilibrium line, that is, there is no process of large expansion of inventories of final products, which could indicate a very strong misalignment between demand and production”, he says.
“What there are are companies working with very fair levels of stocks, either due to a deficiency in obtaining some input to produce more or because the level of general activity is half stopped”, he adds.
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