“Hmmmm….
An interesting paradigm shift is happening here.
I monitor lead times and vendor fill requirements on a fairly regular basis, including from some big e-Commerce folks.
In the last couple of months I’ve noted a rather dramatic shortening of inventory lead times from them — that is, expectation that if you are a vendor you will be able to ship product to them much faster than before.
Some of these shortenings are really dramatic — 50% or more. Amazon, in particular, is getting extremely aggressive in this regard.
This implies that the inventory drawdown we saw in 1Q GDP revisions is going to continue.
That’s the macro-level impact.
But at the more-granular level, why becomes the question. Inventory that is rapidly sold through is not much of a cost, other than the physical space to hold it. That is a big deal, of course, but the trade-off is that if you have inventory in stock you are then able to fulfill customer demand more-quickly. That’s the good part and what customers expect.
So what is leading to these rather-significant reductions?
We don’t know as of yet, but I can speculate…”
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