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Home » Survey: Inventories too lean, more restocking ahead
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Survey: Inventories too lean, more restocking ahead

February 10, 2011
Mark B. Solomon
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Rumors of the demise of inventory restocking may have been premature.

About 42 percent of 500 U.S. and Canadian shippers canvassed by Morgan Stanley & Co. expect a pickup in their 2011 order activity relative to last year. About 34 percent of respondents said they expect inventory levels to increase during that time span. About 43 percent of respondents expect their ordering levels to remain unchanged, while 32 percent said they see inventory levels staying the same.

The findings suggest that restocking activity—whose climb from historically low, recession-induced levels played a major role in last year's economic and transport recovery—still has some life in it, the firm said in its Feb. 4 survey. It had been widely predicted in early 2010 that inventory replenishment would eventually run its course as companies refilled their warehouses, thus leading to a significant cooling in economic activity.

In mid-December, however, the federal government reported that total business inventory-to-sales ratios remained roughly 5 percent below the five-year average. The Institute for Supply Management's monthly report on manufacturing conditions, issued last week, found that end-user inventories in January fell below 50 percent for the 22nd consecutive month, indicating that manufacturers believe their customers' inventories remain too low.

In its survey, Morgan Stanley said the continued leanness in inventories leaves the supply chain "vulnerable to favorable shocks." The firm says it envisions a cycle where a surge in shipping demand will result in tighter capacity and price increases, which, in turn, will encourage shippers to boost their restocking and trigger even greater volume increases.

In that scenario, truckload carriers, which have been losing market share to rail intermodal services, will benefit because most of the survey's respondents believe that truck does a better job of supporting the need for faster inventory turns, the survey found.

Supply Chain Services
KEYWORDS Institute for Supply Management (ISM)
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Marksolomon
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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