From trying to catch up to demand, product manufacturers now find themselves unable to get rid of their inventory. This has led many of them to cut jobs in order to compensate for lack of sales.
One such company is Scotts Miracle-Gro (SMG), led by its CEO Jim Hagedorn. Sales just stopped after two years of SMG struggling to fill store shelves and finally being able to catch up with consumer demand for lawn seed, fertilizer and other garden products. At that point, the company knew trouble was looming. (Related: We warned of a global supply chain disruption, and now it’s here: Workers who keep things moving are now sounding the alarm that a “systemic collapse” is too close for comfort.)
SMG cut around six percent of its workforce since May 2022, with more layoffs expected. Manufacturing plants have slowed and cash had been dwindling. Nobody is getting bonuses either, as the company is now in a full-blown crisis mode.
"I love working, but this isn't exactly the s—hole I was planning to live in toward the end of my career, working my way out of a goddamn latrine. But that’s what it is and that's where I am," Hagedorn said.
Hagedorn said the problem was largely a casualty of bloated inventory at big retailers like Walmart, Target and Home Depot, as the companies did not foresee the sharp reversal in buying behavior that has taken place as shoppers cut back on furniture, electronics and other goods, shifting their budget instead to travel, food and fuel.
Scotts had been in the middle of its active selling season when the pandemic shut down much of the global economy. The company's manufacturing operations were deemed essential because fertilizer is important to the food supply, and most retail stores that sold such products remained open.
Production was chaotic and Scotts began paying its workers a 50 percent premium, but entire shifts would be sent home if at least one person got sick. Scotts then changed from three eight-hour shifts to two 12-hour shifts to use as many available workers as much as possible.
When people started gardening in 2020, keeping shelves filled became a problem. When the quarter closed at the end of June 2020, sales in the consumer business – which made up around two-thirds of their total revenue – were up over 20 percent. The empty shelves indicated they could have sold more.
Shortages often lead to surplus
In an analysis, the Charles Schwab Corporation noted that shortages often lead to surplus – and when this happens, it could lead to a fall in inflation as excess inventory prompts price cuts. This could make things complicated with central bankers' tasks, but this also helps explain their slow steps toward ending pandemic-era policies.
The speed at which shortages can turn into surplus could be rapid.
Markets tend to look at sales six to 12 months ahead and may have already begun to consider the possibility that some shortages may have started to ease and surplus may have started to form by the second half of the year. Should a glut begin to emerge, manufacturing inputs, finished goods and even container ships may see a decrease in demand.
Schwab noted that it is important to watch for signs of investor risk. Stocks tend to react at the first sign of inventory building – excess inventory could be sitting in ports or on order books, where some over-ordering could be taking place.
Surpluses could pull down the stock price and depress inflation, but it could be one of the biggest risks for investors as well.
Visit Collapse.news to get updates about inflation in the U.S. and elsewhere.
Watch the video below to know more about supply-driven inflation and its effect on U.S. economy.
This video is from The Red Express channel on Brighteon.com.
More related stories:
Demand for imports plummeting as global economic house of cards implodes.
Sources include:
Please contact us for more information.