Thanks (a lot!) for the memories | Jerry Epperson

I was told years ago that our brain is hardwired to dim our memories of painful things over time. It seems logical to me; otherwise, we would be overwhelmed with all the pains and problems we all endure.

As our industry went from feast to famine, from acute to boring and happy to frenetic earlier this year, the speed of it has been unprecedented. It brings back memories.

For example, we find that companies do not mark their inventory according to the market. Why?

Their borrowings are tied to asset levels – usually inventory and receivables – and if they write down in value, it will reduce their line of credit. And they can be close to the maximum or already too extensive. Any additional strain and BAM, they’re in trouble.

Another constraint is the quality of the inventory. Everyone has quality issues, but in day-to-day business we are flexible in how they are handled between suppliers and retailers who wish to continue working together. Compromise.

When times are tight, like today, every sale must be good between seller and retailer or the item is returned, refused, or payment is not made. I remember years ago of a long gone store here in town that was caught damaging some merchandise on its floor so it could return it for a credit.

Most of us can go years without using terms like COD, CBD, credit hold, overdue, demurrage, or having buyer-seller lawsuits. Periods of stress bring these terms back.

All of these issues become MUCH more complicated when transactions are international, quantities become HUGE, and distances require multiple carriers. We can go from hundreds of dollars in damages to millions of dollars, and no one can afford it.

In my very old opinion, we are only just beginning to see these issues explode in this cycle. If we are not in a recession, it certainly tastes, smells, sounds and looks like a recession.

And inventories are like hounds: they can be too skinny and too heavy.

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WW “Jerry” Epperson, Jr. is founder and managing director of Mann, Armistead & Epperson, Ltd., an investment bank and research firm. Jerry leads their research efforts and has over thirty years of experience publishing hard and soft dollar research that focuses on demographics, consumer products, furnishings (residential and contract) and related issues. Specifically, Jerry’s furniture industry research is recognized globally for its in-depth coverage of suppliers, manufacturers and retailers.

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