Are low prices tempting buyers to build inventory?
By Staff -- Purchasing, 2/11/1999
Despite deep commodity price declines, most buyers are resisting the urge to build inventory. Asked if there are commodities for which pricing is attractive enough to build stockpiles, only one in five buyers responds in the affirmative. This despite some of the lowest prices we've seen on many commodity materials in years.Among those resisting the siren song of cheap prices, some are emphatically opposed to stockpiling of any kind. "No one should be building inventory!" says a New York-based buyer, noting, "It's the end of the year." An Illinois-based buyer speaks for many when he says: "We never build inventory, no matter what." Others say they are continuing programs to actively reduce inventory due to just-in-time manufacturing aims or simple cost-reduction goals.
Metals buyers--particularly those buying commodity grades of steel--are the ones most frequently succumbing to the lure of cheap prices. "Steel prices are dropping significantly," says a buyer in Washington state. Still, others say this is precisely why they will avoid inventory accumulation in the near future. As an Iowa buyer puts it: "It appears that steel may remain weak for awhile, so we don't need to stock up."
Other commodities for which some buyers have been unable to resist the urge to build inventory include: copper and brass (including copper wire), aluminum, zinc, plastic resins, corrugated, wire/cable, plastic components (including bottles, plugs and closures), some semi-conductors, melamine, and chipboard.
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