{"id":134288,"date":"2023-09-01T14:56:04","date_gmt":"2023-09-01T18:56:04","guid":{"rendered":"https:\/\/www.agribusinessglobal.com\/?p=134288"},"modified":"2026-03-17T16:21:19","modified_gmt":"2026-03-17T20:21:19","slug":"strategies-for-building-a-just-right-inventory-management-model","status":"publish","type":"post","link":"https:\/\/www.agribusinessglobal.com\/zh\/agrochemicals\/strategies-for-building-a-just-right-inventory-management-model\/","title":{"rendered":"\u5efa\u7acb\u6b63\u786e\u7684\u5e93\u5b58\u7ba1\u7406\u6a21\u578b\u7684\u7b56\u7565"},"content":{"rendered":"

Over the past few years, the agriculture industry and many others have adopted more of a \u201cjust-in-case\u201d inventory strategy as opposed to just-in-time. Most supply chain experts opine that while the dramatic impact of the pandemic has eased, the residual effects on labor markets, transportation, finance, and monetary policy continues to create challenges for businesses.<\/p>\n

At the same time, interest rates have seen a sharp rise. Starting in March 2022, the U.S. Federal Reserve has raised interest rates 10 consecutive times. It\u2019s not just the jump in interest rates alone, but the current oversupply of certain agrochemicals that are contributing to a more difficult business environment.<\/p>\n

An Oversupply of Agrochemicals<\/h2>\n

The oversupply in the market is the result of an overcorrection that started in 2021 when inventory levels were too low.<\/p>\n

Terry Kippley, President of the\u00a0Council of Producers and Distributors of Agrotechnology<\/a>\u00a0(CPDA), recalled \u201cthe scarcity mentality that resulted in everybody buying products.\u201d Simply put, \u201cThe industry over corrected. People bought too much.\u201d<\/p>\n

While product is starting to move again, there\u2019s still a lot of supply in the pipeline, he states.<\/p>\n

In general, growers are pulling back and buying only what they absolutely need while retailers are trying hard to empty their warehouses.<\/p>\n

\u201cThey\u2019re not restocking unless they have an order. Everyone\u2019s trying to unload inventory,\u201d Kippley said.<\/p>\n

\u201cYou had very high prices when inventory was low,\u201d but now there\u2019s margin erosion and downward price adjustments along with higher carrying costs.<\/p>\n

Moreover, the impact of the swing from undersupply to oversupply takes a while to move through the agrochemical supply chain. The demand signals generated from the grower do not reach the agrochemical producers overnight.<\/p>\n

\u201cSo really, the next question is, \u2018How are we going to end the year?\u2019\u201d he said and advised to \u201cbe cautious of another overcorrection.\u201d<\/p>\n

Understandably, \u201cThere\u2019s going to be a hesitancy to place new orders and people are going to wait as long as possible,\u201d he said. \u201cIt\u2019s going to be very tempting to let your inventory run down because you\u2019re trying to manage risk.\u201d<\/p>\n

Nonetheless,\u00a0Fanwood Chemical<\/a>\u00a0President Jim DeLisi said this latest oversupply of agrochemicals was actually \u201cpredictable to anyone who was watching the statistics.\u201d<\/p>\n

For example, numerous media reported last year that herbicide was in short supply, which resulted in United States (U.S.) importers bringing in substantially greater volumes in 2022.<\/p>\n

\u201cAnything that could kill a weed \u2014 glyphosate, dicamba, 2,4-D \u2014 all of them were imported in volumes twice as much or more than what was imported in prior years,\u201d DeLisi\u00a0said. \u201cPeople kept buying and buying, but then things started to crash.\u201d<\/p>\n

The crash happened quickly. \u201cBy the end of January 2023, the prices for glyphosate, glufosinate, and 2,4-D started to crater,\u201d he said. \u201cThose who got hurt were the ones who bought big inventories in November, December, and January, and now they have very expensive inventories to work off.\u201d<\/p>\n

Despite the data that was \u201cin front of them,\u201d he said, \u201cpeople believed all the prognosticators who warned of short supply, and they kept bringing in material.\u201d<\/p>\n

Not only were businesses in the midst of supply chain disruptions caused by the (COVID) pandemic, they were also worried about China shutting down their industrial base ahead of the 2022 Beijing Olympics.<\/p>\n

\u201cThe last time China held the Olympics [in 2008], they shut down their industrial base in order to clean the air. There were a lot of shortages as a result. But that didn\u2019t happen this time. The collapse on deliveries that everybody was expecting this past February and March didn\u2019t materialize,\u201d DeLisi said.<\/p>\n

On a positive note, DeLisi said, \u201cThere are very few, if any, stability issues [with these popular herbicides], so at least we\u2019re not seeing any spoilage. Otherwise, this would really be a disaster.\u201d<\/p>\n

Difficult to Diversify Agrochemical Production<\/h2>\n

While other product manufacturers may have more flexibility when it comes to what countries they source raw materials or finished goods from, or which suppliers they buy from, diversifying the agrochemical supply chain is much harder, if not impossible.<\/p>\n

There are only a limited number of plants that are certified to manufacture active ingredients. The plants are highly sophisticated and require significant capital and time to construct.<\/p>\n

In addition, the manufacturing capability in the U.S. no longer exists in order to produce the active ingredients domestically.<\/p>\n

\u201cThirty years ago, for instance, you could make anything in Western Pennsylvania and West Virginia,\u201d said DeLisi. \u201cThe plants, the equipment, the people, and the resources were there. But those plants are gone. They were shut down and bulldozed; literally hit with a wrecking ball. And chemical plants don\u2019t do well when they\u2019re mothballed.\u201d<\/p>\n

DeLisi added that the 1994 Uruguay Round of multilateral trade negotiations [under the auspices of the General Agreement on Tariffs and Trade], which led to the formation of the World Trade Organization on January 1, 1995, also contributed to a reordering of chemical manufacturing globally as chemical tariffs were radically reduced and\/or eliminated in the U.S., European Union (EU), Canada, Japan and several other countries that signed on to the Chemical Tariff Harmonization Agreement.<\/p>\n

At the same time, tighter environmental regulations also changed the chemical manufacturing landscape.<\/p>\n

\u201cThe EU used to have the largest chemical industry in the world \u2014 much bigger than the U.S. and bigger than China and India combined,\u201d said DeLisi. However, as the EU adopted more stringent rules around chemical manufacturing, particularly in the 1990s, most of it migrated to the developing world.<\/p>\n

Building a Just-Right Inventory Model<\/h2>\n

Although the just-in-time inventory model has reverted to a just-in-case strategy for many, the goal for managing inventory remains the same: Finding and maintaining the right balance for the current business environment.<\/p>\n

Here are best practices for mitigating risk and making better inventory management decision:<\/p>\n

    \n
  • Talk with your suppliers, ask questions, lean on relationships, and review terms of your contract.<\/li>\n
  • Commit to continuous improvement in your operations, monitor KPIs, and metrics.<\/li>\n
  • Find reliable sources of industry information and data; stay on top of global issues that can impact your business.<\/li>\n
  • Implement software tools designed for your operations (Inventory Management systems; ERP systems, etc.).<\/li>\n
  • Strive for better visibility and flexibility; have a contingency plan in place.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"

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