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Managing inventories a pandemic headache for US businesses

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Backups at ports like this one, in Long Beach, California, contributed to major inventory challenges for US businesses of all sizes
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More than two years into the Covid-19 pandemic, American businesses are still struggling to manage their inventories in a feast-or-famine cycle caused by fickle consumer demand.

“We have way too much inventory right now,” said Ginny Pasqualone, chief executive of Sparkledots, a children’s clothing manufacturer.

“It’s important that we have a large selection of merchandise that our clients can choose from,” she said, but store traffic has been hit by inflation concerns, with some customers “very scared that they’re not going to survive another recession.” 

For now, Sparkledots is holding more goods in inventory, but that ties up company capital and limits its ability to add to its 18-worker staff.

“It sucks our growth for the future,” Pasqualone said.

Such is the dilemma affecting businesses of all sizes. 

Large store chains like Walmart, Target and Macy’s have acknowledged in recent weeks that they misread consumer patterns, leaving them with excess supplies of appliances, casual clothing and bicycles.

Bicycles were a hot commodity early in the pandemic, prompting surprisingly large orders, said Wayne Sosin, owner of Worksman Cycles, a New York manufacturer best known for its tricycles. 

“Retailers bought whatever they could as if bike sales would continue to have unprecedented demand,” Sosin said. “It was so obvious to me that (this) would not last.”

Still, Sosin said demand remains strong in some parts of the business, placing stress on supplies of some key bicycle parts.

– Unexpected shift –

Torrid consumer demand since 2020 fueled by government pandemic relief programs has led to product shortages and backlogs in seaports.

“The business can no longer count on the idea that you’re going to have this easy, just-in-time inventory and that you can only keep stock on hand that you need,” said Phil Levy, an economist for logistics company Flexport. 

Companies are unsure how much the outsized buying during the pandemic will persist and for which goods.

“The way we tend to predict things is by looking at past patterns,” Levy said. “But we don’t have data on how the consumers behaved during the five recent major modern pandemics.”

In the most recent quarter, the big-box chain Target saw sales of appliances, clothing and other goods slow as consumers shifted spending to travel and other service-oriented consumption.

“We didn’t anticipate the magnitude of that shift,” Target Chief Executive Brian Cornell said on an analyst conference call.

As a result, Target had bought too many televisions and too much outdoor furniture.

Similarly, department-store chain Macy’s was caught off guard by a 20 percent drop in sales of casual clothing and housewares in the most recent period, compared with the prior quarter.

At the same time, “supply chain constraints relaxed,” unexpectedly boosting deliveries of merchandise, said Macy’s Chief Executive Jeffrey Gennette.

– ‘Wildcards’ –

Retailers have adopted different strategies for dealing with a glut of goods.

Target has moved some of its goods outside of stores into temporary storage facilities, while liquidating seasonal merchandise no longer in demand.

Others plan to offer more discounted items. Apparel chain Urban Outfitters expects promotions to increase “not just in the second quarter, but throughout the year and into the holiday season,” said Chief Executive Richard Hayne.

The consumer remains the “wildcard,” said Brian Yarbrough, an analyst who follows consumer companies at Edward Jones.

Demand for goods has remained fairly robust even as consumers spend more on services and contend with inflation, Yarbrough said.

Among other unknowns is the state of ocean shipping between Asia and the United States. Will ports on the US West Coast again struggle with delays, or even a possible strike due to high-stakes labor negotiations this summer?

“How long will it take to ship freight from Asia to the US to have stuff on the shelves this fall?” wonders Levy. “You just don’t know.”

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Struggling SAS files for Chapter 11 bankruptcy proceedings in US

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On Monday, SAS said that the strike "is estimated to lead to the cancellation of approximately 50 percent of all scheduled SAS flights," impacting around 30,000 passengers a day
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Faced with financial difficulties and a massive pilot strike, Scandinavian airline SAS said Tuesday it has filed for so-called Chapter 11 bankruptcy proceedings in the United States, as a part of restructuring plan.

“We simply need to do much more and do it much faster,” SAS chairman Carsten Dilling told a press conference where defended what he called “a well thought-through decision.”

In the US, Chapter 11 is a mechanism allowing a company to restructure its debts under court supervision while continuing to operate.

The move was made in order “to proceed with the implementation of key elements” of its business transformation plan, the troubled carrier, which employs nearly 7,000 people, said in a statement.

Asked why the company chose initiate the proceedings in the US, rather than Sweden where it is headquartered, Dilling said they had considered several countries where they could file, but “ended up concluding that the US framework is the right one for the company.”

Chief executive Anko van der Werff said they expected “to complete the Chapter 11 process in nine to 12 months.”

SAS said its “operations and flight schedule are unaffected by the Chapter 11 filing, and SAS will continue to serve its customers as normal,” while noting that the ongoing strike by Scandinavian pilot unions would continue to impact operations.

– ‘Last thing SAS needs’ –

“A strike is the last thing the company needs right now,” van der Werff told reporters.

Pilots walked out on Monday after negotiations between the unions and the company broke down.

The pilots are protesting against salary cuts demanded by management as part of a restructuring plan aimed at ensuring the survival of the company, which has suffered a string of losses since the start of the coronavirus pandemic in early 2020. 

On Monday, SAS said that the strike “is estimated to lead to the cancellation of approximately 50 percent of all scheduled SAS flights,” impacting around 30,000 passengers a day.

SAS management announced in February the savings plan to cut costs by 7.5 billion Swedish kronor ($700 million), dubbed “SAS Forward”, which was supplemented in June by a plan to increase capital by nearly one billion euros ($1.04 billion). 

Denmark and Sweden are the biggest shareholders with 21.8 percent each. 

Denmark said in June it was ready to increase its stake to 30 percent. Sweden has refused to provide fresh funds, but is willing to turn debt into capital. 

Norway, which left SAS in 2018, has said it is ready to return to the airline, but only by converting debt into equity. 

Suffering, like the rest of the sector, from the impact of Covid-19, SAS cut 5,000 jobs, or 40 percent of its workforce, in 2020. The carrier now had around 6,900 employees at the end of May, a number which fell below 5,000 at the height of the pandemic.

Shares in SAS, already at all-time lows, fell by more than 11 percent in the early hours of trading on the Stockholm Stock Exchange.

SAS’s troubles comes as the summer is shaping up to be difficult for European airlines and airports, faced with staff shortages affecting traffic. 

After widespread job losses linked to Covid-19, airlines and airports are struggling to recruit new staff in many countries. 

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Hacker claims major Chinese citizens’ data theft

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The data stolen in the hack includes names, mobile phone numbers, national ID numbers, addresses, birthdays and police reports
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A hacker claiming to have stolen personal data from hundreds of millions of Chinese citizens is now selling the information online.

A sample of 750,000 entries posted online by the hacker showed citizens’ names, mobile phone numbers, national ID numbers, addresses, birthdays and police reports they had filed. 

AFP and cybersecurity experts have verified some of the citizen data in the sample as authentic, but the scope of the entire database is hard to determine.

Advertised on a forum late last month but only picked up by cybersecurity experts this week, the 23-terabyte database — which the hacker claims contains the records of a billion Chinese citizens — is being sold for 10 bitcoin (approximately $200,000).

“It looks like it’s from multiple sources. Some are facial recognition systems, others appear to be census data,” said Robert Potter, co-founder of cybersecurity firm Internet 2.0. 

“There is no verification of the total number of records and I’m sceptical of the one billion citizens number,” he added.

China maintains an extensive nationwide surveillance infrastructure that siphons massive amounts of data from its citizens, ostensibly for security purposes. 

Growing public awareness of data privacy has led to stronger data protection laws targeting individuals and private firms in recent years, although there is little citizens can do to stop the state from collecting their data. 

Some of the leaked data appeared to be from express delivery user records, while other entries contained summaries of incidents reported to police in Shanghai over a span of more than a decade, with the most recent from 2019.

The incident reports ranged from traffic accidents and petty theft to rape and domestic violence.

– ‘Heads will roll’ –

At least four people out of over a dozen contacted by AFP confirmed their personal details, such as names and addresses, as listed in the database.

“So that’s why so many people have been adding my WeChat over the past few days. Should I report this to the police?” said one woman surnamed Hao.

“I’m really confused about why my personal data has been leaked,” said another woman surnamed Liu.

In replies to the original post, users speculated that the data may have been hacked from an Alibaba Cloud server where it was apparently being stored by the Shanghai police. 

Potter, the cybersecurity analyst, confirmed that the files were hacked from Alibaba Cloud, which did not respond to an AFP request for comment.

If confirmed, the breach would be one of the largest in history and a major violation of the recently approved Chinese data protection laws.

“Heads will roll over this one,” tweeted Kendra Schaefer, tech partner at research consultancy Trivium China.

China’s cybersecurity administration did not respond to a fax requesting comment.

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I.Coast eyes cassava for its bread as wheat prices surge

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Soaring prices for wheat have triggered concern for bread prices in Ivory Coast, where the baguette is a daily staple
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As wheat prices are driven upwards by the war in Ukraine, bakers in the West African state of Ivory Coast are starting to use locally produced cassava flour to bake bread.

The baguette, the stick of bread that is much loved in the former French colony, is commonly seen as a benchmark of the cost of living.

But Ivory Coast does not produce wheat domestically, instead importing up to a million tonnes of the grain per year, mainly from France.

Surging wheat prices have stoked concern about the impact in a country of 25 million where the average wage is less than 250,000 CFA francs ($400) per month, and which was shaken by a wave of violence less than two years ago.

Both Ukraine and Russia are large wheat producers, and lost harvests and other uncertainties have driven up prices of the global staple.

In response, Ivorian authorities have pegged the price of a baguette at between 150 and 200 CFA francs ($0.25 and $0.30) depending on weight, channelling subsidies worth 6.4 billion CFA francs (about $10 million) to the country’s 2,500 bakeries. 

Bakers, with the government’s support, are also starting to substitute a small portion of wheat flour with flour from cassava, a root vegetable.

Cassava, also called manioc, is Ivory Coast’s second largest crop after yam, with 6.4 million tonnes produced each year.

– ‘New flavours’ –

The cassava substitution plan ticks the boxes for economy and sustainability. But what do Ivorians think?

“Everything has become expensive in the market,” said Honorine Kouamee, a food vendor in Abidjan’s Blockhaus district who was cooking pancakes made of wheat mixed with coconut flour. 

“If we can make bread with local cassava flour it will be better. People are willing to eat local products.”

The national consumers’ confederation has thrown its support behind the cassava substitute.

“It will provide a stimulus for manioc producers and maintain the price of bread,” said its president, Jean-Baptiste Koffi.

But image and taste are important and some bakers are cautious.

“It’s not a done deal,” said Rene Diby, a baker.  

“For Ivorians, bread made with cassava is associated with poor-quality bread. Consumers will have to be made aware of these new flavours.”

The authorities will have to run a promotional campaign, he said.

Cassava is high in starch and is a good source of dietary fibre.

But high proportions of cassava flour lower the mineral and protein content in bread, compared with traditional wheat, a 2014 study in Nigeria found.

Financially, even using just a small portion of cassava flour would provide the government with some relief.

Last year, 10 percent of the national budget of around $16 billion was spent on food imports, despite the country’s fertile soil.

Ranie-Didice Bah Kone, executive secretary of the state-run National Council for the Fight against the High Cost of Living (CNLCV), says it is time to unlock Ivory Coast’s rch agricultural potential. 

“It’s a question of thinking long term, about our food security, it’s a question of thinking about how Ivory Coast will ensure it is less dependent on world prices,” she said.

During a visit to a cassava flour processing plant in Abidjan, she called for immediate measures to increase the supply of local flours, in addition to subsidies for the wheat sector.

– ‘Africanise baking’ –

Concerns in West Africa about dependence on imported wheat are not confined to Ivory Coast. 

On July 19, bakers from across West Africa will meet in Senegal’s capital Dakar to launch an association to lobby for setting a regional benchmark of setting up to 15 percent of local content in bread products.

Using local products in bread could “solve food crises,” said Marius Abe Ake, who leads a bakers’ association.

“We need to Africanise baking to help lower manufacturing costs, fight poverty and avoid damaging unrest.”

Ivory Coast has a history of turbulence.

In 2020 scores died in pre-election violence — an episode that revived traumatic memories of a brief civil conflict in 2011 in which several thousand people were killed. 

In 2008 riots broke out when the cost of rice, milk and meat soared.

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