Stockouts Preferred to Fat Inventories?

Businesses’ preference for leaner inventory structures delayed the start of this year’s peak shipping season, reports BMO Capital Markets in its latest market report. The late-arriving peak matches industry forecasts that a pickup in rail business wouldn’t begin until September, instead of the usual August, as companies make do with leaner inventory.

North American rail carloads reached a 2011 high in the last week of September, as did intermodal units, the containers that can move by rail, road and sea and usually carry retail goods. Carloads in September 2011 were up 1.1% over September 2010. Traffic is rising slightly from fall agricultural harvests, increased coal shipments for winter heating and power and retail goods bound for store shelves.

During the last week of September, U.S. railroads originated 312,170 carloads of freight, which is more carload traffic than in any week since the second week in November of 2008. Third quarter U.S. rail carloads were basically flat —down 0.04%— compared with the third quarter of 2010.

Retailers are implementing conservative strategies going into the holiday season. They will prefer stockouts rather than holding excess inventory, BMO suggests. If consumers do beat expectations, look out for a spike in expedited orders. The economy is surely expanding, just not at the growth rate most would like to see, they conclude.

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