Keeping An Eye On Demand
By Jim Phillips, Contributing Editor
“I would love to be able to look down the road — six, 12, 18 months — and be able to plan production,” said one noted Georgia specialty ring spinner. “But there are times these days when I have problems seeing past next week. We started out the year with high expectations, based on the way the market was running last year. But, so far, most of our expectations have failed to materialize. Last year, everyone was fairly optimistic. Going into the first quarter of this year, business was, maybe, okay. Now everybody, especially in the ring-spinning sector, is complaining about business being soft. I don’t know much about open-end, I hear those guys are pretty busy — but I don’t know how their volume of business relates to capacity. I just know that, for us, it’s horrible right now.”
Said another Southeastern spinner: “I’ve been on the road for seven weeks of the past eight visiting customers. And what I’ve found is that most big retailers expect their business to be down substantially in the last quarter. And that, I believe, is the key. There is not enough demand on the retail side for them to consider stocking up. If you look over the past year or so, we’ve been used to retail growth from quarter to quarter in the high single digits to as high as 10 to 20 percent for some of them. If you look over the last two quarters, it has been very mixed. Minuses have almost outpaced the pluses, and the pluses, with only a few exceptions, are in the lower single digits to the mid-single digits. And that, of course, plays in the demand for our textile products. It is the general uncertainty in economic growth that is now reflected in the order situation. The stock market is jumping up and down like crazy. One day you’ve got housing numbers that are bad and everybody kind of buries their heads in the sand. The more you are based on commodity items, the worse it is. You just can’t compete here in commodity items anymore.”
The prospects of a slower fourth quarter are of less of a concern to some manufacturers than the possibility of an extended decrease in demand. “I don’t know that I would say demand is dropping,” said one North Carolina spinner. “But it seems obvious that the growth in demand is slowing – and that may be a longer-term thing. If you look at the US economy from a historical perspective, it seems we are near the end of a growth period and are not really certain about what lies ahead. We are watching the market very closely right now to make sure we are managing our inventory situation and keeping it in line with our expectations of demand over the next few months.”
While there are no magic answers to generating business as demand slows, yarn spinners are almost universally agreed that quick response and enhanced service provide the avenue to continued growth. “You’ve got to be prepared to go the extra mile,” said an executive of a leading ring spinner. “You have to provide turnaround times that others can’t or won’t. And you have to be completely and totally focused on quality. Customers have more choices today about where and how they buy products than ever before. And while price will always be the biggest driver for many companies, response, quality and service come a close second. With the constantly changing demands of the retailer, you can’t leave them hanging with product they can’t sell. Today, more than ever, it’s about getting products on the shelf and off the shelf as quickly as possible and then doing the same all over again with a new or differentiated product.”
The question is, should the US economy begin a downturn, is enhanced service and delivery enough to offset what may become a tendency of retailers and second-tier customers to buy on price alone?
“I don’t know the answer to that,” said one Georgia spinner. “But I just know that it had better be, because that’s all we’ve got.”
August 7, 2007
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