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January 2 2023

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12 Journal of Commerce | J anuar y 2, 2023 Cover Story was 1.63, up from 1.51 in September 2019, while the ratio for general merchandise stores was 1.54, the highest reading for such stores since March 2008. Those ratios show that it took longer to clear goods from warehouse shelves last fall, a sign of falling demand amid high inventory supply. But the build-up of inventories also flooded available warehouses, reduc- ing demand for further imports. For some importers, adding a few extra pounds to previously lean inventories may become the new norm. The capacity shortage on the ocean in 2021 shifted to a shortage of US warehousing space near ports and further inland in 2022. Warehousing space became more constricted as the year went on, bringing the third quar- ter US vacancy rate to 3.3 percent, an all-time low, according to industrial developer JLL. As consumers demand more products and developers such as JLL build out industrial warehousing space to meet that need, importers are expected to embrace higher base levels of inventory. That implies that normalization in supply chains will more closely resemble a gradual resumption of more typical behavioral and operational patterns, rather than a leap backward to the 2010s. Dis- ruptions of the scope and depth of the COVID-19 pandemic generally herald enduring change, if not an evolutionary leap. "Four years ago, people didn't order dinner through DoorDash; why should they go back?" said SJ Consulting Group's Jindel. "The same is true for businesses." As such, shippers and their trans- portation providers must continue to innovate, even in times of relative normality. "Companies get in trou- ble because they get too comfortable with how they've been doing things, and they don't want to rock the boat," Jindel said. "Today, you need to rock your own boat, because if you don't, someone else will." JOC Journal of Commerce analyst Cathy Morrow Roberson contributed to this report. email: twitter: @willbcassidy Chicago, Memphis, Tenn., Kansas City, and Dallas–Fort Worth. Right-sizing stock levels Some of the lower demand reported in the general media is a result of overstocked inventory. Front-loading of imports that typi- cally arrive in the second half during the first half of 2022 created bloated inventories that are still being drawn down, especially for retailers. Last fall, shippers that had to expedite containerized freight from US ports inland throughout 2022 found themselves with too much inventory on hand and more inven- tory coming in trucks, on the rails, and on the sea. That build-up from comparatively low levels is another harbinger of normalization. Although the average inventory- to-sales ratios for broad sectors such as US retail and manufacturing remain below pre-pandemic levels, many industries have built invento- ries back to where they were in 2019. Retail inventories, excluding motor vehicles and parts, jumped 19.8 percent year over year by dollar value in September, accord- ing to the US Census Bureau, well above the rate of inflation. The inventory-to-sales ratio for furniture and appliances stores for the month pressure to speed up goods they've suffered since COVID-19 arrived in 2020 — provided the slowdown doesn't snowball into a collapse. "Lower demand will allow global supply chains to progressively improve, even if it still remains ele- vated in some geographies," Soren Skou, CEO of A.P. Moller-Maersk Group, said during an earnings call in November. "It will certainly also help Maersk deliver a more reliable ocean service, which is what we aim to do." The company has expected normalization to occur "for quite some time," he said. But expectations have been frustrated repeatedly since 2020. US importers and shippers stymied by massive waves of imports and con- gestion at the ports of Los Angeles and Long Beach in 2021 were hit with a shortage of warehousing and storage space and fierce congestion at inland distribution points last year, especially in hubs such as ANNUAL REVIEW & OUTLOOK 2023 "Today, you need to rock your own boat because if you don't, someone else will."

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