Home Nike store Allbirds Increases Inventory By 55% Due To Long Delivery Times And High Demand

Allbirds Increases Inventory By 55% Due To Long Delivery Times And High Demand

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Dive brief:

  • Allbirds increased its inventory by 55% year-over-year ahead of the holidays relying on planning, secondary sourcing and regional diversification, CFO Mike Bufano said in the first earnings call of the company last week.
  • “Given the macro supply chain and logistics environment, we felt it was prudent to build on our strong balance sheet and increase our inventory positions,” said Bufano.
  • Half of the footwear and clothing company’s production is based in Vietnam, but Allbirds has “not experienced a government-mandated manufacturing shutdown” in the country, Bufano told investors.

Dive overview:

Longer delivery times and strong consumer demand ahead of the holidays prompted Allbirds to boost its inventory, the company said. Its third-quarter inventories hit $ 99 million from $ 64 million in the same quarter last year, according to the company.

Allbirds managed to avoid disruption caused by pandemic-related plant closures in Vietnam that cost Nike at least 10 weeks of production and prompted Crocs to move manufacturing elsewhere. Allbirds prides itself on its “small, tightly knit supply chain” and multi-year supplier relationships nationwide, as well as in China, Indonesia, South Korea, Peru and the United States.

In addition to a tight-knit supply chain, Allbirds also uses a vertical distribution model. This model allowed the startup to maintain premium prices while shortening time to market, Allbirds co-founder and co-CEO, Joey Zwillinger told investors.

“There is no price leak,” said Zwillinger, a key factor in maintaining margins as Allbirds faced higher warehousing costs and outbound holiday shipping surcharges.

Bufano predicted “some sort of normalization of logistics costs” over the next five years.

“I’m not saying we’re going to go back to 2019 or pre-COVID levels,” he said. “But… we don’t think we’ll be at the exceptionally high levels that we are today.”

Allbirds was far from alone in building inventory in the third quarter to protect against continued supply chain disruptions and to meet strong consumer demand.

Urban Outfitters has pushed back orders “because the supply chain is four to six weeks longer than it was two years ago,” said COO Frank Conforti. Walmart has increased its inventory by 10% year over year, CEO Doug McMillon told Chairman Joe Biden in a briefing Nov. 29. Target reported “substantially higher” inventory levels from last year.

Supply chains have operated on lean inventory principles for years, but the pandemic has challenged some of those practices. While some companies have increased their safety stock, others have managed to get back to a more normal level by comparing stocks as a percentage of sales. Inventories have also increased for these companies, but mainly in an effort to keep pace with higher demand.

Biden expressed confidence during remarks on supply chains across the country last week that retailers will have sufficient inventory for the holidays.

“Due to actions taken by the administration in partnership with business and workers, retailers and grocery stores, freight carriers and railways,” the president said, “these shelves are going to be stocked.”