Inventory Levels Seen Ballooning as Companies Turn Cautious

By: Nurin Sofia | May 29 2022 at 11:59 PM | Logistics

(Bloomberg) -- Companies from retailers to manufacturers will hold greater levels of inventory this summer as global supply chain snarls force a shift from a just-in-time mentality to a just-in-case one, according to EmergeVest, a Hong Kong-headquartered global investment firm that specializes in logistics.

“If you’re a retail business, what is more expensive -- to carry some additional inventory or miss out on the sale completely?,” EmergeVest Chief Executive Officer Heath Zarin said in an Bloomberg Television interview Monday.

Zarin said that in Shanghai, the center of a multi-week lockdown to stamp out Covid-19 infections, as many as 300,000 containers have yet to leave the city’s port. This summer, ocean freight disruptions could be “similar, if not worse” than last year, he added.

Another key pain point -- inland logistics, both in China and the US. Trucks carry about three-quarters of China’s total freight and while truck traffic in Shanghai and Beijing has started to pick up as the cities reopen, it’s still well below the weekly average in 2019.

“One of the biggest challenges is around inland logistics, in particular trucking to get goods from the factory to the port itself,” Zarin said.

“The news out of Shanghai should alleviate that. However, then once you get to the other side, you run into basically a mirror image of the same problem in the West Coast of the US or into the UK,” he said, referencing the fact that Shanghai is now slowly emerging from its harsh Covid restrictions.

Read more: Beijing Eases Curbs, Shopping Malls Reopen: Lockdown Tracker

Zarin also said EmergeVest is planning a US entry for its flagship portfolio company, EV Cargo, at some point over the coming 12 months. Other portfolio companies include Palletforce, Taylor Maritime and Cargo Services Airfreight, according to the company’s website.

“The US market will be a larger acquisition opportunity for us as we fill out our network across Europe or some smaller Southeast Asian countries,” he said.

EmergeVest established freight forwarding company EV Cargo in 2018 by combining six of its portfolio companies.