Dealing With Unsold Products

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SaigonTimes English - 25 month(s) ago 5 readings

Dealing With Unsold Products

The inventory indices of multiple commodities rose sharply in the first quarter. The main reason is still the shrinking purchasing power, coupled with capital shortage, sky-high lending rates and stagnant cash flow.

Dealing With Unsold Products

By Son Nghia

The inventory index of cement, lime and mortar was up to 55% as of March 1 this year
The inventory indices of multiple commodities rose sharply in the first quarter. The main reason is still the shrinking purchasing power, coupled with capital shortage, sky-high lending rates and stagnant cash flow.

As of March 1, 2012, the inventory index of the manufacturing and processing sectors picked up 34.9% over the same period last year, say the latest figures of the General Statistics Office. Certain industries recorded a strong growth in their indices. For example, vegetable and fruit processing and preservation shot up by 87.2%, fertilizer and nitrogen compound production surged by 62.7%, iron and steel increased 59.1 %, cement, lime and mortar rose 55%, and motored vehicles went up 38.7%.

The consumption indices of many industries dropped considerably in the first quarter of 2012. Particularly, non-alcoholic beverages declined 20.1%, iron and steel dwindled 24.9%, paper and packaging dipped 26.1%, electric cables and wires slid 30.1%, and metal products down 35.7%.

Explaining the current high level of unsold paper and packaging products, Cao Tien Vi, general director of Saigon Paper Corporation, said the export volumes of several commodities have plunged deeply since early this year due to the global economic woes, thus consumption of papers and industrial packages is affected. The economic crisis has sent numerous industries into tailspin. The paper and packaging industries all over the world are suffering immensely with rising production costs, price falls and sales slumps. This also leaves an impact on the local paper industry.

As for the steel industry, Nguyen Tien Nghi, vice chairman of the Vietnam Steel Association (VSA), said steel consumption in the first quarter was much lower than that of the same period last year. The amount of unsold finished products of the entire industry stood at some 250,000 tons at the end of March.

The sugar industry is also struggling with high inventory. According to the Ministry of Agriculture and Rural Development, sugar inventory at factories has reached 366,000 tons as of March 15, and three factories have suspended operation.

Seeking ways out

Dealing with the inventory problem in the current tough times is a major challenge to enterprises. For those lacking capital, inventory is more problematic given the stagnant capital turnover. As there is little hope for immediate interest rate cut, enterprises are seeking external funds with lower lending rates to supplement and balance their capital, together with promoting sales through various preferential policies.

This is what Saigon Paper Corporation has successfully done to relieve the pressure of unsold products. Cao Tien Vi said since earlier this year, his company has mobilized over US$10 million at an annual interest rate of 1.7% from a Japanese partner. “With this capital source, our company is more confident in carrying out new sales policies with more incentives for customers, in order to maintain our market share and accept moderate profits,” said Vi. In addition, the paper producer has paid more attention to end-users by implementing many promotion programs and offering discounts to stimulate demand.

Meanwhile, Nghi of VSA said the currently high inventory is not the highest. In 2011, there was time when inventory hit 300,000 tons. Still, industry players are looking for ways to promote consumption of unsold products. “The biggest challenge of the steel industry is that supply has exceeded demand in the domestic market. Therefore, to reduce inventory, steel firms are seeking ways to export their products to the foreign markets,” said Nghi.

A beverage producer in HCMC said the amount of unsold products of his company has soared more than 30% year-on-year. The company is focusing on better customer care and different sales modes. A division in charge of inventory has been established, thus information on unsold products is updated and reported daily to the management. Based on the reports, the company quickly adjusts the amount of goods for sale, as well as offers sales agents better commission rates and pricing policies. For instance, the best distributors in a certain period of time will enjoy 3-5% higher discount rates. Sales agents with good sales will receive additional incentives, including the priority to distribute new and well-consumed products with higher volumes than others.

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