Farm and garden supply retailer Southern States Cooperative has seen unusual spikes in demand for products such as fertilizer and birdseed since April, forcing it to vie for extra capacity in a tight truckload market and to “right-size” inventory levels.
The company, similar to many US retailers, is seeing a surge of demand after months of weak orders, but is uncertain how long the demand will hold, meaning it must walk a fine line to avoid stockout but not get stuck with unsold inventory.
That’s putting pressure on Southern States Cooperative to support its 69 retail outlets and the approximately 1,700 other cooperatives and dealers throughout the US East Coast it supplies. What’s more, the company is doing so while reconciling how much of that increased demand is temporary in nature due to changing buying patterns during the COVID-19 pandemic, Holly Pearce, Southern States’ director of distribution and logistics, said in an Aug. 12 episode of JOC Uncharted.
“Over the last four to six weeks, we've really seen a significant surge in capacity tightening,” she said. “Some of those non-essential businesses are coming back online, and we're having to kind of fight with them to get the right pricing.”
Pearce said sales of grass seed and fertilizer have spiked due to home landscaping and farming demand during the pandemic. One product that’s seen significant — and unusual — growth of late is birdseed.
“It's a nontraditional time of year for us because this time of year, birds have plenty of food to forage,” she said. “And yet, we can't keep the birdseed from going out of stock. Fertilizer is the same thing. We're seeing a lot more people putting in gardens, as well as planting row crops, whether it's due to a concern or food shortages due to COVID or to have some type of hobby to keep them occupied.”
The surge in demand has exposed the capacity limitations of smaller domestic carriers in particular, Pearce said.
“Some of our smaller carriers that have less than 10 trucks, they are definitely feeling it,” she said. “They're in constant contact with us, wanting to find out if we have loads available. Some of the larger players that have hundreds, if not thousands, of units or equipment at their disposal, seem to have been doing alright. They're able to identify turnover in other businesses or find alternative pipelines for moving freight.”
Pearce said before the pandemic, Southern States Cooperative was focused on significantly reducing its inventory replenishment levels from what they were historically. But now, demand fluctuations have caused the firm to reconfigure those targets.
“In the past, we may have had what I would consider an excess number of weeks of stock, meaning that in some product lines, we'd [have] 22 weeks of stock and we've tried as an organization to drop it down to between six and eight weeks of stock at our wholesale facilities,” she said.
“What that means is when there's a disruption to the supply chain, whether it be from the international turmoil of the pandemic, or even just a tightening of capacity, it means that those supply chains may be disrupted. And so we're looking at right-sizing our inventory replenishment planning to say, ‘Is it eight weeks, is it 10 weeks of supply?’ And also being able to take these forecasts and determine, are the sales a bump due to pandemic buying or is this going to be our new normal?”
Pearce said her focus over the next six to 12 months is recording “as much data as possible” so the company can determine how much of the revenue variation in certain product lines is attributable to the pandemic and how much is independently sustainable.
“I'm hoping that we continue to see these successful sales, this high volume of growth,” she said. “However, I don't want us to get caught in that conundrum where in 2021 we project out by saying 2020 was a fantastic year. We have to keep the history with us and to understand that there were some unique things that were playing into that.”
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