CarParts.com CFO loads up inventory as just-in-time delivery loses favor – CFO Dive

January 19, 2022 by No Comments

CarParts.com’s CFO-COO David Meniane is one of an increasing number of financial executives bulking up inventory and pushing back on the long-time trend toward just-in-time lean inventory management.

The e-commerce company’s inventory, which focuses on gaskets and brakes and other parts for car owners, has risen to $131.7 million as of the third quarter, nearly 3x the size it was before the pandemic in December 2019, according to SEC filings.

Meniane believes the approach has helped grow the company’s market. The company expected a 33% increase in sales to $582 million in fiscal 2021 compared to the year-earlier. 

“In this environment [just-in-time] doesn’t work. The longer the lead time, the less reliable the supply chain, the more inventory you have to carry, ” he told CFO Dive. Otherwise “we lose the sale to whoever has inventory and is more aggressive.”

David Meniane

Courtesy of CarParts.com

 

Meniane is part of a surge of companies that have reconsidered their leaner approaches to supply chains as clogged ports, soaring container costs and scarcity has led to bare shelves and threatened sales. Lean inventory management, or just-in-time inventory planning, is the practice of trying to match inventory level to consumer demand and it has taken hold in recent decades, with U.S. companies adopting a method that Toyota is often credited with.  

Against the grain

Loading up on inventory is a concept that Meniane agrees goes against the instinct of CFOs to optimize returns and reduce carrying costs, but he sees it as necessary now, although it’s likely “transitory,” he said.

Lean inventory management will come back into vogue again, probably by 2023, he said. ”I think it’s going to ease up in the next two years. As lead times compress, you’re going to see more firms having less inventory.” His hope is that his firm will ultimately have less inventory but maintain higher sales.

Meniane arrived at the company, formerly known as U.S. Auto Parts Network, in 2019 after spending nearly three years as executive vice president of L.A. Libations and prior to that about six years as CEO of Victoria’s Kitchen. Since he joined, the company has pursued a strategy focused on building a streamlined vertically integrated supply chain, which puts the inventory closer to the customer for a competitive advantage. 

<…….

Source: https://www.cfodive.com/news/carpartscom-cfo-loads-up-inventory-as-just-in-time-delivery-loses-favor/617384/

Tags:

Leave a Comment

Your email address will not be published.