Decades ago, MBAs and international logistics experts were touting the advantages of just-in-time inventory management in manufacturing. The idea was to reduce product-storage costs while still making goods available to customers as soon as needed. Just-in-time inventory was heralded as a way to increase manufacturing efficiencies and eliminate the costs of mothballing products while turning over inventory quickly.
The success of the JIT approach depends on manufacturers forecasting product sales accurately, including spikes in demand that would require fallback inventory. But when a wildly unexpected surge in demand occurs — say, for a record-setting number of boats and marine products during a once-in-a-century pandemic — the just-in-time system can fail.
“Just-in-time inventory is the problem,” Craig White says of today’s industrywide supply-chain problems. He co-owns White’s Marine Center, a dealership in Casper, Wyo., and has watched for years as manufacturers “ruthlessly” eliminated excess inventory to gain pricing advantages, leaving dealers like him without access to the kind of surge inventory (also called buffer or safety stocks) they need now. “I think just-in-time inventory really tripped us up.”
Dealers like White know they are not in a position to fix the inventory problem, so they are addressing it in ways they can control. Chief among their strategies is a marketing and sales-pitch pivot that
focuses more on setting realistic customer expectations.
“I think all dealers are having to change their marketing mix,” says Merlin Thykeson of Mark’s Marine in Hayden, Idaho. “The day of a newspaper and radio ad with the message, ‘Come on down, our lot’s full and we have inventory clearance’ just isn’t the case anymore. We’re all working with our manufacturers. We’re on Lightspeed [a cloud-based point-of-sale system] trying to deal with what the manufacturers are offering, and are looking to add some staff to do more video content and prepromotion.”
Sometimes, Thykeson says, success can be had by nudging consumers in a direction that matches whatever product is available. A deal may start out with a customer asking, “How soon can I get this?” A good salesperson might pivot that customer’s thinking to, “Am I comfortable taking a red hull instead of a silver one?” All the while, the dealership is working overtime to get more inventory and to make more options available.
“We’ve ordered more boats already than I’ve ever done in my life, and I’m talking to the rep and he says, ‘Well, you’ve probably got to order another million dollars’ worth of boats today if you want to get them next year,’” Thykeson says. “I’m ordering my April, May, June, July boats today for next year.”
Randell Seyfert of Captain’s Marine in Kalispell, Mont., is working hard to restock inventory — any inventory, new or used.
“On the new-boat side, that’s a challenge because I only get what the manufacturers can provide. I’ve just been trickling in a few boats here and there from the manufacturers. Most of the stuff I get is presold. But if I do get something that’s not already sold, that’s usually sold within a week or less. We are now being fairly aggressive, telling people to order now to buy for next year because, at least in my mind, I don’t see things getting caught up at least until after next summer. I have an allocation from my pontoon manufacturer of 32 boats, and half of those are sold already.”
Another challenge for some dealers has been shipping and logistics. Problems that freight companies — which are also dealing with unprecedented demand — are having with staffing and equipment are compounding the problems dealers are experiencing with manufacturers.
White recalls a recent incident when he contacted a freight company about a missing order. “I asked, ‘What’s the problem? Is it personnel?’ They said, ‘Yeah, we don’t have people to unload the trucks. We don’t have people to drive the trucks, and we have equipment issues. We don’t have enough trucks.’ ”
Another time, White was trying to take delivery of product from Mercury Marine for three presold engines. They didn’t arrive on time because they were stuck in transit. After 45 minutes on hold with the freight company, he learned that the engines were stuck at a hub the freight company called a “black hole.”
“Our three engines were still in a truck that hadn’t been unloaded,” he says. “She couldn’t tell me any information about when we’re going to get them. I asked, ‘Do you think we’ll get them by the end of the week? You know, these are sold. We need to let the owners know when they can have their motors.’ She said that they are so overwhelmed, they transferred the engines to [another freight company].”
Thykeson, too, has had engines he ordered fall into in a shipping void. “The freight has been through 10 different terminals, on and off trucks, and then we look at our freight damage this year and it’s up dramatically, and I’m thinking, These orders used to go to Minneapolis and up to Spokane and back to me, like three or four stops,” he says. “This order has been into 10 different terminals. And obviously, we still haven’t got the motors, and they’ve been on the road now for three weeks.”
Thykeson says that for now, communication is the most important factor he can control. Most manufacturers are a doing a good job communicating about shortages and production, he says, and his dealership, in turn, passes on that information to customers.
“We’re the frontline to the consumer, and we’re the ones that are trying to make sure that the consumer is kept up to speed as to why the delays are happening and what our next best estimate is on delivery,” he says. “But keep in mind, that is still an estimate. We don’t have control of the final product until it gets here.”
White says that even his longtime colleagues in the industry have never seen this kind of high demand and low supply, compounded by so many problems. “I don’t know how long it’s going to take to resolve itself, but we’re grateful for our partners and our vendors because we’re all in it together,” he says. “We’re just trying to keep customers happy and on the water.”
This article was originally published in the September 2021 issue.