| The Wall Street Journal published several articles | | | | cash is available to fund basic operations, |
| recently noting the failure of major corporations | | | | necessary advertising and marketing expenses, |
| to manage inventory levels during the rapid | | | | importers will be forced to sell down existing |
| downturn in retail. Glassware manufacturers and | | | | inventory levels over time to generate cash and |
| distributors cannot afford to tie up cash in | | | | will lose out on the chance to create new revenue |
| inventory. During the rapid growth of the late 90's | | | | channels. Precipitous revenue declines are possible |
| and early 21 century, buying glass jars in bulk | | | | and extremely dangerous as a result. |
| from China made a lot of sense as lower costs | | | | Over the next few years, glass distributors that |
| combined with increased profitability tempted | | | | follow the domestic model will succeed, and those |
| lending institutions to expand credit lines. This | | | | seeking lower cost alternatives overseas in China |
| magnified the purchasing power and competitive | | | | will likely fail. The stronger sales organizations |
| advantage of small and medium size glass | | | | focused on glass quality, jar selection, customer |
| importers, allowing them to grow at the expense | | | | service and domestic sources will profit |
| of domestic sources. | | | | tremendously as importer rivals will not deliver. |
| When the market soured, glassware | | | | Trends in retail purchasing departments are clear: |
| manufacturers in China and their importer | | | | until economic conditions significantly improve, |
| counterparts suffered major disruptions to | | | | buyers will purchase candles and other affordable |
| existing supply chains. Unstable and rising | | | | luxuries in glass jars on a just-in-time basis. This |
| commodity prices in 2007 and early 2008 coupled | | | | forces all glass fillers to purchase from distributors |
| with the collapse of credit markets destroyed the | | | | with immediate supply available. Although input |
| basic fundamentals underpinning the China sourcing | | | | costs may be slightly higher, sustainable revenue |
| strategy. Hundreds of glass factories in China | | | | growth and long term viability are more important |
| have since closed, gone bankrupt or are incapable | | | | than worrying about pennies. |
| of taking on new business as they seek to shore | | | | Most, if not all, corporate purchasing departments |
| up their own finances. This has actually forced | | | | are anticipating a prolonged slow down and have |
| prices higher for basic jar sizes and styles and | | | | pared back sourcing efforts. Even companies like |
| thus consolidated orders into the hands of the | | | | P&G are not purchasing glassware overseas. |
| few strong Chinese glass factories capable of | | | | A recent project for RiteAid required 10,000 jars |
| weathering the financial crisis. As such, there is | | | | delivered within a 10 day time frame with the |
| little incentive for those jar makers to offer | | | | designated manufacturer Libbey Glass. Whereas |
| pricing or extend terms to glass importers. | | | | previously P&G's buyers would import larger |
| Seeking lower costs is not of primary concern for | | | | quantities direct from China to increase project |
| glassware users during slower sales periods. Glass | | | | profitability, the consumer products giant is now |
| fillers can survive with good cash flow and low | | | | directing cash flows into potential new revenue |
| profitability, but the reverse is not true. Reducing | | | | sources. A recent article in the Journal noted their |
| inventory levels to a just-in-time basis to maintain | | | | purchase of a chain of car washes. |
| stronger cash flow is of primary concern. If no | | | | |