Monday, January 5, 2009

Slower production causes bigger stockpile in warehouses

LOGISTICS firms are experiencing an increase in raw material stockpile in their warehouses as manufacturers have slowed production due to falling demand.

The country’s trade is expected to be hurt even more this year due to its large exposure to the United States, especially for electronics and electrical products.

Also, falling commodity prices have affected Malaysia’s export and import of commodity-related materials such as fertilisers.

Transways Logistics (M) Sdn Bhd president and chief executive officer Edward Chan told StarBiz that the stockpile of raw materials occupied more than 50% or 30,000 sq ft of its warehouse space.

“The raw materials include plywood and fibre boards for the furniture industry that is currently facing falling demand. If this situation persists, we will look into the possibility of acquiring new warehouses,” he said.

He said Transways usually handled the distribution and inventory of the raw materials for its customers in Malaysia, Vietnam and China.

Chan said there was no indication how long it would take for the stockpile of raw materials to clear up as it very much depended on trade.

Infinity Logistics and Transport Sdn Bhd managing director Chan Kong Yew said the company’s warehouses experienced a sudden change in pattern, with slower turnaround for some of the stored materials.

“For imports, we are currently stockpiling or storing a lot of fertilisers. I think the plantation industry, especially oil palm, needs less fertilisers as the palm oil price continues to fall,” he said.

And for exports, he said, there were a lot of electronics product materials being stored at the company’s warehouses. Asked if the long storage of materials meant extra business, Chan explained that the warehouse business made more profit on moving goods rather than “dead” cargo.

“The faster the goods move in and out of warehouses, the more we earn,’’ he said. “But the current situation of increasing stockpile in warehouses in a sense would balance out the supply and demand for warehouses in Port Klang, which are currently facing an oversupply.”

Freight Management Holdings Bhd managing director Chew Chong Keat told StarBiz that the company was not experiencing any “long” storing of products that could be deemed as stockpiling.

“The inventory is a little bit more but electronics products and raw materials are still moving,’’ he said. “Maybe it’s due to how we have structured our service.”

Source: Star Online

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