Like many other manufacturers competing in discretionary and seasonal consumer oriented markets, Polaris Industries Inc. is attempting to manage the right level of inventory to meet a current surge in demand for its products. A Wall Street Journal article, After Slashing Inventory, Polaris Now Struggles to Meet Demand, (paid subscription may be required) outlines a current common problem being expressed by many. This manufacturer of recreational equipment such as motorcycles, snowmobiles and four-wheelers had to make dramatic cuts in production and inventory during this past recession. Now that consumers are returning to dealer showrooms, Polaris needs to insure that its dealers have the right product on-hand, but also insure that inventory investment is not overdone if another hiccup in the economy should occur.
Polaris cut its North American inventories by nearly a quarter last year and expects an additional 15% drop this year, its lowest level since 1997. The company has rehired 10% of its production workforce and is urging its dealers to order inventories in smaller quantities on a much more frequent basis. Polaris had been previously noted as a ‘channel stuffer’, pressing its dealers to take more inventory than they really needed, in exchange for financial incentives.
Behind these headlines, a broader supply chain agility story is being played out at Polaris. The company has plans to double revenues to $3 billion by 2014 which include expanding into Latin America, and leveraged use of supply chain technology may help in this effort. Polaris invested in multi-echelon inventory optimization technology from SmartOps as well supply chain execution technology from RedPrairie. While competitors in its industry sector severely cut back in product innovation, Polaris launched 34 new products in 2009. The company also made a comprehensive analysis of its product sales and determined that two-thirds of revenues come from two varieties of ATV products, and that about 40 percent of North American sales originate from the southern part of the U.S.
Polaris announced plans last week to restructure core strategic manufacturing operations, creating manufacturing centers of excellence, with plans to open a new manufacturing facility in the Monterrey/Saltilo area of Mexico in the next 15 months. Polaris will unfortunately close its Osceola Minnesota plant if a new plant supplier buyer cannot be found. To emphasize its commitment to supply chain transformation, It recently recruited Suresh Krishna as its new vice-president of supply chain and integration. Krishna has a background in global operations and IT having a recent role leading the supply chain activities of the Fire and Security division of United Technologies (UTC). Supply Chain Matters has previously commented on the notion that in the presence of broad supply chain transformation, combining supply chain and IT responsibilities can be effective in alignment of common supply chain process and business objectives.
Over the coming months it will be interesting to observe how Polaris continues to navigate within an quickly changing market while at the same time, undergoing supply chain re-structuring.