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Polaris Balances Inventory Reduction with Consumer Demand

Many consumer-goods makers reduced their inventories to get through the toughest parts of the recession, but that strategy may now backfire as consumer spending grows again.

William Strauss, a senior economist at the Federal Reserve Bank of Chicago, told The Wall Street Journal that some companies "are unable to meet the demand because the inventories are low."

Polaris, a Medina, Minnesota-based maker of sport vehicles, is navigating a fine line when it comes to inventory. It cut its American and Canadian dealer inventories by nearly 25 percent last year, and will slash them another 15 percent this year to its lowest point since 1997. But sales have been better than predicted, company President Bennett Morgan told the Journal, so it will hire 200 production employees during the first half of this year, and will likely hire again during the second half.

As customers have returned, dealers have felt pressure to both sell inventory and accept more goods from Polaris. To manage the demand, Polaris will shorten its order cycle so that dealers can accept smaller shipments every few weeks. The company predicts that two-thirds of its American and Canadian dealers will accept the new program by the end of the year.

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