A story in today’s Wall Street Journal (5/24/2010) outlines the moves that Polaris Industries is making to adjust its short ORV (off-road vehicle) production capabilities to meet the growing demand for off-road vehicles, especially its hot RZR four-passenger model UTV machines. Read WSJ story here.
The story describes Polaris efforts to hike production as dealers moan about lost sales because of inventory shortages. One group of Polaris dealers I contacted reported selling 53 more RZRs through April this year than it did in 2009, 25 of which were four-seaters. “Supply is definitely a problem,” one dealer told me. “If we’d had another 25 of them to sell, they would have gone too.”
The shortages are a major change for Polaris, which used to be accused of overloading its dealers with inventory. This year, Polaris expects its North American inventories to be the lowest that they’ve been since 1997, reports the Journal, although it doesn’t break out those inventory levels by product line.
Even though low inventories could hurt 2010 wholesale sales, it’s the right strategy, long-term, Scott Wine, Polaris CEO, told the Journal. “It’s a work in progress,” he said.
After reading the Journal report, I checked with Bennett Morgan, Polaris president and COO, about the Polaris inventory situation and its moves to gear up production.
“We are pleased to have had success in working with our dealers over the past few years to bring dealer inventory down to lower, more effective levels,” says Morgan, “and feel pretty good where we are today.” Morgan said the company is “tight” on a few key models, but he said Polaris is “working hard to increase our supply to meet growing demand.” He noted that the sales forecast that Polaris gave to its shareholders for the second quarter was increased to 14 percent to 17 percent, compared to Q2 2009.
Regarding adjusting its production to meet the increased demand, Morgan said the company “significantly” increased production in the second quarter by adding staff and boosting line rates.
He said production this quarter has been increased by adding back additional second shifts at the plants in Spirit Lake, Iowa, and Roseau, Minnesota, for off-road products. “We have added over 200 hourly production line positions in the second quarter already,” Morgan told me today, “and (we) expect to add that many or more in the next 60 days. We are also working overtime and some Saturdays.”
During the last couple of years, the suburban Minneapolis OEM has made aggressive strides to dump its reputation as a channel stuffer that pushed excess inventory on its overloaded dealers. The company’s innovative ordering system— Maximum Velocity Program— that it launched a couple of years ago, allows dealers to purchase machines every two weeks rather than twice a year.
Something like 70 percent of Polaris dealers are expected to be on the new system this year. That’s close to all of the eligible dealers, because many of Polaris dealers are too small to participate in the program. JD
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