My view on the inventory build-up.
Think of RACL’s products, they are gear / gear blanks. They need to supply to the customer throughout the year, however the demand for a single SKU is not significant that they can have a Just in time sort of a process. [ refer to Sahil’s post ].
So they have a batch process where they make 10000-20000 such gears and and that gets sold over a year based on customer forecast. They also ( apparently ) keep the inventory near the customer location so the the customer does not have to wait for a incredible amount of time in case of a demand surge ( can go to upwards of 2 months). They carry the inventory on behalf of the customer and the customer is also delighted . What is important for a RACL type business is if Tier 1/ OEM start to engage with them at the design stage itself for building such relationship and maintaining quality. In the auto space this relationship is a superb moat.
Disc. Have a small position in RACL .
| Subscribe To Our Free Newsletter |
