New industry data has revealed that manufacturers are holding double the amount of stock compared to pre-pandemic levels as the world’s supply chain woes take on a new form.
Inventory management software provider Unleashed has released its Manufacturers Health Check report, which used data from its software to track how SMEs in the UK have fared in 2022. The report showed businesses have been forced to stockpile huge quantities of goods as they navigate delays and shortages, against a background of rising inflation.
The analysis of more than 4,500 SMEs aimed to paint a picture of manufacturer health by examining four main data points: the value of stock on hand, Gross Margin Return on Inventory (GMROI), fulfilment days, and the price paid for goods purchased.
Overall, stock on hand levels for manufacturers in the UK jumped by 99.7%, from an average of £365,736 in Q3 2019 to £730,681 in Q3 2022, while GMROI dropped from 2 to 0.9 in the same period, and fulfilment times fell from 20 days to around two weeks.
Meanwhile manufacturers are paying 10.24% more for their goods now compared to the start of 2022.
“What started as a supply chain crisis appears to have evolved into an inventory crisis at the individual business level,” said Gareth Berry, CEO of Unleashed.
“We’ve seen shipping times and prices ease, but that’s at the expense of firms who are forced to hold far more stock just to stay operational.”
Digging deeper, Unleashed said it’s clear that there is variation across industries, with some industries faring better (and worse) for each data point featured in the research. The Sport, Entertainment and Recreation sector reported a 123% increase in stock on hand value (Q3 2019 v Q3 2022).
Furthermore, all sectors in the UK, apart from food, saw a decline in overall GMROI with clothing firms reporting the largest drop of 81.8%.
“It’s a tough situation for manufacturers that will present real cash flow pressures. Managing those stock levels down in the coming months will be a delicate task,” added Berry.