Stock Crisis: Stocks held by UK firms are doubling

New industry data shows manufacturers are holding twice as much inventory as before the pandemic as global supply chain troubles take on a new shape. Unleashed’s Manufacturers Health Check report used data from its inventory management software to track how UK SMBs fared in 2022. The report shows that companies are being forced to stockpile huge amounts of goods to cope with delays and shortages amid rising inflation.

Analysis of more than 4,500 SMBs paints a picture of manufacturer health by examining four key data points: inventory value, gross margin return (GMROI), days of fulfillment and the price paid for goods purchased.

Overall stock levels for UK manufacturers increased by 99.7%, from an average of £365,736 in Q3 2019 to £730,681 in Q3 2022, while GMROI fell from 2 to 0.9 and fulfillment times from 20 days to 20 over the same period about two weeks.

Tense storage situation

Meanwhile, manufacturers are now paying 10.24% more for their goods compared to early 2022.

“What started as a supply chain crisis appears to have evolved into an inventory crisis at the individual company level,” said Gareth Berry, CEO of Unleashed. “Yes, we’ve seen delivery times and prices ease off, but that’s at the expense of businesses who are being forced to hold a lot more stock just to stay operational.

“It’s a difficult situation for manufacturers who will pose real liquidity pressures. Managing these stockpiles over the coming months will be a delicate task.”

Crazy delivery times

Noah Warren, CEO of British bike manufacturer Temple Cycles, says the impact on his business has been significant: “One of the biggest issues we had was the exponentially insane lead times. So we had to switch from a just-in-time stock model to just in case. The only way to be in stock is to invest more money in it. But you can’t do that indefinitely.”

Digging deeper, it becomes clear that there are differences between industries, with some industries performing better (or worse) for every data point included in the study.

The largest percentage change in average inventory value between Q3 2019 and Q3 this year was the plastics and rubber sector – which saw an average increase of 180%. It was followed by energy and chemicals (+174%) and sports and entertainment with an average increase of 123%.

In fact, all industries considered in this study held a higher inventory value this year compared to 2019, with the exception of manufacturers in the construction sector.

Decrease in GMROI

Looking at GMROI, it’s clear that companies are feeling the impact of higher holdings, with the majority of companies seeing a decline in overall profitability when looking specifically at this metric.

Apart from the food sector, which increased GMROI by 93.69%, all sectors in the UK saw overall GMROI fall, including clothing companies (down 81.8%), plastics & rubber products (down 81%) and energy & chemicals ( down 62%). see the biggest declines.

Six of the nine industries considered in this study have successfully reduced lead times over the past three years, including energy and chemicals (down 74.1%), automotive (down 65.6%) and food (down 48.6 %).

But there are still sectors struggling to bring fulfillment times back to pre-pandemic levels, notably the plastics and rubber products sector, where average fulfillment days have more than doubled – to 29.3 days (+266, 8th %).

Instability of supply and demand

Daniel Myers, Director at Plastock, a provider of materials solutions to the retail and display markets, adds: “We have witnessed firsthand the significant supply and demand instability of materials, going from spikes in very stable supply to huge spikes in demand, and that is it will have a significant impact on the cost.

“Price increases of up to 45% gave us some pretty big problems, and then as the cost of these materials went up week by week, people started panicking to buy all the available inventory. It makes it really difficult to manage inventory – it’s unprecedented.”

CLICK HERE to read the full study.

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