SME manufacturers holding high inventory levels suggests report

Photo by Scott Graham on Unsplash 

SOFTWARE COMPANY Unleashed’s Manufacturers Health Check report used data from its inventory management software. More than 4,500 SMEs were analysed.

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 Gross Margin Return on Inventory (GMROI) dropped from 2 to 0.9 in the same period.

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,” says Unleashed CEO Gareth Berry. “Yes 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.” 

“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.” 

Noah Warren, CEO of UK bicycle manufacturer Temple Cycles, says the impact on his business has been considerable. 

“One of the biggest problems we’ve had is lead times going exponentially crazy. So we’ve had to move away from a just in time stock model to just in case. The only way we could be in stock is to invest more money in it. But you can’t do that indefinitely.”  

Daniel Myers, director at Plastock, a material solution provider to retail and display markets, adds: “We have witnessed first-hand the significant supply and demand instability of materials, going from peaks of very stable supply to huge surges in demand and this is having a significant impact on costs.

"Price increases as much as 45% presented us with fairly significant issues, and then with the cost of those materials increasing week by week people started panic buying any available stock. So it makes it really difficult to manage stock – it's unprecedented." 

For the full research, visit http://bit.ly/3GSFeyp