New research suggests that some UK manufacturers will be able to significantly improve their cashflow as they recover from holding excess inventory crisis through 2022.
Inventory management software firm Unleashed looked at the stock held by nearly 2,000 manufacturers turning over less than $25 million in the UK, New Zealand, Australia, the US and Canada.
In 2022, companies were typically spending twice as much on stock as they were before the pandemic in response to widespread shortages and long lead times. As a result, Unleashed believes the average manufacturer in the UK held £102,000 of stock over and above what they actually needed last year.
Six sub-sectors were ‘overstocked’ by more than £100,000 per company on average:
- Sport, entertainment and recreation (£152,870)
- Electrical and electronic components (£136,041)
- Furniture, fixtures and home furnishing (£122,786)
- Health, medical supplies and equipment (£116,934)
- IT products and services (£107,434)
- Industrial machinery, raw material and equipment (£102,415).
The sub-sectors with the lowest level of average overstock were the beverage and food industries (£47,515 and £76,772 per manufacturer respectively).
Holding excess stock is a potentially significant source of much-needed cash for companies if they are able to start paring back stock levels through 2023, Unleashed said.
Jarrod Adam, Head of Product at Unleashed, explained:
“Firms last year were forced to stockpile in response to supply chain shocks. But that's had serious cash flow impacts. Now the challenge for many is freeing up cash flow as economic conditions tighten – and the good news is the money is there, when you look closely at the numbers.”
Some businesses will be able to translate their overstock into better cashflow faster than others. Those that turn over goods quickly and buy new stock regularly are the best-placed to benefit by simply adjusting their orders through 2023. In contrast, manufacturers with longer cashflow cycles have less flexibility and should instead focus on selling excess stock before it becomes obsolete.
Our specialist Manufacturing Advisors can provide expert guidance on optimising inventory levels and managing your cashflow. Book a diagnostic today by contacting a member of the team.