UK electronics businesses holding almost double the stock amidst ‘inventory crisis’

Unleashed’s Manufacturers Health Check report used data from its inventory management software to track how SMEs in the UK have fared in 2022. The report shows businesses 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 paints 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.

Electronics manufacturers saw the fifth biggest increase in stock on-hand levels of any sector when comparing Q3 stock levels in 2022 v the same period in 2019 – up 90% on pre-pandemic levels. Plastics manufacturers saw the biggest increase (up 180.8%), with manufacturers in the energy and chemicals sector just behind, recording an average increase of 174%.

In fact, all industries featured in this research were holding an increased value of stock this year compared to 2019, with the exception of manufacturers in the building and construction sector.

The five industries with the biggest % increase in stock on hand value (Q3 2019 v Q3 2022)

When looking at GMROI (down 37.5%), it's clear that electronics manufacturers are feeling the impact of holding more stock, with the majority of firms seeing a drop in overall profitability when looking at this metric specifically.

Apart from the food sector, which lifted GMROI 93.69%, all sectors in the UK saw a decline in overall GMROI with clothing firms (down 81.8%), plastic and rubber products (down 81%) and energy and chemicals (down 62%) seeing the biggest declines.

The industries with the biggest % decrease in GMROI (Q3 2019 v Q3 2022)

When looking at fulfilment times, electronics firms have been able to make a slight cut compared to pre-pandemic levels (down 24%). Energy and chemicals (down 74.1%), automotive (down 65.6%) and food (down 48.6%) saw the biggest declines.

However, it’s clear that the plastics sector is still struggling to pull fulfilment times back to pre-pandemic levels, where the average fulfilment days are up more than double – to 29.3 days (up 266.8%)

The industry-wide percentage change in fulfilment days (Q3 2019 v Q3 2022)

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,” says Gareth Berry, CEO of Unleashed. “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 electronics manufacturers that will present real cash flow pressures. Managing those stock levels down in the coming months will be a delicate task.”