Unleashed’s Manufacturers Health Check report used data from its inventory management software to track how SMEs in the UK have fared in 2022 and shows businesses, including clothing, are forced to sit on huge quantities of stock 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 – a profitability evaluation ratio), fulfilment days, and the price paid for goods purchased.
Clothing and fashion manufacturers saw the seventh biggest increase in stock-on-hand levels of any sector when comparing Q3 stock levels in 2022 vs the same period in 2019 – up 57% on pre-pandemic levels.
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.
When looking at GMROI (down 81.8%) – the highest out of all industries featured in this research – it’s clear that clothing 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.
When looking at fulfilment times, clothing firms have been able to make a slight cut compared to pre-pandemic levels (down 27.8%). Energy and chemicals (down 74.1%), automotive (down 65.6%) and food (down 48.6%) saw the biggest declines.
In terms of fulfilment days, the percentage change between the third quarter of 2019 and 2022 fell 27.77%.
When it comes to manufacturers (in general) they are paying 10.24% more for their raw materials 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 fashion and clothing manufacturers that will present real cash flow pressures. Managing those stock levels down in the coming months will be a delicate task.”