The Cash Flow and Overstock report, by inventory management software provider Unleashed, analysed 381,000 products, ingredients and components stocked by over 1,800 firms across the UK, North America, Australia & New Zealand.
“Firms last year were forced to stockpile in response to supply chain shocks,” said Jarrod Adam, head of product at Unleashed. “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.”
The GBP86,223 figure from the report represents an average ‘overstock position’ for all UK clothing, footwear and accessories manufacturers – the difference in value between optimum stock levels for each product, versus the actual value of stock held. The UK average across all manufacturing businesses was GBP102,000.
“It’s a genuinely eye-opening number,” said Adam. “What we’re seeing here, really, is the cost of caution: a value in pounds that shows where firms are, against where they could be – while still doing business at the same levels.”
The figures will be good news for many UK clothing firms, especially those looking to improve the health of balance sheets ahead of the new financial year. However, industry experts are cautioning that the savings won’t apply to all.
Commenting on the figures, Phil Oakley, MD of systems integration specialists Outserve, said: “I think it will vary, from business to business, and those with quicker stock turnover will realise the cash quicker. So they could make small changes to their purchasing cycle where they’re only a month or two ahead of themselves, giving themselves a bit of a breather to get their stock at the right limits rather than over-stocking. Having that right limit just allows them to slow down their purchasing. So, within a month or two they could see that cash staying in their bank account rather than going out.
“If you’re on a longer cycle and you’ve got more in stock, then it’s going to take a bit longer for you to benefit. But there may be other benefits that you can look at, like selling some of the items that you’re overstocking, even if it’s not quite the margin you’d like, it’s getting cash back into the business. It’s freeing up warehouse space.
“Different businesses will have to see where they can adapt and where the benefits are. But I really do think for so many businesses there is ‘cash on the table’ that they could either keep in the bank or put to use.”
Ultimately, Unleashed’s Adam believes the findings will make a real difference for product businesses pressured by inflation and supply chain shocks. Everyone who needs to hold inventory has had a tough few years, he says – and most of it’s been out of their hands. “It’s all about finding ways to control the controllables,” Adam explains. “That can mean anything from improving internal efficiencies, to using a more granular, data-based approach to rebuying.”