UK electronics manufacturers holding 90% more stock than pre-pandemic

Author: EIS Release Date: Dec 8, 2022

Unleashed, the software business analytics service, has found that electronics manufacturers are now holding almost double the amount of stock compared to pre-pandemic levels – up 90%.

 

The report looked at four key indicators: 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.

 

When looking at GMROI it’s clear that electronics manufacturers are feeling the impact of holding more stock with a 37.5% drop in profitability..

 

When looking at fulfilment times, electronics firms have been able to make a  24% cut compared to pre-pandemic levels. 

 

Across all industries, not just electronics, 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.”

 

*Gross Margin Return On Inventory (GMROI), also known as Gross Margin Return On Inventory Investment is a profitability evaluation ratio that analyses a firm’s ability to turn inventory into cash above the cost of the inventory. It is calculated by dividing gross margin by the average inventory cost.

 

GMROI shows how much profit inventory sales produce after covering inventory costs.

A higher GMROI is generally better, as it means each unit of inventory is generating a higher profit.

GMROI can show substantial variance depending on market segmentation, period, type of product, and other factors.

Methodology

 

To create the Manufacturers Health Check report Unleashed analysed anonymised data from over 4,500 manufacturers that use Unleashed in the UK, Australia and New Zealand over  12 consecutive quarters; from Q3 2019 up to Q3 2022.