UK food manufacturers are holding onto thousands of pounds worth of excess stock as fears over the supply chain crisis remain.
New research found that on average UK food suppliers were overstocked to the tune of nearly £80,000 and could secure “significant” additional revenue if they freed up stock that piled up last year due to disruptions to supply chains, according to analysis by inventory management tech firm Unleashed.
However, companies are still reluctant to sell too much stock as they fear a reprise of the supply chain crisis that affected global trade for over two years. There was a major drive to increase inventory and lengthen supply chains in the early years of Brexit, but Covid saw major sell through or stockpiles and challenges with replenishment, especially given soaring production costs, labour shortages and knock-on effects of trade disruption.
Food & drink businesses make money when stock is moving, which means holding extra stock can ramp up warehousing costs and massively impact their cash flow. While demand for warehouse space is “softening”, food & drink manufacturers are more prone to following the ‘just in case’ model after seeing how unpredictable consumer demand could be during the lockdowns.
Maintaining those higher stock levels now could result in higher margins. Companies trading long shelf-life goods like canned and dried products are poised to benefit more as they can order less stock over the next year while their current stock keeps rising in price in line with inflation.
But for those whose cash flow was seriously impacted by the supply chain crisis and the added costs of piled-up stock, there was now an opportunity to secure “significant” cash windfall through tighter stock control.
Given the current economic conditions it’s no secret that brands are being forced to free up some cash where they can. The good news is we are seeing that the demand is there