Plastics businesses under pressure due to supply chain issues

Unleashed 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.

Plastics firms saw the biggest increase in stock on hand levels of any sector when comparing Q3 stock levels in 2022 v the same period in 2019 - up 180.9% on pre-pandemic levels. This was followed by energy and chemicals (up 174%), and manufacturers in the sports and entertainment sector which recorded an average increase of 123%.

In addition to this, 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, plastics firms 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.

Meanwhile manufacturers are paying 10.24% more for their goods now compared to the start of 2022.

Gareth Berry, CEO of Unleashed said: “What started as a supply chain crisis appears to have evolved into an inventory crisis at the individual business level.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.”