UK fashion manufacturers are "dangerously overstocked" - report
Clothing, footwear and accessories manufacturers in the UK are holding overstocked goods worth £86,000 on average, a new study shows.
Describing them as “dangerously overstocked as they recover from last year’s overstocking crisis,” the claim is part of the Cash Flow and Overstock report from inventory management software provider Unleashed.
It comes after the business analysed 381,000 products, ingredients and components stocked by over 1,800 firms across the UK, North America, Australia & New Zealand.
The £86,223 figure it came up with 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.
Jarrod Adam, head of product at Unleashed, said: “Firms last year were forced to stockpile in response to supply chain shocks. 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.”
While getting that stock moving will free up tens of thousands of pounds in cash flow, industry experts cautioned in the report that not all businesses will find it easy to do this.
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.”
But he advised manufacturers on a longer cycle to accept hits to margins as it’s important to “get cash back into the business. It's freeing up warehouse space”.
James Trevelyan, business director of Unleashed customer Circle One, a UK surf brand, said: “In terms of the overstocks, by the end of last year we were probably four times over what we'd expect our inventory to be at that point.
“This time around we were forced to order early. The factories in China were saying five or six months before, 'you need to order now, otherwise you're not gonna get your slot'. Now usually we'd have all the data on the table. I would get quite granular and then add on a bit more to the forecast of uplifting sales etc. It's not really an agile lead time. You can't go back and change this quantity so we had to draw a line in the sand in September.
“It does mean we are not getting twitchy about a late shipment. We don't have that worry, but a lot of our cash is tied up in that stock. However, we were fortunate in that Covid dealt our sector a good hand and that enabled us to boost our cash reserves, and use that cash to invest in more stock.”
Jarrod Adam added: “It's all about finding ways to control the controllables. That can mean anything from improving internal efficiencies, to using a more granular, data-based approach to re-buying.”
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