Manufacturing businesses will weather supply chain challenges

Features Posted 19/09/21
Businesses are reporting serious challenges to supply chains, with stock lead times hitting 56 weeks for even the most basic items, says Andrew Tate, partner and head of restructuring and transformation at Kreston Reeves.

Kreston Reeves’ June survey of 100 businesses in London and the South East found that 41% are currently experiencing significant supply chain challenges, with a further 17% expecting problems in the very near future.

The issue is particularly acute for UK manufacturers, with one manufacturer reporting stock lead time of up to 56 weeks for even the most basic of items.

Manufacturing businesses are facing a perfect storm of delays caused by Covid, Brexit and the temporary closure of the Suez Canal, and stock lead times are typically between 24 and 56 weeks.

The demand for high quality and high value UK-manufactured products is high, but the ability to stockpile for even just a few weeks is not possible for most businesses. Businesses are unable to fulfil orders and are taking a hit on margins.

The problems appear to rest in transportation rather than overseas manufacturing, with businesses simply unable to ship to the UK. Problems are expected to continue into the summer of 2022.

The Covid-19 pandemic has also meant that businesses cannot send staff overseas to sort our problems on the ground, and when they can, the transportation is simply not there. As infection rates once again increase, that is unlikely to change anytime soon.

Increased costs to UK manufacturers caused by supply chain delays are currently being absorbed by CBILS and Recovery Loan funding that has yet to be spent, but funding challenges loom large.

Businesses need to ask - what will happen when that funding is exhausted? Will banks respond if more funding is needed?

Businesses experiencing supply chain challenges should scenario plan, forecast pinch points and open dialogues with funders and banks now.

If your business is currently experiencing supply chain issues, then get in touch with us.

Tweets from @SEBmagazine