19 July 2024, 07:53
By Furniture News Apr 04, 2023

Overstocked furniture manufacturers sitting on significant funds, states report

UK furniture and furnishings manufacturers are dangerously overstocked and could enjoy an average cash windfall of £122,786 as they recover from last year’s overstocking crisis, according to new research released today.

The Cash Flow and Overstock report, by inventory management software provider Unleashed, analysed 381,000 products, ingredients and components stocked by over 1800 firms across the UK, North America, Australia and New Zealand.

Jarrod Adam, head of product at Unleashed, says: “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.”

The £122,786 figure from the report represents an average ‘overstock position’ for all UK furniture and furnishings manufacturers – the difference in value between optimum stock levels for each product, versus the actual value of stock held. The UK average across all manufacturing businesses was £102,000.

"It's a genuinely eye-opening number,” says Adam. “What we’re seeing here, really, is the cost of caution – a value in pounds that shows where firms are, against where they could be – while still doing business at the same levels.”

The figures will be good news for many UK businesses, especially those looking to improve the health of balance sheets ahead of the new financial year. However, industry experts are cautioning that the savings will not apply to all.

Phil Oakley, MD of systems integration specialist Outserve, says: “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.

“If you're on a longer cycle and you've got more in stock, then it’s going to take a bit longer for you to benefit. But there may be other benefits that you can look at, like selling some of the items that you're overstocking, even if it's not quite the margin you'd like, it's getting cash back into the business. It's freeing up warehouse space.

“Different businesses will have to see where they can adapt and where the benefits are. But I really do think for so many businesses there is ‘cash on the table’ that they could either keep in the bank or put to use.”

Jarrod believes the findings will make a real difference for product businesses pressured by inflation and supply chain shocks: “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 rebuying.”

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