SME buyers stockpile supplies in Q2

9 August 2011

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10 August 2011 | Adam Leach

Purchasing of supplies increased sharply in the second quarter (Q2) as businesses moved to stockpile inventories in order to mitigate the impact of potential disruptions.

The SME Trends Survey, published on Monday by the Confederation of British Industry (CBI), found that small- and medium-sized enterprises (SMEs) upped orders of raw materials over the past three months, with the survey recording a score of +20, the highest since 1988. The increase in purchasing was particularly strong in the medium enterprise sector (businesses with 200-499 employees), with a score of +37.

In contrast, the survey, which scores positive answers as +1, negative answers as -1 and indifferent answers as 0, found that purchasing over the next quarter would reverse to a similar degree with a score of -18 for SMEs. This could be taken as a sign that the spike in activity was a result of companies looking to stockpile supplies in order to mitigate the impact of any disruptions to their supply chains. Despite significant increases in domestic orders, +14, and total orders, +19, confidence among SMEs declined sharply, dropping to -10 from +12 in April 2011.

Lucy Armstrong, chairwoman of the CBI’s SME Council, said: “Orders and production have been strong for the UK’s smaller manufacturers this quarter, but growth is expected to stagnate and [business confidence] has fallen for the first time in two years.”

Another report, published by software company Inform, also highlighted the importance of supply levels. It found that three quarters of material management professionals believe that lacking inventory stifles business growth. The report, which is based on interviews with 117 materials managers, also found that 80 per cent of companies believe that management of suppliers – in terms of ensuring they stick to delivery dates – needs improvement.

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