Steel and metals was the worst affected sector © Photo by OLI SCARFF/AFP via Getty Images
Steel and metals was the worst affected sector © Photo by OLI SCARFF/AFP via Getty Images

£23bn of unfinished goods trapped in 'limbo' due to supply disruption

13 December 2022

Supply chain problems are keeping £23.6bn worth of unfinished goods in warehouses because manufacturers are unable to get parts to complete them.

report by Barclays found seven in 10 (72%) businesses were struggling with unavailable materials as of October, holding unfinished items worth over £1m on average. 

Steel and metals was the worst affected sector, with £9bn worth of goods in “limbo”, around 19% of the sector's annual turnover. Food and drinks manufacturers had £3bn worth of goods awaiting completion, followed by plastic products (£2.6bn), and electronics (£2bn).

Almost four in 10 (39%) businesses were forced to invest in storage capacity, found the survey of senior executives at 631 UK-based manufacturing firms.

A third (33%) had responded by bringing suppliers closer to home, and another third (33%) by moving sourcing and manufacturing to locations associated with less risk of disruption. Just under a third (32%) said they had integrated elements of the supply chain and brought them in-house.

The report emphasised four key strategies to enable long-term success in the face of disruption.

1. Consider financing solutions

Optimising working capital may be one way to alleviate the pressures of the current economic environment and suppliers seeking payment while goods are detained. Additional bank funding or private equity may be necessary if the squeeze on key goods necessitates new supplier relationships.

2. Explore different options

Creative strategies were a key area the report found respondents investing in. Just over a quarter (28%) of executives said they were exploring new market sectors to reduce the impact of price rises.

Another 26% were cutting their energy usage, and 25% had invested in automation. Just under half (43%) saw an opportunity to switch materials. Reducing output and cutting workforces were strategies employed by 35% and 32% of respondents, respectively.

3. Monitor supply chains

The fundamental response to supply disruption, the report found, was seeking visibility. This was key to predicting and heading off disruption before it became a problem. Simulating difficulties could help businesses observe the impacts of spikes and shortages, ensuring real-time data on demand, inventory, and capacity across the chain.

“In the face of these forces, there is something powerful about the proactivity and pragmatism being displayed by UK manufacturing leaders,” the report concluded.

“Whether by transforming supply chains, trialling new methods or materials, or exploring new markets, our research reveals the sheer number of solutions being used by businesses to reconfigure supply chains in ways that enable them to survive and thrive, while securing the sector’s future.”

Automotive manufacturers were facing similar issues in October, as Volkswagen was left with 150,000 unfinished cars due to supply disruptions. Ford had 40,000 cars waiting for final key parts in warehouses in September.

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