Manufacturing: under the microscope
Under pressure
Together, these factors will impact manufacturers’ margins, push cost increases to customers, lengthen lead times and delay new product development. And more than a quarter (28%) say they aren’t confident that all the businesses in their supply chain will be trading in a year’s time. In response, firms will be looking to build up inventory, while also exploring alternative manufacturing solutions and seeking new suppliers who are perhaps closer to home. One quirk to emerge from this instability is that UK manufacturers are evenly split over the impact of the global shortage of microchips; a third say it’s having a negative impact, a third say the impact is positive, whilst a third haven’t experienced any impact. At the same time, more than half of the manufacturers we spoke to said their own place in the supply chain could be in jeopardy. Indeed, 53% are expecting to come under pressure from creditors in the coming year, which could include winding up petitions or County Court Judgements. With this in mind, it’s vital that manufacturers are on top of their forecasting and open and honest with all stakeholders about the challenges they face. We suggest using a rolling 13-week cashflow forecast so you can continually monitor and manage money in and out of the business.
The war in Ukraine and China’s zero-COVID policy haven’t helped manufacturers over the past 12 months. However, in reality, they have served to compound longstanding issues in global supply chains. As lockdowns around the world ended, a rapid uptick in demand was hamstrung by limited supply and logistics capacity. It threw into sharp relief how a flood in Malaysia, for example, could cause a production line in Munich to grind to a halt. Brexit has also introduced new administrative obligations that importers and exporters are still working through. And, of course, energy bills and interest rates continue to create uncertainty that’s affecting decisions about everything from investment to employment.
Risky business
It’s no great surprise that manufacturers told us the top five risks to their business over the next 12 months are the availability of materials (33%), international trade complexity (29%), increased energy costs (28%), increased materials costs (27%) and increased import/shipping costs (26%).
What are the biggest risks to your business in the next 12 months?
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Availability of materials International trade complexity Increased energy costs Increased materials costs Increased import/shipping costs Availability of labour New COVID variants Supply chain delays/uncertainty Increased wage costs
*Results based on responses from 100 senior decision makers from heavy manufacturing businesses, who each selected all steps that applied to their business.
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