“Firms last year were forced to stockpile in response to supply chain shocks, but that's had serious cash flow impacts,” explained Unleashed head of product Jarrod Adam. “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.”
Unleashed’s Cash Flow and Overstock Report found that, on average, UK food manufacturers held GBP £76,772 in overstock – the difference in value between optimum stock levels for each product, versus the actual value of the stock held.
Where we are versus where we could be
“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,” Adam added.
While these figures may sound like good news to businesses looking to improve the health of their balance sheets, industry experts warned that these savings won’t apply to all.
Phil Oakley, managing director of systems integration specialists Outserve, said: “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 – within a month or two they could see that cash staying in their bank account rather than going out.”
However, businesses that operate on a longer cycle and have more stock will have to wait longer to see any benefit. Still, other benefits they can look at include selling off some of the items being overstocked for a smaller amount of money and to free up warehouse space.
“Different businesses will have to see where they can adapt and where the benefits are,” Oakley concluded. “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.”