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AU SMEs losing more than one-third of profits in inventory crisis, data reveals

Australian manufacturers’ stock profitability has dropped through the floor since the pandemic, signalling an inventory crisis for Australian businesses, according to current industry data.

Overall, manufacturers’ stock on hand climbed steadily in Australia, from $770,950 in Q3 2019 to $895,729 in Q3 2022 (up 11.52 per cent), compared to more abrupt rises in NZ (115.37 per cent) and the UK (99.78 per cent). On the other hand, Australian businesses are losing more than one-third of their inventory returns, which have fallen from 1.5 per cent pre-pandemic to 0.9 per cent now (a 39.33 per cent reduction).

AU SMEs losing more than one-third of profits in inventory crisis, data reveals

Fulfilment times have been cut to an average of ten days after peaking above 16 days last year, decreasing below pre-pandemic levels of 12 days.

Unleashed’s Manufacturers Health Check report used data to track how SMEs in Australia, New Zealand and the UK have fared in 2022. The report betrays a common theme among businesses, now forced to grapple with a storm of rising costs, slimmer profits, and stockpiled goods. 

The five industries with the biggest  per cent increase in stock on-hand value (Q3 2019 v Q3 2022)

Energy, Chemicals176.57 per cent
Automotive and Automotive supplies114.58 per cent
Clothing, Footwear, Accessories52.21 per cent
Building and Construction27.35 per cent
Electronics, telecommunications, Electrical & Electronic components24.50 per cent

All industries included in this study held more stock this year than in 2019, indicating that more money was tied up in inventory as a result. The energy and chemicals industries increased by 176.57 per cent, the automobile industry increased by 114.58 per cent, and clothes, footwear, and accessories increased by 52.21 per cent. 

Typically, sectors with the largest exposure to international supply chains have been the most affected, while those sourcing items closer to home – or able to source alternative suppliers domestically – have been less affected.

The five industries with the biggest  per cent decrease in GMROI (Q3 2019 v Q3 2022)

Building and Construction-41.53 per cent
Energy, Chemicals-47.52 per cent
Beverages (alcoholic and non-alcoholic)-53.01 per cent
Sport, Entertainment, Recreation-69.23 per cent
Clothing, Footwear, Accessories-80.28 per cent

When it comes to GMROI, it’s evident that most industries are suffering the effects of both inflationary expenses and being required to keep more stock, with the majority of firms experiencing a decline in overall profitability when this indicator is considered.

Seven of Australia’s nine sectors had a decrease in overall GMROI, with the clothes, footwear, and accessories sector (down 80.28 per cent), sport and leisure (down 69.23 per cent), and beverage industry (down 53.01 per cent) experiencing the greatest decreases.

On the other hand, the other two experienced considerable recoveries in return on inventory, with the beverage sector improving by up to 175.96 per cent and clothes and automotive supplies jumping by 45.81 per cent.

The industry-wide percentage change in fulfilment days (Q3 2019 v Q3 2022)

Building and Construction-38.55 per cent
Beverages (alcoholic and non-alcoholic)-19.64 per cent
Electronics, telecommunications, Electrical & Electronic components-9.61 per cent
Sport, Entertainment, Recreation-9.22 per cent
Clothing, Footwear, Accessories-4.97 per cent
Energy, Chemicals0.00 per cent
Food10.53 per cent
Plastic and Rubber Products15.11 per cent
Automotive and Automotive supplies68.79 per cent

Six of the nine industries studied had reduced fulfilment times below pre-pandemic norms, including building and construction enterprises (down 38.55 per cent), drinks (-19.64 per cent), and the electronics industry (-9.61 per cent).

The remaining industries, most notably automotive and automotive supplies enterprises (up 68.79 per cent), plastic and rubber products (up 15.11 per cent), and the food industry (up 10.53 per cent) continue to struggle with long fulfilment delays.

The Unleashed Manufacturing healthcheck is an analysis of stock holding, profits, and lead times of 1,772 manufacturers over three years. Unleashed is cloud-based software that gives product businesses clarity and control across suppliers, production, inventory and sales.

For the full research, visit here.

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Yajush Gupta

Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

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