The impact of component and skills shortages is being felt by manufacturers in the electronics, telecoms and electricals sectors, according to a new report.
Small and medium-sized firms in the sector ranked among the lowest in the latest Manufacturers’ Health Index, compiled quarterly by inventory software brand Unleashed.
The electronics and telecommunication category scored just 38 out of 100, while the electrical and electrical components industry scored 48.
Unleashed’s Manufacturers’ Health Index is calculated from a number of key performance metrics including sales, purchasing, and internal efficiencies that impact stocking levels and lead times across 16 manufacturing categories. A score of 50 points or more indicates that a sector is performing well against these metrics.
Jarrod Adam, Head of Product at Unleashed, said:
“Manufacturers in every industry category were hit by challenges from all directions in 2023 – including high inflation and rising borrowing costs.
“However, it seems that the electrics and electronics industries have struggled more than most possibly due to the recent component shortages and ongoing labour shortfalls.
“The appetite for digital technology and connectivity is ongoing going to grow, bringing new opportunities to become trusted suppliers to OEMs and telecoms providers. But the pace of change is so rapid that manufacturers will need to be ready to deliver at a competitive price to avoid losing market share to overseas competitors.”
Looking ahead to the coming year, he added:
“Whatever happens in the coming year, having full oversight of their inventory management processes will allow them to proactively respond to changes in the market and improve internal efficiencies to reduce the impact of labour shortages, in order to drive sales, protect their margins and improve profitability.”
Bigger picture: the haves and have-nots of UK manufacturing
Overall, the UK manufacturing industry rebounded at the end of 2023, with 11 of the 16 categories studied scoring more than 50 health points in the Manufacturers’ Health Index – contributing to the average of 77.
Top of the table were cosmetics and personal care, and industrial machinery, raw material and equipment, which both achieved a near-perfect score of 98. Office equipment and supplies was bottom of the table at just 18 points, followed by food at 30 and electronics and communication at 38.
Lead times have also more than halved from the 43 day average of 2022 to 20 at the end of 2023.
However, the legacy of the pandemic is still clear, with ‘just in case’ overstocking now a fixture for many businesses. In the latter part of the year, excess inventory levels grew to £141,397 compared to £119,183 for the same period in 2022. Retail and consumer-centric manufacturers appear to have a better handle of their inventory compared to heavier industries like building and construction or metal and fabrication where longer lead times are already more typical.
For more information and for the full research, visit: https://www.unleashedsoftware.com/blog/manufacturing-health-index