Supply chain issues ‘fuelling multiple pressure-points for manufacturers’
26 Jul 2022
Nearly four in 10 medium sized UK firms suffered supply chain problems in the last year, states a report from one of the country’s largest business advisory companies.
RSM UK’s The Real Economy report warns that manufacturers have been especially hard hit as they cope with the lingering effects of lockdown and port closures from the previous two years of trading.
“Brexit identified the number of organisations that were unprepared in their supply chain processes and management. Compounded by the pandemic, those that were under-prepared are now really feeling the pinch, and will continue to do so,” warned RSM UK head of manufacturing Mike Thornton (pictured).
He continued:“Good supply chain management is not just about dealing with and knowing your suppliers; it’s about monitoring them, and working with them to mitigate pinch points, delays and contractual issues with the primary supplier and, critically, their suppliers too. The issues we are seeing now gives insight into how many businesses were not adequately ready to cushion against the global supply shocks.”
As well as experiencing supply chain issues an even larger percentage (44 percent) had experienced ‘significant increases’ in operating costs while 42 percent said profits had declined. Manufacturing had suffered worst from shortages of materials and increased cost.
Latest S&P Global PMI data shows sector growth fell to a two-year low in June, with output stagnating while new orders dipped for the first time since January 2021.
The RSM UK research described pandemic, the war in Ukraine, the aftermath of Brexit and the soaring cost of energy and manufacturing materials as creating “a perfect storm that is hitting the bottom line of businesses”. The vacuum in political leadership in Government would add to uncertainty until the appointment of a new prime minister, it warned.
The current main problems for respondents were listed as delays with orders, increasing costs, missed deadlines, unfulfilled orders and poor communication from suppliers.
One in three said the pandemic was the main driver of the supply chain challenges, while one in five blamed Brexit with other causes attributed as increased shipping costs, events in Ukraine and increased competition for scarce resources.
Added Thornton: "Manufacturers in the UK are still feeling the hangover from the initial wave of coronavirus related lockdowns, and with ongoing shutdowns in China, a further supply chain crisis threatens to hit the UK later this year.
“The first supply chain shocks, mainly from coronavirus related chaos, were most acutely seen in advanced microchips, semi-conductors and high-end consumer goods, but now we have a more general supply chain issue affecting basic necessities too, and this is when the challenges really start to bite."
