Supply chain issues leave companies overstocked

Australian small business retailers and manufacturers are sitting on potentially significant cash windfalls, but there may be a price to pay.

Research from inventory management software provider, Unleashed, shows that many businesses have overstocked by an average of $231,700 due to the supply chain issues caused by COVID-19 delays.

Aussie small businesses are drowning in 1000s of overstocked products

The findings come after Unleashed analysed 148,142 products, ingredients, and components stocked by 660 Australian small and medium businesses.

Taking extra stock as a safeguard was understandable during a challenging period, but the findings highlight the cost of caution when it comes to overstocking for Australian industry. However, they also point to what could turn into a much-needed cash injection.

Unleashed believes for many businesses the option is now there to free up cash flow as economic conditions tighten, with industry and product-specific data now able to analyse just how much you need to have on hand at any one time.

“You can’t blame Australian businesses for taking on extra stock while supply chains were lagging behind,” said Unleashed Head of Product, Jarrod Adam. “Thankfully, we are now in a place where we can safely define what ‘too much’ stock is, and where businesses can afford to free up cash flow as economic conditions tighten.”

The cost of caution: Overstocking by Australian industry

By industry, Building & Construction ($370,528) and Industrial Machinery & Raw Material and Equipment ($358,427) had the highest overstock position of Australian small to medium-sized businesses, while Beverages ($73,244) and Personal Care ($115,165) were the lowest overall.

Of the markets analysed, Australian firms had a higher average overstock position than both New Zealand ($200,733 AUD) and the UK ($186,500 AUD), while the North American firms topped the group at $236,391 AUD.

Adam is confident that the recent findings will bring relief to product businesses feeling the squeeze of rising prices and supply chain blunders. For those who are carrying inventory, the last few years have been rough and factors such as these are out of their control.

But Adam believes that regaining control is the key to turning the situation around.

“It’s all about finding ways to manage the controllable elements”, he says. “We know that providing more cash flow is top priority for our customers and we’re committed to helping them succeed.”