Electronics manufacturers reeling from components and skills shortages

These findings emerge from the latest Manufacturers’ Health Index, a quarterly assessment by inventory software brand Unleashed, which evaluates small and medium-sized firms across various sectors.

In this index, the electronics and telecommunication sector scored a low 38 out of 100, while the electrical and electrical components industry fared slightly better with a score of 48. The Manufacturers’ Health Index uses key performance metrics such as sales, purchasing, and internal efficiencies to gauge stocking levels and lead times across 16 manufacturing categories. A score above 50 points is considered indicative of strong performance in these areas.

Jarrod Adam, Head of Product at Unleashed, commented on the situation: “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.”

Adam also offered insights for the future: “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.”

The broader context for UK manufacturing shows a mixed picture. By the end of 2023, the UK manufacturing industry saw a rebound, with 11 out of the 16 studied categories scoring above 50 health points in the Manufacturers’ Health Index, contributing to an average score of 77. Cosmetics and personal care, and industrial machinery, raw material, and equipment were the top performers, both scoring an impressive 98. Conversely, office equipment and supplies were at the bottom with just 18 points, followed by food at 30 and electronics and communication at 38.

Lead times also saw a significant reduction from an average of 43 days in 2022 to just 20 by the end of 2023. However, the aftereffects of the pandemic are still evident, with many businesses continuing to overstock ‘just in case.’ In the latter part of the year, excess inventory levels rose to £141,397, up from £119,183 in the same period in 2022. Retail and consumer-centric manufacturers seem to manage their inventory more effectively compared to industries like building and construction or metal and fabrication, where longer lead times are more common.