Supply Chain Funding index falls in line with predictions
17-May-2017The second edition of the Supply Chain Funding index (SCFi) has just been released, and the results are broadly in line with the somewhat pessimistic predictions made first time round.
Read on to find out more about the SCFi and what the latest report means for business owners.
What is SCFi?SCFi is a biannual report designed to "measure the existing and forecasted condition of the UK’s supply chains, taking into account its strength, payment and credit terms and forecasted growth."
The index was developed by URICA in conjunction with YouGov and launched in September 2016. This report surveyed representatives from 2,000 businesses, asking each of them to answer questions regarding supply chain funding on a scale of 1–10.
This data was then aggregated and presented as a report to provide insight into the overall condition of supply chain funding.
What does the latest edition state about supply chain funding?
Key findings from the initial report were as follows:
• Supply chain funding ranked at 6.6 out of 10 overall.
• 34% of businesses had experienced a broken supply chain in the preceding year.
• 33% of businesses believed the situation would get worse during the coming six months.
This implied that businesses were working hard to grow, but were concerned about supply chain funding undermining their commercial activities.
Results from the second survey (conducted in February) have just been released. Here's how the findings compared:
• The overall index score fell 6% to 6.2.
• Among small businesses, this figure fell by 7.6% to 6.1.
• 31% of small businesses suffered supply chain issues in the preceding year.
• Two-thirds of these businesses were disrupted by supply chain issues.
• Almost one-third expect these issues to get worse over the next six months.
• However, two-thirds of businesses expect turnover to increase over the coming year.
What do these figures mean in a wider context?
Essentially, small businesses are confident about growth but concerned about their suppliers' ability to deliver.
Lindsay Whitelaw, chair and founder of URICA, described this trait as "worrying", and predicted that some businesses would have development plans impeded by supply chain issues.
However, he stated that a 10% increase in the index would see growth and productivity rise by 3%. Conversely, noted economist Dr. John Ashcroft noted that,if the index were to fall as low as 5.5, SMEs would struggle to capitalise on growth opportunities. As suppliers themselves, any changes felt by SMEs would also soon be felt by larger businesses.
These findings imply that liquidity needs to be added to supply chains to give businesses the confidence they need to grow.
These surveys remind us that SME's face all sorts of pressures in the modern economy and lack of cash flow and poor technology only exacerbates the problem. It is interesting to see that there has been an increase in innovative methods of helping companies cashflow with the growth of so called FinTech and Alternative Lending. URICA is one of these new "disrupters" and this is in an interesting survey. That said good financial controls are the most vital ingredient for all businesses.
If you're concerned about supply chain funding issues or cashflow problems and how they might impact on your bottom line then give us a call.