For far too long, there was little or no data on the strength of engineering supply chains in the UK. However, there is now fact-based evidence which shows the fragile state they are in. The data reveals a contradiction in the minds of engineers; 42% believe supply chains are at breaking point, although 74% expect an increase in turnover during the next twelve months.
How do we know this?
The Supply Chain Funding Index (SCFi) was created by URICA - the global supply chain funding specialist - alongside economist Dr. John Ashcroft and YouGov, in order to measure the existing and predicted condition of UK supply chains on a scale of 0-10.
In the first edition, the engineering supply chain stood at a weak 6.5. In the second SCFi edition, it had fallen to 6.0 - a 7.7% deterioration in only six months and the largest fall of any business sector.
Dr John Ashcroft is concerned that the situation could get a lot worse. ‘A further slump towards 5.5 would threaten the capacity of the engineering industry to capitalise on future export opportunities,’ he says.
What has caused this deterioration?
When a supply chain breaks it can make life very complicated and almost half of the engineering businesses surveyed had experienced disruption in their supply chain.
The survey also revealed that six months ago, engineering businesses had a working capital requirement of 35 days. In only six months, this has increased to 49 days. This suggests that pressure on cash flow is to blame and therefore resulting in subsequent pressure on the supply chain.
How can we improve overall performance?
According to URICA, the ability to improve the liquidity in supply chains would enrich overall performance, as well as bringing a higher level of investment and creating greater cash flow confidence. URICA’s SCFi continues to highlight the necessity for cash in the supply chain, which will, in turn, stimulate the growth and productivity of the UK economy.
‘If we can move the index towards 7.0 rather than 5.0, we can make a real difference; a 10% shift upwards could generate a 3% increase in growth and productivity,’ Lindsay Whitelaw, chair and founder of URICA commented. ‘What it needs is more cash in the supply chain.’
Generating more cash in the supply chain:
The positive news is that over the last five years, Fintech has enabled businesses to access finance where they previously had none.
There are companies out there that support growth without the need for debt - URICA is one example. URICA’s supply chain funding network can help improve liquidity and overall health of funding in engineering supply chains.
About the Supply Chain Funding Index:
The Supply Chain Funding Index (SCFi) measures the condition of business’s supply chains, taking into account their strength, payment and credit terms, as well as forecasted growth.
The SCFi is calculated by inputting survey results into an algorithm. All numerical questions were answered on a scale of 0-10. YouGov executed a statistical correlation analysis to understand the links between the three factors comprising the index, ensuring the calculation was reflective of their weightings.
The result is a figure between 0 and 10 which indicates the overall condition of the supply chain; a higher score indicates a stronger and less pressured supply chain.
URICA is an online supply chain funding network for business. URICA combines funding, leading credit insurance technology and forex management to accelerate invoice payments between businesses of all sizes, removing entirely the need for debt. It was conceived by a group of leading European business people, in strategic collaboration with world leading non-bank financial institutions.
In France, URICA carries the Finance Innovation label, which is awarded to the few Fintech businesses that have the potential for global impact.