Supply chain disruption, coupled with cost inflation, is putting pressure on manufacturers, particularly small- to medium-sized enterprises, a new study by AIM, the European Brands Association, has found.
According to AIM's survey of 664 manufacturers, some 56% of branded manufacturers said that their energy costs have risen by at least 30%, while more than a quarter (27%) said that they had to absorb energy costs of 60%.
In addition, more than a third (36%) have seen cost inflation of over 30% in packaging while transport and logistics costs have soared by more than 30% for some.
While many manufacturers have passed on some of the increased costs they are facing to customers in the form of price increases, just 4% have been successful in passing on the full cost of inflation.
Absorbing Unplanned Costs
“Whilst the focus of cost inflation is on energy, the survey shows it is beyond energy, with cost inflation on raw materials, packaging, transport and logistics also a challenge”, commented Michelle Gibbons, Director General of AIM.
“It shows that 96% of consumer goods manufacturers have had to absorb unplanned costs in 2022, which has inevitably had an impact on production, as well as planned investments for this year.
Sourcing Raw Materials
A succession of crises, from COVID-19 to war in Ukraine, and now inflation and energy crises, had also left many facing challenges with sourcing raw materials – some 75% of those surveyed said that they have faced difficulties in sourcing certain commodities and raw materials.
“All of us are concerned for consumers’ purchasing power, but we are also worried about the impact of cost inflation on operations within the supply chain itself," Gibbons added.
"The reality of supply chain disruption has forced an increasing number of manufacturers to make tough economic decisions, including lowering production, reducing investments, and cutting workforce, with some doing so to avoid insolvency."