Help! I need more stock to keep my business running smoothly
What keeps you awake at night? Read Complete Commercial Finance’s guides to some of the common challenges that many businesses face.
Alongside COVID-19, one topic dominated global business in 2021 and that was supply chain management. From a weeklong blockage in the Suez Canal which created a domino of delays for thousands of businesses around the world, to the messy break-up of January’s Brexit divorce, UK firms have encountered numerous challenges to their supply chain and access to stock.
It’s estimated that 90 per cent of all products that we consume have been on a ship at some point and with around 200 ships arriving daily at Chinese ports experiencing a 1-3 day delay in berthing, coupled with COVID disruptions, established supply chains have been heavily disrupted over the past 12 months. Simultaneously, arrivals at British ports have also been affected and a shortage of lorry drivers and warehouse space have compounded the problem, increasing the time it takes to distribute containers from port to final destination from an average four to ten days.
Consumer demand continues to grow with increased online spending both during and following lockdowns, and the current pressures on manufacturing and retail look unlikely to abate. Firms need to examine this aspect of their business closely to ensure smooth trading in 2022. For those needing to increase their stock levels or navigate the challenge of importing products from overseas, there are several factors to consider.
How can I get more stock for my business?
One approach to this logistical tangle is for a company to secure more stock by increasing its order book. For businesses operating with non-perishable goods, this enables a company to control their own supply chain to a larger degree and plan for the long-term. This scenario sounds ideal, with more product or raw materials available for its manufacturing teams as they respond to increased demand, less reliance on sketchy delivery schedules and rising material costs.
For some companies, this may involve importing materials or products from overseas and there are specific overseas trade finance products which can help to support this and enable it to increase stock.
The issue many firms face when increasing stock levels is cashflow – a larger order of materials means more expense and juggling the lag between outlaying for these and receiving revenue from sales. There are a number of finance options to support a business’s cashflow cycle either by a traditional business loan or cashflow facility. Invoice discounting can help to bridge the gap and is now a highly flexible product that can be tailored to a company’s individual needs – read more here.
What should I think about when increasing stock levels?
During the first wave of COVID-19, many firms around the world shut down operations or reduced output. This has resulted in a shortage of materials in many sectors, particularly construction, which has consequently reduced availability and increased costs. This, in turn, has created challenges for businesses in delivering projects and maintaining profitability, and many have considered increasing the stock of non-perishable products that they hold to reduce the impact of future disruption.
Taking greater control of your supply chain may involve bringing more of your production in-house, perhaps increasing staffing levels and investing in equipment or machinery to improve productivity. This will put a company in a strong position to control more of its workflow and minimise its vulnerability to external market forces.
If space is an issue, it might be an opportunity to look at investing in larger business premises or to consider a warehouse or storage facility that enables a company to scale up its stock levels – read more about investing in a commercial building here. Our commercial mortgages 101 guide is a good starting point to explore investing in a business premises.
As with all aspects of business management, the key to success lies in looking ahead and planning for the long-term. While some sectors may be limited by a ‘just in time’ supply chain, the more a business can do to anticipate and reduce its exposure to market disruption or rising costs, the greater its ability to weather the storm and create stability.
