Even by my own low standards, this may be taking mixing metaphors and analogies a little too far – ‘Friends’ episode titles, fast food and chronic issues in UK supply chains. But given the high profile examples in the last week, it seemed to hit the spot.
Nando’s announced that it had been forced to shut 40 restaurants (10% of it’s chain in the UK) last week due to staff shortages at food processing suppliers – hot on the heels of KFC UK reducing its menu the previous week due to supply delays.
The UK supply chain landscape is suffering some chronic issues:
· Staff shortages widespread in food processing, retailers and hospitality
· A shortage of drivers in logistics, and container freight costs at record levels
· Covid isolation issues still not out of the economy after further easing of rules last week
I have talked to a client this week who had a short notice and urgent order in from a client, and needed to source the product from Holland. He was quoted 4 weeks in shared haulage – or a dedicated lorry that week at 5 times the standard haulage costs. How do you rate his chances of maintaining any margin in the deal in the required timeframe?
If the major firms are restricting trading operations, imagine the effect these issues are having on SMEs broadly in the UK and the drain on their cash flow from long delays and far higher costs.
We help UK businesses fund their supply chain from within the UK and overseas with Supply Chain Finance and Trade Finance, and wanted to lay out how broadly it can help business in a variety of sectors in the UK economy – especially at the moment.
How can Supply Chain Finance and Trade Finance help you?
Let’s lose the common misconception first – Supply Chain and Trade Finance can be for stock, materials or goods sourced within the UK, as much as it can be used the purchase of raw materials and finished goods or parts internationally.
Trading with suppliers or manufacturers can begin with either an order from a client that you have to fulfil, or having to ‘stock up’ on the goods that you sell because your customers will expect a quick delivery after they make a purchase.
Depending on the nature of their business, companies either buy raw materials that they manufacture or assemble to create finished and saleable goods, or they will purchase ‘finished goods’ from a manufacturer or supplier – packaged and ready for delivery to their customers.
How can the finance be used?
Supply Chain and Trade Finance can be used to fit a wide range of business types:
· Purchase raw materials or finished goods
· Trade can be with UK based companies as well as overseas
· Commonly finance companies are also experts in FX
· Goods can be pre-sold, or to provide a stock for sale
Your business can improve prices and terms from having the backing of a trade facility and being able to pay earlier; Supply Chain or Trade Finance facilities can be flexible to accommodate deposits if required on order, and other costs including import VAT and freight / haulage if these are applicable to you.
Is the cost of taking finance justified for your business?
In the current environment companies need to conserve cash within the business as working capital can become strained without much notice.
Funding the purchase of goods or materials that are either pre-sold or to provide you with stock leaves crucial cash in the business to cover overheads and unexpected cash calls on the company.
This is especially true when supplementary costs like transport or freight may now be a multiple of what you had first budgeted for when pricing the project or order.
A common objection to arranging finance is the cost of the facility and funding these transactions; beyond the fact that lenders that we work with offer extremely competitive rates on their facilities, I would suggest that these are a great example of the ends justifying the costs of the means.
The cost of funding will slightly reduce your margin on the transaction – but with very little effect on working capital, and consequently you are still able to meet other demands that you face – as well as to fulfil any opportunities that are presented to you.
If you buy materials or goods in the UK or from overseas, don’t let that be the reason you cannot accept new business or orders, or take up any new opportunities.
Why not get in touch and discuss how we can support you with suitable Supply Chain or Trade Finance options?
How do you want to be supplied?
Mark Grant, August 2021.
email@example.com / 01636 614 014