In uncertain times we want to keep as much cash in our business as possible. This maximises our ability to take advantage of opportunities as and when they arise, means we are better prepared for any nasty surprises and perhaps most importantly, there is less likelihood that a sustained dip in sales will wreck our business.
A well organised supply chain helps to ensure your clients get the best possible service. Having that edge allows you to retain clients and attract new business, which obviously keeps the cash flowing, but we can go a step beyond this. Many suppliers are not aware of the sophisticated supply chain tricks they can use to increase available cash:
1) Outsourcing stock handling and storage
By managing stock in this way a business only outlays the precise amount of cash that it absolutely needs to.
Working with a 3PL means that you pay for stock handling and storage on an item-by-item basis. When stock levels are low you don’t pay for wasted warehouse, staff and equipment capacity. Conversely, when stock levels are high there is never a need to pay for costly overspill solutions.
2) Bonded warehousing
This can enable you to retain 30% of the value of your stock, or even more in some cases.
By taking advantage of bonded warehousing (through your 3PL or at your own distribution facility) your business can avoid outlaying import duty & VAT on your consignments until absolutely necessary. This means you can order more stock and fulfil more orders to generate more cash; or you can just keep the cash in the bank that you didn’t have to outlay when the goods arrived.
CFSP is like bonded warehousing on acid!
You pay import duty & VAT on an item-by item basis in the month after each item is sold. This works particularly well for companies who supply end consumers or multiple retailers. Stock is immediately available for despatch but there is no import duty & VAT on stock that remains in store. It also means you never pay duty on sales outside the EU.
4) Stock procurement solution
Gives your business a line of credit that the bank or your supplier would probably be unwilling to offer.
Factories in China are rarely willing to offer credit. With a 30 day transit time to the UK, then the time taken to receive and process orders, followed by the 30 days credit that your customers expect, vast amounts of cash can be tied up in your supply chain for a long time.
Because 3PLs have financial security in the goods that they hold for you they may be willing purchase stock from your suppliers on your behalf. This helps you to hold on to your cash until after stock has sold.
Next week’s Saturday Breakfast Brexit Survival Guide – Export Markets