Whether your clients are dealing in fast-moving consumer goods (FMCG), building materials, medical supplies or manufacturing parts, it’s become increasingly difficult to guarantee the smooth running of the supply chain. And when supply wanes, this can have catastrophic consequences for your clients’ ability to meet customer demand and generate sales.
So, what can you do to help? There are strategies for reducing the supply chain risks and patching some of the holes in the client’s supply process. But additional funding is generally required to put these Plan B options into action.
We’ve outlined some of the key ways to beat the crisis, and how access to the right routes to fast and effective funding will be a lifeline for your affected clients.
The foundational reasons behind the supply chain crisis
The supply chain problems we’re currently experiencing are not entirely new. But they have been exacerbated by the current challenges faced by the UK, as an island nation that’s so recently removed itself from Europe’s largest trading network. Total trade in goods with EU countries has decreased by 23.1% and the UK is currently estimated to have a shortfall of between 60,000 and 76,000 HGV drivers within the logistics chain. So, it’s fair to say that conditions for keeping the European supply chain running smoothly are far from ideal:
Key external causes of our supply chain issues include:
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The logistical impact of Brexit – trading with our European neighbours has become far more difficult. Where import and export was once straightforward, there are now new regulations and processes, plus mountains of ineffective paperwork. This is causing delays, additional costs and considerable discontent, with once-thriving UK businesses now faced with a supply chain that’s less stable, predictable and (crucially) affordable.
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The staff shortage impact of Covid – Covid has had a significant impact on staff shortages, resourcing and the efficiency of the main logistics channels. Employees being stuck in lockdown, off sick or self-isolating has reduced the size of the workforce, and the additional health & safety procedures required for safe transit between countries and borders has made a smooth supply chain less easy to deliver.
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Ongoing global economic conditions – global economic recovery is still uneven and unpredictable. We’re operating in an economic landscape where many companies are struggling for financial stability, cash flow is tight and some suppliers have hit the wall or ceased trading as a result of the Covid crisis. Keeping the supply chain flowing when cash is tight isn’t easy, and it will take time to return to a more predictable position.
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A lack of available HGV drivers – The UK is not alone in having an HGV driver shortage. But we’re certainly in a precarious position when it comes to keeping vehicles on the road, logistics working effectively and supplies being delivered to customers on time. With driver shortages now beginning to affect even everyday supplies of supermarket goods, medical supplies and petrol, swift government intervention is needed to replenish the pool of drivers and get lorries back out on the tarmac.
Getting proactive with clients internal supply chain issues
It’s impossible to bring these external threats of Brexit, Covid, economic unpredictability and driver shortages under your clients’ control. These are wide-ranging national challenges that only time, government intervention and industry-wide actions will be able to change.
But this doesn’t mean that clients are powerless to overcome the supply chain crisis. The key here is to help them devise their own Plan B – to come up with strategies, tactics and operational processes that will keep their companies as close to fully stocked as possible. And which, when implemented, will allow them to continue trading and meeting customer demand.
Actions may include:
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Buying in more stock and increasing buffers – if a lack of stock is what’s stopping clients’ businesses from operating effectively, one solution is to buy in additional buffer stock to supplement their current inventory and allow them to fulfill customer orders. Buying in more stock obviously has cash-flow implications, so it’s likely that some form of cash-flow finance would be needed to fund this buffering insurance policy – working capital finance is one way to provide this additional cash at reasonable rates.
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Simplifying your supply chain – the more complex the client’s supply chain, the more potential there is for delays and issues to occur. Simplifying the chain, so your client is using fewer suppliers, or supplying to a more selective range of customers, helps to reduce the risk. Choosing local suppliers and/or customers can also reduce the supply chain issues by making it easier to carry out the logistical elements of the chain.
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Bringing your logistics in-house – if the lack of HGV drivers is negatively affecting your client’s ability to deliver to customers, it’s worth looking at the possibilities of bringing your logistics in-house. There are clearly significant costs in buying vehicles and hiring or training the right drivers but once set up this could also reduce the client’s expenditure on outsourced logistics and make them more agile as a business – asset finance covers the costs of buying a new delivery vehicle and spreads the impact of making such a significant purchase.
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Improving your systems and data interchange – the additional red tape and paperwork involved in import and export of goods is causing huge delays for many companies. Updating their systems and their electronic data interchange (EDI) capabilities will make it easier to manage the supply chain data and keep all their systems connected and talking to each other. A short-term loan is one way to cover the expense of updating the client’s systems via manageable repayments over an agreed period of time.
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Pivoting your business model – during the ongoing Covid pandemic, it’s been the flexible, innovative companies that have survived the most effectively – and the same will be true of the supply chain crisis. Being innovative in a crisis allows clients to revisit their business model, reimagine their strategy and pivot to a new way of delivering on their key mission. This change in direction may require investment and extra funding, but it’s a deep investment in the future of your client’s business and their continued success – applying to the Recovery Loan Scheme may allow the client to borrow up to £10 million, if the business can meet the eligibility criteria, opening up new ways to fund their recovery and growth.
Financing client’s new supply chain strategy
As you can see, there are plenty of ways to mitigate the impact of a poor supply chain. But many of these resolutions require good working capital and cash flow to succeed.
So, how do you ensure that clients can raise the relevant funds and keep that cash flowing? By becoming part of our Capital Advisory community, you open up a network of different financial products and lenders to your clients – and a world of advice, support and educational resources for your practice. Our Partner Managers work with you to identify the right funding product and the best possible finance deals, allowing them to access the funding they need.
Talk to us about your clients’ supply chain issues. Find out how our advice, finance options and advisory support help your practice deliver a solution to overcoming the ongoing crisis.
Call us on 020 3696 9700 or email us at support@capitalise.com.
For any press enquiries, please email paul@capitalise.com
