While commodity shortages, port logjams and other disruptions have eased, businesses continue to apply lessons learned from recent periods of instability to make logistics and distribution processes more nimble and resilient.
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Proactive businesses prioritize not just navigating the current economic environment but also preparing for any uncertainties in the future. As the manufacturing industry continues to evolve, retail and distribution supply chains face inevitable and unpredictable fluctuations. Improved financial efficiency ultimately strengthens market position.
Reevaluating operational processes helps find opportunities to increase a company’s financial position. Understanding current trends can help an overall approach to strategically aligning with projections for the future of the logistics and distribution industries to stay ahead of the competition.
Businesses must deal with rapidly evolving markets, higher costs, supply chain shifts and delays, defensive business structures, higher interest rates and growing costs of borrowing. The best plans utilize:
- More sustainable and diverse suppliers.
- Regionalized supply chains.
- Production and warehousing investments.
- Increased use of automation, artificial intelligence and robotics.
- Modernizing sourcing technology.
However, cyber criminals often prey on companies during periods of instability, resulting in an increased need for supply chain technology investments both for fraud defense purposes and to streamline production.
Many nations remain skeptical about cross-border trade, thus increasing localized production trends. Despite widespread market fluctuations, demand remains high and resources limited for industries within logistics.
Businesses in this sector heavily rely on client loyalty to maintain steady cash flow. Because reliable relationships remain essential to achieving sustainable growth, independent consultants’ or smaller firms’ revenue can be cut short due to staffing issues and limited ability to take on a growing number of clients. Seasonal factors also create uncertainty; for example, in the wholesale industry, demand can drop during the first fiscal quarter due to a post-winter holiday reduction in retail sales.
Fortunately, there are solutions to these problems, especially through creating a collaborative and mutually beneficial relationship with a financial services provider.
To propel a business forward, the most important focus is to develop both short- and long-term plans that can help successfully navigate any surprises in a supply chain and corresponding cash management plan. In an unstable market where share is up for grabs and positive cash flow can be a competitive advantage, make time to connect with internal teams and outside advisors to evaluate which financial strategies can help increase margins. Consider obtaining a line of credit for additional financial breathing room during periods of uneven cash flow caused by seasonal demand, or reevaluating the size of existing lines of credit based on current circumstances.
With the most current digital technologies, streamlining cash management processes can help support a small team.
To optimize a cash position, the below action items can allow business leaders to assess and fully understand needs, vulnerabilities and opportunities:
- Look for ways to automate financial functions by utilizing tools such as ACH payments, online bill pay and wire transfers, and explore digital solutions that can cut down on operational costs.
- Schedule time to connect with a banker and other advisors to prevent financial surprises and understand factors that may impact your cash position.
- Review client, vendor and supplier history to give context to the cash flow state and evaluate the status of a supply chain.
- Prepare for supply chain adjustments that could require identifying alternative suppliers and have a vetted standby list ready to implement, if needed.
- Explore localizing vendors and other opportunities to base production out of the local region to boost efficiency and cut transportation costs.
- Create a strategic financial plan with help from financial advisors to prepare for “off-season” periods.
Inevitably, business owners will face the need to contend with stringent customer requirements while grappling with inventory shortfalls, rising fuel and shipping costs, unpredictable purchasing patterns and other uncertainties. Innovative companies will continually evaluate and rethink their conventional supply chain and logistics practices and never assume the status quo will remain viable.
Author: Karah Gagnon is senior vice president and Commercial Banking Team lead for Enterprise Bank & Trust, Member FDIC.
