Direct manufacturer sales account for nearly 30% of total wholesale trade.1
The supply chain for Industrial Manufacturers is beginning to transform to more closely resemble a B2C model. Manufacturers are bypassing the wholesalers and retailers, to sell directly to buyers. As companies implement dedicated e-commerce websites, as a complement to traditional retail channels, they now have the ability to reach more customers and generate more revenue. But these financial benefits bring with them associated risks. In direct selling, manufacturers must now assume the responsibility of safely shipping products and collecting payments. And for those with a large global presence, it poses a greater degree of risk. A risk mitigation strategy must be put in place to protect high-value goods in transit that may be time sensitive and prone to perishability against loss, damage or delay.
Since more and more industrial manufacturers are moving to a direct sales model, companies need working capital to transform former warehouses into high-tech fulfilment centres. To build an efficient outbound operation, working capital may be required in order to fund technology and equipment enhancements.
Distributors, however, are a different story. They are increasingly importing their goods from other countries, so their funding can be tied up in inventory for up to 60 days. And since banks typically are unable to offer financing due to the high risk, being able to finance goods in transit is a great way to improve working capital.
And with the changing landscape, slow or non-payment of goods is a challenge that both manufacturers and distributors face. When you have a number of buyers located in different cities or countries, holding them accountable can be a risky business. Being able to quickly convert invoices to cash, collect on outstanding receivables and minimise buyer credit risk is the key to healthy cash flow. The financial challenges in the industrial manufacturing industry are more complex than ever before. A smooth-running supply chain is essential to succeed in such a highly competitive industry. Leverage UPS Capital® products and services to enable a more flexible, efficient, smoothly running supply chain.
SOURCE: 1. Studies for 2013, based on intelligence from First Research