For the toy sector, some peaks, such as Christmas, are predictable.
Others are less so: a computer game becomes a hit, or a certain scooter or plush toy suddenly disappears from shelves because it got featured in a famous TV show.
Managing and capitalising on spikes in demand is a challenge for any business. How you respond at such times can not only transform the bottom line, but be the key to achieving long-term sustainable growth.
Without the benefit of a crystal ball, all businesses will have moments when they are caught off guard by a new trend or unexpected increase in demand. Taking advantage of these moments often requires immediate access to finance.
In addition, when trends are predictable, stock must be ordered, and likely paid for some time before it will be purchased by customers.
At Christmas, there might be nine months between stock being ordered and paid for before costs are recouped from the customer. This gap between outlay and income can leave businesses vulnerable and may strain relationships with suppliers if appropriate finance is unavailable.
Without appropriate finance in times of opportunity, businesses can find that their hands are tied. This is particularly true in situations where fast turnaround is needed as trends don’t last that long.
The toy companies we work with often tell us that the major corporates, who theoretically should need less help, actually receive far greater support from the financial system.
They have services and means at their disposal which are not afforded to smaller companies.
But, there are tactics you can employ to help level the playing field.
First of all, start right. A better understanding of your supplier helps you order better and be better prepared. Make sure you have done your due diligence – visit your supplier and be precise with requirements. Developing a good relationship with them will not only help to ensure the best product but will likely make them more supportive to help you handle the unexpected.
Collaborative supply chains rest on information, goods and finance. Making these three elements smooth, fast and convenient offers both suppliers and their customers lowers costs, greater ability to exploit opportunities and space to try new ideas.
Customers that demonstrate liquidity, agility and flexibility are always more attractive to a supplier. Financial flexibility can be the best negotiating tool with suppliers who are juggling their own risk, cash flow and investment priorities.
There are a number of financing options available to SMEs beyond the bounds of the traditional banking system. Extra cash gives you a negotiating variable for discounts, better terms or better relationships.
If possible, paying a percentage up-front will not only secure the best quality products but also help build favour with your suppliers.
Manage currency risk to protect margins. Learning to manage currency risk and to strategically plan your approach to finance would help increase profits when exporting or importing goods and to maximise the value of overseas payments.