Businesses in a wide range of industries rely on stock procurement to thrive, and issues with supply lines will always have a hugely detrimental impact on profits. Ultimately, companies cannot consistently sell their own goods if they’re struggling to procure the products and materials needed to manufacture them.
In this respect, 2021 will hold challenges for many businesses. As the UK has officially left the European Union with a deal, the potential crisis of a no-deal Brexit has been avoided. However, the deal does not permit free movement of goods in the same manner that the UK experienced whilst still a member of the EU, and this will likely cause delays at borders, which may impact supply chains.
Similarly, the border crisis over Christmas and New Year showcased how fragile the status quo can be, as governments across the world close borders in response to new Covid developments. When France closed its border for just a few days, a huge backlog of cargo vehicles found themselves stuck on either side of the channel.
Faced with these issues, ensuring that stockholding and procurement are fully optimised will be more important than ever for businesses, and could mean the difference between thriving and struggling in the years ahead.
So, what options do businesses have to strengthen their stockholding power? There are different models of stock procurement and they all have their own pros and cons. Many will suit some businesses more than others.
For smaller companies who need fast access to materials, but lack the assets to purchase in bulk, consignment stock may be a good option. This entails storing supplier-owned materials in the purchasing company’s own premises and at its own expense. The purchasing company can then pay for the stock as and when they need it, with the convenience of having quick and easy access to it, rather than needing to rely on potentially unpredictable supply chains to match their demand.
At the other end of the scale, larger companies may solve the issue by advance ordering products in bulk. The advantage of this is that they can ensure they have the required amount of stock stored ready for use and can over-order to account for potential supply chain issues in the future. It’s also comforting to suppliers as they can be confident in the financial security of a large advance order.
However, no strategy is flawless and individual businesses need to analyse their requirements, as well as their own resources, before committing to a particular method. Factors such as cash flow, warehouse space, insurance and staff, will all have an impact on whether a particular strategy is suitable for a company.
Businesses with limited warehouse space and without the budget for the necessary insurance will not benefit from strategies which require large amounts of materials to be stored on their premises, such as the two aforementioned methods. They would likely benefit more from an on-demand ordering system, where orders are placed to meet demand and resupply stock levels as they diminish.
Similarly, businesses that rely on a tight production schedule and need immediate access to stock may find themselves in jeopardy if they encounter supply chain issues, so are more likely to benefit from holding stock on site.
For all of these strategies, warehouse space will be a key consideration. Companies who already have or can afford to purchase or rent storage will be able to enjoy the benefits of storing large quantities of goods onsite without it denting their overall budget too much.
It’s also important to remember that the costs of storing goods in a warehouse do not begin and end with the costs of the property itself. Businesses will need to consider additional expenses, such as staff wages, security and insurance, before committing to storing large quantities of goods and materials onsite. Furthermore, for companies opting for consignment stock, it’s important to remember that much of the produce stored in the premises will not be owned by the company itself, so loss or damage caused to these goods will also have to be paid for.
It’s clear that over the coming months and years, many companies will experience teething problems and challenges as the UK’s new relationship with the EU becomes familiar, or as it changes and adapts. However, companies can ultimately negate any potential issues with thorough planning and troubleshooting of their stock procurement process. Whichever strategy businesses opt for, they should remember to tailor it to the requirements and nature of their business, and this will put them in a strong position to overcome any challenges.
By Paul McFadyen, managing director of metals4U
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