Our latest guide details a range of challenges facing the UK manufacturing sector today – such as manufacturing finance, and how businesses could leverage their working capital to impact their performance.
Scenario 1 – Weather the storm of a “soft” Q2 for new orders
It’s safe to say that the latest IHS Markit purchasing managers’ index (PMI) – as reported by the Financial Times and the Guardian – offered something of a mixed outlook for UK manufacturing’s immediate future. In terms of causes for optimism, the March / Q1 2018 survey showed that the sector continues to expand with a 55.1 PMI, largely due to promising levels of work coming from overseas and domestic channels alike in recent months. IHS Markit director Rob Dobson noted “business optimism […] holding steady at an elevated level” too, “with over 54 per cent of companies expecting output to expand over the coming 12 months”.
Dobson’s forecast for the coming quarter wasn’t totally positive, though, additionally warning of a “softer patch” for new orders in the months ahead. Indeed, despite the “healthy” activity reported by consumer goods industries of late, the FT also highlighted that these growth figures for 2018’s opening quarter were notably “offset by a fall in investment goods and intermediate goods”. Fluctuating order levels hold profound importance for this sector and as such, forecasting models should factor in this prediction of declining demand into any manufacturing firm’s FY 2018 strategy.
If funding your company’s workforce, tools or technology purchases or distribution in the midst of order shortages seems a daunting proposition, then now could be the perfect time to consider your manufacturing finance options. For instance, aligning an unsecured business loan with your operations could enable your business to access vital short- or long-term funding during this “softer patch” for new orders, with the flexible loan terms offered by Touch Financial’s funder panel allowing manufacturing firms to only utilize this cashflow support mechanism until such a time when their orders return to manageable, profitable levels. No longer will your business need to make manufacturing strategy overhaul based on every new piece of industry data – instead you’ll have the funding support in place to weather even the fiercest of sector storms.
Scenario 2 – Review your key performance indicators
In 2013, the Manufacturing Enterprise Solutions Association (MESA) published valuable research on which industry metrics carry the most weight with regards to manufacturing firms striving for success. According to LNS Research, there are units of measurement which vary considerably in purpose such as on-time delivery, manufacturing cycle times, yield and capacity utilization and administration-based metrics like factory incidents but, when combined, can be “aligned to larger goals and objectives” for an industry player’s overall commercial gain.
The composition of client experience, commitment standards, efficiency and compliance are integral to performance so questions should constantly be asked to ensure performance is aligning with targets. Why not assess your firm’s recent track record for producing goods at an efficient speed, including making any necessary changeovers between plants and delivering the product(s) to customers on time? Or examine whether external factors like the quality of suppliers’ materials are affecting your factory’s yield and / or the number of products returned by customers? Scrutinising each aspect of your business operations sooner rather than later could soon have a pivotal impact on boosting its production efficiency, customer relationships and end-of-year bottom line.
Since projects such as these can prove costly, any business considering evaluating and potentially overhauling their operations should simultaneously ascertain whether they’re in need of further manufacturing finance support to do so. A variety of options are available in this regard, but one facility which often helps businesses lacking the funding to pursue an internal restructure, particularly when they’re still waiting on customer payments for delivered goods, is invoice finance. This popular cashflow solution allows businesses to access a high percentage of their unpaid invoices, often within just 24 hours, which in turn means that your firm could utilize the advance funding to support its internal assessment and begin revitalizing its operations, rather than waiting 30-120 days for customer payments instead.
Scenario 3 – Expand your business’ inventory
While we’ve discussed already the risks of new order shortages during this fiscal year, that doesn’t mean businesses should necessarily scale back their inventory of materials accordingly. Quite to the contrary, Leo Sadovy has written in Industry Week about the need for businesses to expand their inventories if they’re aiming to improve their throughput – another of the key metrics referenced by LS Research – to more efficient and thus profitable levels going forward. After all, without a frequent stream of materials available for your factories to utilize, they cannot hope to improve the speed with which their workers produce desired goods.
Enter asset finance, an invaluable form of manufacturing finance support through which firms can truly take advantage of their machinery, equipment and vehicles. As its name suggests, asset finance involves a funder providing a pre-agreed amount while using assets like these as their security. This cashflow support would in turn enable your business to launch an investment campaign for new materials to expand its inventory, thereby boosting its throughput levels and the number of goods it’s able to deliver – thereby funding further projects for a wider customer base – on a monthly basis, all without the worry of possessing insufficient working capital for this endeavour due to late payments or other obstacles.
Find out more
You can visit our invoice finance, asset finance and unsecured business loans pages for more information on how these services can align with the strengthening of your operations. But above all, get in touch today if you have any queries or want to pursue one of these manufacturing finance solutions and one of our expert consultants will be happy to help.