RICHARD Chellumbrun, Head of Sales at global fintech solutions firm Whites Group, talks to manufacturers on a daily basis and hears first-hand about the problems they face.
In this article he looks at the five common challenges encountered by manufacturing businesses of all sizes, across differing industries and gives insight into how they can address them head-on.
1. Lower costs overseas: Competition
“British manufacturers increasingly face competition not only from our own island but further afield. China in particular has been a source of intense competition as they’re able to produce products for a fraction of the price compared to here in the UK. That said, whilst the cost of manufacturing may have risen in recent years, so has quality. In fact, nations such as the UK tend to be known for the quality of their products and can therefore demand a higher price.
British manufacturers must ensure they can outperform the competition on this front – they have to up their game and remain at the forefront of quality assurance.
Manufacturers can also outperform their competition if they keep a close eye on the cost of their FX transactions. Many companies can become complacent on this front, but FX forward planning can provide savings by helping to lower costs and give British manufacturers a more competitive edge.
2. Understanding New Buyers
A key factor in success in existing and new markets is market research and small-scale testing of the market. In The Manufacturer’s Growth Manifesto, Bruce McDuffee, founder and CEO of the Manufacturer’s Marketing Group believes: ‘Most executives in the manufacturing industry are laggards when it comes to understanding the new buyer’s habits and how they apply to go-to-market strategy and tactics.’
In his report he suggests that the window of opportunity is open for modern, bold manufacturing executives willing to change the way they interact with their target audience. In a 2015 study by the Content Marketing Institute85% of manufacturing marketers surveyed cited sales as a goal for content marketing, with social media platforms such as LinkedIn and YouTube being earmarked for their effectiveness at distributing content. With the digital era there is a whole new raft of opportunities for modern manufacturers to capitalise on
3. Supply Chain Management
Dun & Bradstreet and the Cranfield School of Management published the ‘Q3 2018 Global Supply Chain Risk Report,’ at the end of last year. The authors investigated the level of perceived supply chain risk that European companies face with international supplier relationships and foreign currency payments.
In the period of the report, foreign exchange risk rose by 4% across the Wholesale, Infrastructure, Services, Manufacturing, and Finance sectors during Q3. This suggested that buyers could be taking advantage of the currency fluctuations to save money on purchases. Using a system that delivers savings via efficient FX transfers can streamline foreign transactions and protect margins.
4. Optimising Foreign exchange
Businesses that import or export should also consider key factors when transacting in foreign currencies. Foreign currency transactions are sensitive to fluctuations within the exchange rate. Prices agreed with customers or suppliers on one day will likely rise or fall when the exchange rate changes.
Importing components priced in a foreign currency, which form part of the product you’re selling in sterling poses a different issue: you’ll need to decide how to price those goods to reflect the exchange rate. Unfortunately, currency is a business risk that will not disappear for any UK company who desires to trade with or even expand overseas.
One solution which helps mitigate risk is a ‘Forward’. This is a contract to purchase an amount of foreign currency at an agreed rate, either in parts throughout or in full at the end of the lifetime of the agreement. As there are no guarantees in how the market will move, forward planning allows the client to reduce the risk and lock-in an agreed rate. This in turn allows the client to budget and have foresight, rather than the more common and riskier approach of having an unknown exchange rate on any given date.
The preceding issues inevitably boil down to pounds, shillings and pence. As mentioned, this subsequently has an impact on what we all go to work for – profit.
These are just a few of the common issues which face many of the manufacturing businesses we work with today.”
For more information about Whites Group and how Whites Pay can help streamline foreign exchange and currency transactions for manufacturers contact us.