Effective cash management is vital to the health of any business, but it can have a particularly significant impact on consumer brands and their supply chain operations. Effective cash management can ensure a steady flow of inventory, maintain strong supplier relationships and keep transportation logistics on track, all while allowing room for companies to invest in growth opportunities. On the other hand, poor cash management can have drastic consequences for your business; leading to delayed payments to suppliers and therefore delayed shipments and transportation as well as a lack of resources for innovation and marketing.
Here, we’ll take a closer look at the impact cash management has on consumer brands’ supply chain, and how effectively managing cash flow can help companies stay competitive and meet customer demand. We’ll also discuss tools and solutions brands can leverage to keep cash flow healthy and ensure minimal disruptions to their supply chain.
4 Ways Cash Management Strengthens Your Supply Chain
There are of course a myriad of ways efficient cash management can influence the success of your supply chain strategy. But there are four, in particular, that are worth highlighting as economic complexities increase their value. These include:
1. Inventory Management:
Cash management directly impacts a company’s ability to manage inventory. It is essential to ensure that companies have enough stock to meet consumer demand without overspending on storage costs. If a company is not managing its cash effectively, it may not have the funds to purchase inventory in a timely manner. This can lead to stockouts, which can disrupt the supply chain and negatively impact customer satisfaction. To mitigate these risks, companies can use inventory management solutions to integrate with their accounting software and keep track of cash flow and expenses.
2. Supplier Relationships:
Supplier relationships are critical to maintaining a steady supply of quality products. However, failing to pay suppliers on time can damage the relationship you have built with them and may lead to delays. This can also affect the quality of the products being produced if suppliers cut corners to make up for the late payments. One way to maintain a strong relationship with your supplier and avoid any of the pitfalls that can come with delayed payments is to be transparent about your goals and try negotiating some fees that feel unreasonable.
3. Transportation and Logistics:
Cash management can also impact transportation and logistics as they ensure products are delivered on time and in good condition. However, both can be costly and come with unforeseen and, frankly, inevitable expenses. Poor cash management can only make this worse. If a brand doesn’t manage its cash effectively, it may not have the funds to pay for shipping and other logistical expenses. This can lead to delays in getting products to customers, negatively impacting customer satisfaction and damaging a company’s reputation.
Having a cash surplus can also be particularly important when you run into unwelcome transportation issues that will inevitably come your way; last-minute freight increases, canceled pickups that lead to additional storage penalties, and more, all can catch you off guard. Having a backup plan such as a Line of Credit you can pull cash from during these times or working with providers that offer flexible payment options such as Pay Later solutions can help you keep your business healthy and running smoothly.
4. Innovation and Growth:
Looking to the future of the company is critical for consumer brands determined to stay competitive in today’s market. However, these initiatives take and can be capital intensive. By effectively managing cash flow, companies can invest in research and development, new products, and new markets to bring in new customers or keep existing customers excited. This can ultimately keep your business competitive and growing.
Moreover, strained relationships on the supplier side due to late payments also make R&D more challenging, as manufacturing partners will become less likely to bring you new concepts or samples (typically at no cost) for fear of not getting paid. Keeping these relationships mutually beneficial will only open more doors in the future.
Overcoming Complexities With A Healthy Cash Flow
Cash management plays a critical role in the supply chain for consumer brands. It impacts inventory management, supplier relationships, transportation & logistics, and innovation and growth and can lead to a whole host of issues such as stockouts, transportation delays, a lack of innovation and resources, and more if you are not careful. Unexpected disruptions can occur at any time. Having access to capital through a line of credit or other debt solutions, like the Growth Line of Credit or Pay Later solutions from Ampla Technologies, can help companies avoid cash flow issues and keep their supply chain moving.
By having a financial safety net in place, consumer brands can be better prepared to weather unexpected challenges, invest in growth opportunities, and ultimately succeed in today’s highly competitive market.
