Keeping the production lines moving
October is upon us, and many manufacturing companies will be beginning to ramp up production to meet the fast approaching seasonal demand.
Careful strategic planning is vital during this period, and failure to plan accordingly could have a serious negative impact on business.
Social media marketing has helped spread the word about what is popular for the upcoming holiday season, from the best toys, to the most fashionable winter clothing, and the ‘must have’ gifts. Unexpected publicity can put a strain on manufacturers who are not ready to meet the increase in demand. Production must increase, but where will the money come from?
In most cases, some sort of financing will be required to meet the extra costs of production, such as:
Increased raw materials
More warehouse storage
This money can be found as a result of planning through traditional forms of finance such as lines of credit and bank loans, or even credit cards, but there are occasions where traditional financing is not an option, or may not be the most cost effective approach.
The company that may have been taken by surprise as a result of positive publicity may struggle to find the right financing. They may have already extended their line of credit in the effort to increase production, and have no ready cash available for capital investment. Where can they turn? What asset can they sell? How about their accounts receivable!
Invoice factoring provides an excellent answer to short term financing. A good manufacturing financing company will make sure you have the cash you need to meet your increased seasonal costs, or sudden increase in demand for your product.
Accounts receivable factoring will supply the money based on your existing orders so there is no waiting to receive money from your customers in order to cover your extra costs.
While planning is an absolute necessity, over planning can be harmful to your business. An increased stock of inventory in preparation for seasonal demand can also be a liability if it is sitting on the shelves taking up space. Factoring your invoices can also prevent you from having to overstock when you have the funds to do so, and free you up to produce what you need when you need it. In other words, to plan your production according to demand, whether seasonal or sudden!
Holidays and events cause a change in demand that every company must do its best to accommodate. The tail off period following a peak in demand must also be taken into consideration. Holding excess product once the demand has peaked will cost money. Seasonal demand will impact manufacturers differently depending upon the product they are selling. Many manufacturing financing services have expertise in this area and can help with planning as well as manufacturing factoring.
If you are considering factoring for the first time, it is common to have concerns about how the system works. Most factoring companies are more than happy to sit down with you and explain the process.