3 Cash Flow Strategies for Manufacturers with High Peaks of Seasonal Demand
Manufacturers are about to enter the busiest time of the year, which marks the peak season. The peak season is seasonal, affecting businesses in various ways, including historical trends in demand and economic factors beyond the owner's control.
Due to seasonal occurrences, cash flow is usually at significant risk of mismanagement. For manufacturers with high peaks of seasonal demand to cope with downturns and constricted cash flow, they need to implement a mix of active and preparatory strategies. Here are three top tips to get started:
Know and Understand the Peak Season
Manufacturers with varying peak seasons must identify the busy and slow seasons to create an accurate cash flow forecast. It's crucial to be realistic with the estimates to certify the revenue collected in the peak season and the off-season expenses are accurate. For established manufacturers, the best place to start is evaluating the historical sales data and isolating the months with higher incomes and lower costs and vice versa.
Employ the Right Third-Party Logistics Partnership (3PL)
Peak seasons bring a share of burdens to the supply chain, but manufacturers don't need to navigate them independently. Having a partnership with the right third-party logistics company can take much of the weight off through:
- Technological Capabilities That Improve Visibility: Carrier visibility is a critical factor that enables manufacturers to mitigate issues along the supply chain. Given the volatility of the trucking industry, shipping visibility is essential for maintaining control. The ability to track shipments can proactively prevent delays and minimize disruptions that affect cash flow.
- Implementing Warehousing Capabilities and Strategies: Many manufacturers have warehousing challenges during the peak seasons. They need additional space for their inventory and loading and offloading, which can cause congestion for drivers and, ultimately, shipping delays if space isn't available. With the right 3PL, manufacturers can implement a well-distributed warehouse strategy across multiple centers.
- Using Flexible Multi-Modal Networks for Transportation Cost Savings: With the right 3PL, manufacturers can increase visibility and warehouse capabilities and save transportation costs. A 3PL can efficiently pair a business with reliable carriers even during driver shortages. They can help them schedule freights on the same truck with multiple companies to save shippers money. The concept refers to "less than a truckload" (LTL), which can dramatically reduce disruptions.
Always Maintain Active Revenue Streams
Business owners must continually think of new ways to generate revenue even when their cash is strapped. It could mean greater revamping of client contracts, having seasonal sales to keep sales moving, or restructuring payments due to keeping the business covered.
Despite the best efforts to maintain a detailed cash flow forecast, manufacturers may sometimes need to inject a large amount of cash into the business yet don't have the money available. Unforeseen expenses can be challenging for a company with varying peak seasons to shoulder, but a line of credit in place can help bridge the gap.
A line of credit provides much-needed capital at a lower interest rate than a credit card would offer. Manufacturers should work with their banks to determine their financial needs and check if a line of credit is a credible option to help them manage their cash flow in and out of season.
Professional Help in Cash Flow Management for Manufacturers
As the holiday season approaches, it's an excellent time for manufacturers to step back and check if their cash flow forecast is up to date. Knowing how much cash is coming in and going out each month makes it easier to identify the loopholes and establish the best strategy to employ for better cash flow management.
For manufacturers that wish to employ the 3PL strategy, R&S Logistics can help. We provide logistics services at half the cost and twice the communication and integrity to help businesses keep their cash flow impeccably smooth. Contact us to learn more about how we can help your business or schedule a tour.