28.11.2015

Workwear purchaser uses working capital to import stock

Searching the internet for commodity products like toner cartridges or industrial grade light bulbs can prove incredibly frustrating and time-consuming, given the wide choice of suppliers in each of those categories. Assuming that the search terms can be narrowed down to yield just a handful of potential vendors, is there any certainty that the goods are of the right quality or can be delivered to an acceptable timescale?

Buying a one-off ‘bargain’ ink cartridge may not pose too much of a financial risk, but when the objective is to purchase goods with a potential value running into thousands of pounds, disappointment comes at a high cost. Opting to source these higher ticket items through an established purchasing intermediary is one effective way of eliminating that risk.

One of the TAEFL group’s more recent clients takes on that particular role for the workwear sector, seeking to meet its customers’ requirements for technical specification, quality, price and availability. Sourcing perhaps 500 or a thousand flame retardant uniforms emblazoned with the company logo is typical of the commissions which UK companies have passed to this specialist in recent months. The company does not manufacture clothing but maintains a knowledge base of suppliers from around the world. Rather than simply pass the name of the producer to its customer for a fee, the company assumes the role of commercial principal; ordering and taking delivery of stock on its own account for onward sale.

Managing purchasing process imposes pressure on funds

That direct involvement in the supply chain means that the company maintains a firm grip on the production and delivery process. But this assurance comes at the price of laying out the funds to purchase the stock once the manufacturer has been identified. Most of these suppliers are in Southern Asia or the Far East, so that those funds are tied up not just while the order is being fulfilled, but during its delivery to the UK.

As the volume of purchasing commissions increased, the UK company was finding it more difficult to finance orders, which meant that the company‘s growth rate was being held back. Very much an SME, its capacity to fund new business had reached a ceiling when a high profile UK-based clothing distributor invited the company to supply a new range for its clients. The sourcing specialist was introduced to the TAEFL group of companies by another, non-competitive, UK clothing supplier which had previously drawn on TAEFL’s services to assist its own business.

The funding requirement was taken up by UK EXIM, one of the B2B finance companies in the TAEFL group. The structure of the deal was well tried and tested. UK EXIM becomes the principal and formally places the order for stock with the overseas manufacturer; making payment in the stages specified by the contract. As the legal owner of those goods, UK EXIM invoices the ultimate purchaser. Each order is treated as a separate deal, allowing the finance provider to satisfy itself of that company’s financial standing.

The initial order for which UK EXIM has provided finance involved less than £20,000, but the client relationship has now been established. So long as the purchaser is a good credit risk, there should be no effective limit on the volume of new business which the purchasing specialist can support. As a result, the specialist clothing sourcer can develop its business more rapidly than it could otherwise do.

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