David Williams, managing director of Rhenus UK, shares how SMEs can take advantage of the global export market.
With the announcement by UK Chancellor George Osborne in March 2014, that Britain will be doubling the funding for export finance to £3bn, it has confirmed its clear intent to support UK manufacturing. Osborne has said that interest rates on this borrowing will also be reduced in order to help UK business exports reach £1trillion by 2020.
However, despite the fact that the 2014 Budget is encouraging for the UK economy, in our experience we have found that businesses will continue to face the same challenges of organising their logistics to take full advantage of the export market: whatever the fiscal sweetness, goods still need to be delivered to the right person, in the right place at the right time and for the right price.
With EU export figures for the UK in 2013 reaching in excess of £150bn, exporting provides an obvious opportunity for SMEs to increase profits. However, there remain a number of potential issues that are critical to avoid in order to take full advantage of the opportunities associated with exporting goods.
There are a range of different elements that all businesses need to consider when entering the world of global logistics, but the most important five are:
There are a number of issues that revolve around insurance, but for any SME looking to take advantage of the export market, ensuring that goods are properly insured is one of the most critical. In our experience, too many companies pay little heed to insuring stock, despite the significant financial losses that can be sustained. Companies need to ensure that the insurance that they purchase covers against loss or damage to goods in transit and also to cover for any political or economic instability throughout the supply chain.
Control and visibility
When looking to export goods, it can be very difficult to maintain quality via a fragmented supply chain. One of the critical considerations is that the freight forwarder selected for the task is able to provide visibility across the entire supply chain to ensure that you are able to keep track of your goods from the moment that they leave the warehouse to the arrival at the customer’s premises.
Perhaps the biggest concern amongst many UK-based SMEs revolves around payment. When an SME starts to trade internationally, it is critical that it takes advice regarding the UK Export Credit Guarantee Scheme, and also protection against exchange rate risk, thereby ensuring the payment process runs as smoothly as possible. A good freight forwarder will be able to provide initial advice in these areas.
The role that freight forwarders play in dealing with disputes and how issues can be resolved quickly is often over-looked. Inevitably, there may be disputes between the SME and its customers, but a reputable logistics company with a strong network, can help mediate any disputes, control the flow of goods and assist in ensuring that the parties come to an amicable conclusion to ensure the businesses partnership is maintained.
War, natural disaster, political unrest, import restrictions or a change in the law in the country, can all have a significant impact on the success of SME exports. It is therefore critical to choose a supply chain partner with a sound understanding of regional markets, taxes and customs that can be on the ground if any problems arise.