How to overcome your supply chain bottleneck woes

It's easier to meet fluctuating customer demand with a just-in-case inventory model. But it also means increased warehousing costs and the requirement to have more upfront capital to buy extra stock. It's one of many reasons why Australian businesses remain concerned about ongoing supply chain challenges.

While supply chain pressures ebb and flow, the underlying issues remain "deep-rooted" and require businesses to take active steps to protect themselves from disruption. Here's how you can prevent a 'just-in-case' supply chain from becoming a 'just-can't-win' situation.

First, let's explore the factors creating ongoing supply chain issues and their impacts in greater depth.

Modern supply chains face pressure from multiple sources:

Shifting consumer behaviour. Changes in consumer spending patterns—from services to goods, from in-store to online—create fluctuating demand for shipping and transporting goods.

Manufacturing and distribution disruptions. Whether due to health crises, natural disasters, labour shortages, or geopolitical events, manufacturing and distribution facilities can experience unscheduled closures and production pressures.

Global logistics complexities. International shipping relies on intricate networks of ports, carriers, and border procedures. When one part of this system faces delays, the effects ripple across the entire chain.

Geopolitical instability. Trade disputes, conflicts, and changing international relationships can disrupt established supply routes and increase costs.

As a result of these supply chain disruptions, businesses and consumers face increased shipping costs, extended lead times, and unpredictable delivery schedules.

Supply chain imbalances can create container shortages in some locations while others face surpluses. Increased shipping demand, combined with these logistical challenges, port congestion and labour shortages, leads to surging costs and lengthy delays for businesses and their customers.

Like motorway traffic jams, it takes time to clear supply chain congestion and return it to normal flow. The challenge is that supply chains often face multiple disruptions before they can fully recover from previous ones.

Despite rising costs, delayed deliveries and shortages of key materials, some Australian companies face even more significant problems given persistent supply chain challenges.

Australian importer of premium natural stone slab and tile, Worldstone Solutions, has experienced these issues first-hand.

"Factory shutdowns and capacity issues, shipping container availability and port closures have all contributed to the supply chain bottlenecks we've had to overcome. We've seen client demand change as a result though. Clients are ordering more, and earlier; they're more focused on delivery timeframes over price or are willing to compromise by selecting in-stock products only," says Paul Nahon, Director at Worldstone, an Octet Finance client.

Even global, well-established brands are not immune. Supply chain disruptions can cause runaway increases in raw materials costs, with vendors insisting on upfront payments—creating severe cash flow pressures.

Economic indicators consistently show that whilst insolvency rates may fluctuate, vulnerable businesses continue to draw down on cash buffers to cover lost revenue or higher costs—making further increases likely.

Mr Nahon has witnessed the trickle-down pressure of these supply chain disruptions on his business and supply chain partners. He says, "the risk of insolvency is particularly high when we're supplying stone to a builder who agreed a fixed price to deliver the project. In these situations, there's an increased risk to all the builders' suppliers as the builder has to either break supplier contracts for cheaper alternatives or put themselves in a loss-making situation."

These pressures require proactive management, which is why it's more important than ever to work to protect your business from them.

Working capital is crucial for your business to weather ongoing supply chain disruptions. Never has the phrase ‘cash is king’ meant more. However, it can be challenging to manage the funding gap between paying suppliers, waiting for goods to arrive and waiting for buyers to pay.

With Octet's Trade Finance facility, you can bridge these cash flow funding gaps. It gives you access to a flexible line of credit with up to 60 days' interest-free and up to 120-day repayment terms.

Alternatively, our Debtor Finance solution (also commonly known as Invoice Finance) may be an option for your business. It lets you tap into up to 85% of the funds tied up in your accounts receivable straight away. Instead of waiting up to 60 days for payment, make your unpaid invoices work for you by converting them into fast working capital.

Through our working capital solutions, you can better manage your cash flow, minimise financial risks and maximise the efficiency of your supply chain.

In the face of ongoing uncertainties in the business landscape, now is the time to adapt. There are still significant growth opportunities afforded by Australia's international trade relationships and evolving global markets.

Our intelligent supply chain finance and payment solutions can help to satisfy your working capital requirements, particularly for overseas business transactions.

Get in touch with one of our finance specialists today to discover how we can power your business to scale.