Rising to the export challenge requires flexbility
Breaking into a new export market or increasing overseas trading activity can bring significant rewards for small and medium-sized manufacturers. However, there are significant financial risks to bear in mind.
Managing working capital can be particularly challenging for growing businesses. While a new export contract could represent a great opportunity to drive profits and increase the scale of the business, it could also pose risks if not carefully managed. According to the latest international trade survey by the British Chamber of Commerce, the majority of those that take the plunge experience an uptick in sales and a third expand their production capacity to cope with demand from international markets.
Often export activity means longer lead times and depending on the size of the contract, businesses may be required to make an initial outlay for key procurement costs, such as raw materials, as well as plant and machinery. In the short term, such pre-shipment costs could deplete cash resources significantly and make it harder for the business to pay for fixed costs, such as staff and property leases, and pay suppliers.
To minimise the risk of getting into financial difficulty, manufacturers may wish to take the precaution of asking the overseas customer to provide a letter of credit to guarantee payment. Such guarantees can help to improve confidence and reassure lenders. While businesses are often understandably reluctant to request them, in some circumstances it may also be possible to negotiate a phased timetable of payments prior to signing the agreement.
To help bridge any gaps and ease pressure on cash flow, the business should put in place flexible finance arrangements, such as invoice finance, to give them access to funds that they can draw upon as needed. This type of finance can be especially useful if the business believes it might be necessary to dip into profits to meet the cost of operational overheads.
When trading in a new territory for the first time, it is important to get to know the local customs, as well as any relevant laws and regulations. Getting in touch with UK Trade and Investment (UKTI) is a useful first step; providing access to accurate and up-to-date information about doing business in different parts of the world. For example, when trading in certain countries it is necessary to set up a local branch office and the UKTI can advise on how to go about this. It may also be possible to join trade visits to certain countries in order to explore other export opportunities.
Dealing in foreign currencies can also pose specific risks to businesses trading internationally. In some cases, fluctuating exchange rates could erode profits; turning what should have been a healthy profit into a loss. If care is taken when drawing up contracts, it may be possible for the business to build in clauses that help to mitigate such risks and in some cases, it may be possible to agree terms that allow the business to trade in sterling.
Before signing an overseas trading agreement, manufacturers should consider all the risks and challenges it is likely to bring. Planning ahead by preparing a detailed financial forecast, backed up by a flexible finance package, will ensure the firm’s growth strategy is sustainable.
John Atkinson is Managing Director at Hitachi Capital Invoice Finance
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Fluent.ai x BSH: Voice Automating the Assembly Line
Fluent.ai has deployed its voice recognition solutions in one of BSH’s German factories. BSH leads the market in producing connected appliances—its brands include Bosch, Siemens, Gaggenau, NEFF, and Thermador, and with this new partnership, the company intends to cut transition time in its assembly lines.
According to BSH, voice automation will yield 75-100% efficiency gains—but it’s the collaboration between the two companies that stands out. ‘After considering 11 companies for this partnership, we chose Fluent.ai because of their key competitive differentiators’, explained Ion Hauer, Venture Partner at BSH Startup Kitchen.
What Sets Fluent.ai Apart?
After seven years of research, the company developed a wide range of artificial intelligence (AI) software products to help original equipment manufacturers (OEM) expand their services. Three key aspects stood out to BSH, which operates across the world and in unique factory environments.
- Robust noise controls. The system can operate even in loud conditions.
- Low latency. The AI understands commands quickly and accurately.
- Multilingual support. BSH can expand the automation to any of its 50+ country operations.
How Voice Automation Works
Instead of pressing buttons, BSH factory workers will now be able to speak into a headset fitted with Fluent.ai’s voice recognition technology. After uttering a WakeWord, workers can use a command to start assembly line movement. As the technology is hands-free, workers benefit from less physical strain, which will both reduce employee fatigue and boost line production.
‘Implementing Fluent’s technology has already improved efficiencies within our factory, with initial implementation of the solution cutting down the transition time from four seconds to one and a half”, said Markus Maier, Project Lead at the BSH factory. ‘In the long run, the production time savings will be invaluable’.
Future Global Adoption
In the coming years, BSH and Fluent.ai will continue to push for artificial intelligence on factory lines, pursuing efficiency, ergonomics, and a healthy work environment. ‘We started with Fluent.ai on one factory assembly line, moved to three, and [are now] considering rolling the technology out worldwide’, said Maier.
Said Probal Lala, Fluent.ai’s CEO: ‘We are thrilled to be working with BSH, a company at the forefront of innovation. Seeing your solution out in the real world is incredibly rewarding, and we look forward to continuing and growing our collaboration’.