3 Ways Suppliers Can Lower Risk When Going Global
Even with today’s technology and fast, reliable worldwide shipping, going into new markets is far more complicated than simply launching a website and sending out shipments. Expanding across borders carries certain risks. If your company fails to understand the complexities—from maintaining visibility of your shipments, to moving them swiftly through customs, to preserving cash flow—you can quickly run into costly fines, delays, and even lost business.
To meet these challenges, you’ll need to anticipate the risks, prepare for them, and rely on the networks and resources of your logistics providers.
Here are three ways you can manage the financial risks of selling across borders.
1. See your supply chain clearly.
A study in the journal Production and Operations Management found that companies encountering a major supply chain disruption suffered average sales declines of 93 percent. Such events can cause operational hiccups and added costs for customers, too.
The risk is especially acute if you have high-value shipments, such as programmable logic controllers, proprietary tooling, or custom automation solutions, where a disruption could cause significant trouble for your customer—and erosion of their faith in you. Many companies may not be aware there are insurance and financial products that can help you maintain business continuity and cash flow during such supply chain disruptions.
One way to mitigate the risk of loss is by improving visibility across your supply chain. This doesn’t require costly infrastructure spending, especially when you can tap the technology and services your third-party logistics provider offers.
For even more protection, consider purchasing additional services when you’re shipping high-value goods. Texas Precious Metals, for example, teamed up with UPS Capital to protect their in-transit shipments. “We are using UPS Proactive Response® Secure not only to transform our business, but to transform the precious metals industry,” says Tarek Saab, chief operating officer and co-founder of Texas Precious Metals. “The speed of delivery and high level of security, in tandem with the insurance protection from UPS Capital® services, go hand in hand to ease both our clients’ anxieties and our own,” he states.
2. Cross borders with confidence.
Whether you’re doing business outside your country’s borders for the first time or expanding into new international markets, there will be challenges to face. You’ll have to deal with everything from transporting your goods over long distances and communicating in foreign languages, to understanding each country’s unique laws and regulations for imports and exports. These details can be overwhelming, especially when you want to stay focused on meeting the needs of your new customers.
To move into international markets with ease, it helps to partner with a logistics provider that has extensive global experience and customs brokerage expertise. They can help assist you with the proper documentation, keep you in compliance with local laws and codes, and help you avoid penalties and fees. Not only will they guide you successfully through customs, but they’ll also get your products where they need to go, and even determine the best mode of transit to get them there.
3. Keep your cash flowing.
When your buyers are scattered across continents, it can be difficult to manage your accounts receivables, and you face a greater risk of slow payment or non-payment of invoices. This can make your company vulnerable to unfavorable lending rates and curtail the agility needed to stay competitive. In addition, the invoicing and collection practices effective in one country may not work in others, due to conflicting laws. All of these issues could leave an inexperienced exporter strapped for cash, especially in the wake of the large capital expenditure needed to enter a new market.
You can set funds aside and try to manage these cash flow risks on your own, or you can partner with a knowledgeable financial services provider—preferably one with a strong international presence.
Companies like UPS Capital offer services such as trade credit insurance, which could mitigate the risk of bad debts caused by customer bankruptcies, defaults, or global political risks. They can help you improve liquidity with global asset-based lending, a service that lets you secure cash advances against foreign inventories and goods in transit, as well as domestic receivables and inventory. Plus, they can provide extra protection while your goods are being shipped, through flexible parcel insurance or cargo insurance, so you don’t lose revenue due to loss, damage, or delay.
 The UPS Proactive Response® Secure program is underwritten by an authorized insurance company and issued through licensed insurance producers affiliated with UPS Capital Insurance Agency, Inc., and other affiliated insurance agencies. UPS Capital Insurance Agency, Inc. and its licensed affiliates are wholly owned subsidiaries of UPS Capital Corporation. The insurance company, UPS Capital Insurance Agency, Inc. and its licensed affiliates reserve the right to change or cancel the program at any time. The UPS Proactive Response Secure program is governed by the terms, conditions, limitations and exclusions set forth in the applicable UPS Proactive Response Secure policy. This does not in any way alter, supplement, or amend the terms, conditions, limitations or exclusions of the applicable UPS Proactive Response Secure policy and is intended only as a brief summary of the program. Please consult the policy for the exact terms and conditions. No warranty, guarantee, or representation, either express or implied, is made as to the correctness or sufficiency of any information contained herein. Coverage is not available in all jurisdictions.