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Navigating the Transition to Shipping: A Case Study on Cost Savings and Working Capital Management

In today's ever-evolving business landscape, companies are continuously seeking ways to optimise their operations and reduce costs. One of our clients recently faced a significant challenge when they decided to transition from importing goods via air freight to shipping from China to the UK. While this move promised a substantial 70% saving on freight costs, it also presented a new set of challenges related to working capital management.

The client approached VAST to help them navigate this transition seamlessly. The primary concern was the extended purchase/sales cycle that shipping entails. Whereas air freight took only 1-2 weeks to land, the shipping process would require 10-12 weeks, putting pressure on the client's working capital.

In collaboration with the client's accountant, VAST presented two viable options. The first option was a capital injection to support the client's cashflow during the transition phase. The second option involved exploring trade finance solutions, which could serve as a longer-term preferred option if the business grows as expected in the next 2-3 years, rendering the initial capital injection insufficient.

After careful consideration, the client opted for a capital injection to test the shipping process initially. This decision allowed them to assess the impact of the extended supply chain on their working capital requirements and operations. However, the client acknowledged that if their business expands as anticipated, trade finance would likely become the more suitable long-term solution, enabling them to effectively manage their working capital needs without relying solely on a capital injection.

Through this case study, VAST demonstrated its expertise in guiding businesses through complex operational transitions, offering tailored solutions to address specific challenges. By presenting multiple options and collaborating closely with the client and their advisors, VAST ensured that the client's decision was well-informed and aligned with their long-term growth objectives.

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