Three major sources of money in business are becoming increasingly important in delivering measurable improvement: stocks, debtors and creditors. A C&T supplier can improve profitability by managing stock more efficiently, delaying payment to suppliers of packaging, ingredients and services, and by encouraging customers to pay earlier.
Given the retailer’s ability to exploit Key Account Managers’ (KAM) historical tendencies to ‘ignore’ these elements, by effectively delegating their day to day management to in-house experts, it is no wonder that cash business retailers have been able to make major gains at the expense of suppliers’ working capital. This all started in the sixties, when they delivered in large quantities once a month, making a 30 day payment period reasonable. In practice, a 30 day credit period, payable at the end of the following month, really worked out at 45 days; retailers who did not pick this one up are already history, or moving that way, simply being acquired by competitors who know better and are using suppliers’ money.
How free credit grew
Obviously, good retailing practice encouraged more frequent delivery in smaller quantities and suppliers were willing to oblige, in the interests of efficiency and customer service.
Not yet a Subscriber?
This is a small extract of the full article which is available ONLY to premium content subscribers. Click below to get premium content on Cosmetics Business.
Subscribe now Already a subscriber? Sign in here.