Supply Chain Risk: Manufacturer explores new opportunties

A MULTI-MILLION pound South Yorkshire manufacturer is exploring new ways to operate its supply chain as it continues to develop.

Sheffield-headquartered Evolution Power Tools was established 20 years ago as a tool repair business. Today the £27m turnover company designs and manufactures power tools, which are exported to more than 230 countries around the world.

It employs 42 staff in the UK, with subsidiaries in France, the US and Japan taking the global figure to 79.

With a customer base spread globally, Evolution Power Tools is now looking into taking the company to open account trading – although it’s a riskier working capital model, if done successfully it can significantly reduce bank charges.

It currently uses letters of credit on a 120 day working capital cycle when dealing with its suppliers.

Nick Shaw, finance director, said: “Letters of credit are costly and you pay for raising one, then for having 120 days and then the interest charge. If I have funds to clear before 120 days I do, but we still have to pay to raise it and have it. If we go to open account as it eliminates the bank charge.”

The company is working with its bank for an alternative way to reduce letter of credit charges so it can still raise a letter of credit to give to the factory.

Shaw said: “Instead of it being open for 120 days, it will be open for one day and as soon as that is drawn down we instead open an import loan in the UK. We pay the letter of credit off with an import loan straight away and then we are not paying the charges – just for the overall value of the facility and any interest.”

In the UK, the business is split 60/40 between trade and DIY customers; in the US its steel products are sold to welding and metal fabricators; while in France and Japan the business is purely focussed on DIY.

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