18 July - 24 July
Companies Offer Supply Chain Finance To Vendors As They Bulk Up On Inventory
Spotlight on companies offering financing programs to vendors to bridge the cash flow gap.
Trending opinion on how India’s logistics sector is slowly rising from the COVID-19 induced slump.
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Supply-chain snarls over the past two years have prompted businesses to home in on whether key vendors have sufficient cash flow to stay afloat after many companies delayed supplier payments during the early stages of the pandemic. As a result, vendors were paid late or not at all. To solve this problem, companies are offering supply chain financing programs to their vendors, a tool that allows them to pay their bills later while also providing suppliers with faster access to cash.
The size of the corporate supply-chain finance market increased to $1.8 trillion globally last year, up 38% compared with 2020, according to estimates from BCR Publishing Ltd., a data provider. Supply chain financing programs are being offered in the nick of time to free up cash flow and allow vendors some breathing space.
Supply-chain financing can boost the cash position of both buyers and sellers. A third party, often a bank, pays a vendor’s invoices but takes a cut. The company pays the bank the amount that was due under the invoice, though at a later date than originally required. The bank’s cut is determined by the company’s credit rating.
On average, companies in 2021 increased their days of payables outstanding to 62.2 days from 61.9 days a year earlier, according to a survey of the largest 1,000 U.S. companies by revenue from business advisory firm Hackett Group Inc. That figure has only increased over the past decade.
Key Takeaway
Inventory levels at companies in the S&P 500 index increased 15% during the first quarter from a year earlier, to $1.13 trillion, according to data provider S&P Global Market Intelligence. Companies in recent quarters have clearly bulked up on inventory, putting pressure on their own working capital.
That is leading some businesses to push out payment terms even further and launch supply-chain financing programs to bridge the gap. Rising interest rates also drive demand for supply-chain financing programs, as the programs provide suppliers with a relatively cheap source of cash.
Highlights
- Protests against California’s AB5 law began Monday and have swelled in proportions. Truckers say they are prepared to block the West Coast’s third-busiest container port until California Governor Gavin Newsom listens to concerns about the new state law that will make it harder for them to operate.
- The Unite union said more than 500 of its members employed at MDHC Container Services, all dockworkers at Liverpool port, would be asked to vote over whether to strike in a dispute over pay and conditions, potentially bringing activities to a virtual standstill and causing supply chain delays.
- The U.S. Postal Service plans to order 25,000 electric vehicles as part of its initial 50,000-unit purchase of new delivery trucks, a move that more than doubles the number of EVs it had planned to order. The Postal Service also said that it will supplement the 50,000-unit order by acquiring 34,000 commercial off-the-shelf vehicles.
- Schnuck Markets and DoorDash have expanded their prepared food delivery partnership to target faster delivery times, with orders arriving in as little as 30 minutes. The expansion includes 25 of the Midwestern supermarket chain’s locations in Missouri, Illinois, and Indiana.
Trending
With automation changing the face of work, companies and governments can do more to ensure workers are happy. While there are various ports reporting worker strikes and pay gaps, as well as evolving new laws, industries need to focus on recognizing the needs of the workforce going forward.
With unionization efforts growing in some industries (Amazon, Starbucks), automation rapidly accelerating in others (warehouses and factories), and even the place of work — offices, remote or hybrid — among the hot topics, industries are in fact eager to identify what the workforce of tomorrow will look like. US Secretary of Labor Marty Walsh commented on the need for investing more in the workforce while attending TechCrunch’s Robotics 2022 conference.
He encouraged companies to put aside funding to train the workforce for the jobs of the future. He also mentioned how this is something the Government needs to focus on as well. In a 25-minute interview, Walsh touched on a number of modern workforce conditions, including unionization pushes across the country and the role automation will play. These are important concerns that the industry needs to look into to ensure that the workforce is aware of their changing role and ready to take on the challenge.
