Supply chains face liquidity crunch as transactions tank - Just Style
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Supply chains face liquidity crunch as transactions tank

By admin-demo 17 Mar 2020

A slump in global trade transactions across the Tradeshift platform reveals the scale of disruption to supply chains globally as a result of the Covid-19 outbreak – and points to significant pressures on liquidity.

Supply chains face liquidity crunch as transactions tank

A slump in global trade transactions across the Tradeshift platform reveals the scale of disruption to supply chains globally as a result of the Covid-19 outbreak – and points to significant pressures on liquidity.

According to the latest data from Tradeshift, which helps buyers and suppliers digitise their trade transactions, global business to business transactions have dropped by 62% in the week beginning 8 March.

Analysis across its entire platform, which handles trade activity between over 1.5m businesses in 190 countries, found cross border transactions between businesses have fallen by 58% week on week, while domestic transactions have dropped 66% during the same period. 

The findings mirror the pattern observed in China during the height of the coronavirus outbreak across the region, when cross border and domestic trade activity in China fell by 56% in the week commencing 16 February.

The scale of the slowdown is having a significant impact on liquidity, with an increasing number of large organisations saying they are looking at ways to build or maintain cash reserves. 

“Every conversation I’m having with businesses right now centres on cash flow,” says Tradeshift CEO Christian Lanng. 

“Companies are looking at how they can keep cash on their books to see them through the current period. But they’re also acutely aware that suppliers are facing the same liquidity challenges. If cash dries up across the supply chain, we could see a lot of smaller businesses start to fold. It’s a balancing act. Get it wrong and the whole house of cards could come down. 

“Large organisations I’m talking to recognise the importance of keeping supply chains solvent right now. 

“Governments have been proactive in introducing measures to try to ease the pressure. But we can’t afford to leave any stone unturned. There is $1.5 trillion in liquidity sitting trapped and doing nothing in accounts receivable as a result of archaic payment practices and the digital disconnect between large business buyers and their suppliers. 

“If ever there was a time to take a serious look at how we unlock that capital and make it accessible to every business across the supply chain, it is now.”