As global trade experiences a modest upswing, the latest Tradeshift report reveals a complex landscape for suppliers grappling with the benefits and challenges of the economic recovery.
Trade Health Indicators Show Growth
Tradeshift’s Q1 Index of Global Trade Health has detected a slight improvement in transaction volumes, marking a consistent yet below-expectation growth over nine quarters. Despite this, the first quarter of 2024 has shown signs of positive momentum, particularly in the U.S. and China. The U.S. has exceeded baseline trade expectations, while China’s manufacturing sector has halted its contraction, signaling potential recovery ahead.
Suppliers Face Persistent Challenges
While the uptick in trade suggests a rebound, suppliers are not fully reaping the benefits due to ongoing liquidity issues. High interest rates and stringent bank lending practices are squeezing the financial resources needed to finance new orders. Suppliers are still experiencing delayed payments, with the average invoice settlement time remaining 6% longer than pre-pandemic levels. This cash flow strain threatens to impede suppliers’ ability to meet the rising demand, potentially slowing the pace of economic recovery.
Innovative Financing Solutions Emerge
In response to these payment delays, some suppliers are resorting to alternative financing, such as accepting early payments at a discounted rate. Supply chain finance and dynamic discounting programs are becoming more prevalent, especially among larger suppliers seeking more favorable capital rates. Additionally, data-driven invoice financing is emerging as a novel approach to assess risk more accurately and provide liquidity to suppliers, potentially leveling the playing field for smaller entities in the global trade arena.
In conclusion, while global trade is showing signs of recovery, suppliers are still navigating a challenging environment. The resilience of the supply chain may hinge on the adoption of innovative financing solutions that can provide the necessary liquidity to sustain and grow supplier operations.
