Disruption, Transformation and Why Suppliers are Hungry for Better Cash Flow

The themes of disruption and transformation continue to dominate political, economic and industry-specific conversations across the globe. Entire industries are being subjected to these dual forces, and that’s become increasingly obvious since the start of 2018.

Automotive companies are continuing to respond to disruption and consumer demand shifts. Ford, for example, is throwing in the towel on its unprofitable U.S. small car business to focus on endeavors such as battery-powered cars, hybrid vehicles, sports cars, trucks and SUVs. Amazon continues to disrupt the retail world, resulting in moves like Toys ‘R’ Us closing its doors and Sainsbury’s $10 billion purchase of Walmart’s Asda, further driving the UK grocery pricing war.

We are currently undergoing a fascinating disruption/innovation journey. Call it the ‘tipping point’. The pace is getting exponentially faster. The transformations are becoming more extreme. Uncertainty and fear still exist, but companies are doubling down to fuel innovation. If you’re Ford, that means making tough decisions about where or where not to innovate. If you’re one of Ford’s suppliers, that may mean making significant investments in production capabilities (whether through infrastructure upgrades or by acquiring them) to capitalize on this shift.

We’re bullish on the global economy for the next 12 to 18 months, but we also realize that cash flow will play an even more critical role in business health. This accounts for why we’re seeing an uptick in supply chain finance transactions facilitated by our platform.

The Value of Supply Chain Finance to Suppliers Just Got More Valuable

It’s not just buyers keeping a close eye on cash flow – suppliers are too. Now more than ever, suppliers need extra liquidity to keep up with the disruption/transformation happening around them.

We’re currently processing 1.1M approved invoices per month and more than $4 billion in supply chain finance payments per week, but this activity is on the rise. Approximately 20% more suppliers joined a supply chain finance program in Q1 this year on a year-over-year (YOY) basis. We have experienced a 35% three-year compound annual growth rate (CAGR) in Q1 outstandings and a 40% three-year CAGR in Q1 transaction volume.

In Q2 2018, we are managing $3 billion more in outstandings than this time back in 2017. This means that not only are more suppliers trading in 2018 than in 2017, but suppliers are trading their invoices earlier than they were in 2017. Suppliers, just like their buyers, are showing increased value in cost of capital and in cranking up efforts to improve their cash flow so they can fund their future.

We are thrilled that more suppliers are choosing supply chain finance to head off the cash flow challenges that come with industry-wide changes. We’re also eager to make it even easier for suppliers to do business with us, which is why we recently released an automation integration that dramatically speeds up (85% improvement) the supplier’s time to cash flow. Additionally, we’ll continue improving our supplier onboarding process, with the goal of helping suppliers maximize value from the PrimeRevenue platform.

Today’s disruption is forcing innovation across the entire supply chain. We’re here to help our buyers and suppliers realize their maximum cash flow potential so they may respond effectively.