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The past year has seen a startling number of high-profile bankruptcies, including powerhouse brands like Hertz Global Holdings Inc., J.Crew Group Inc. and Gold's Gym International Inc. But the biggest blow may have been to the more than 200,000 U.S.-based mid-market companies that are essential to America’s economic success. Many of them temporarily shut down operations or closed altogether. The ones that survived borrowed at the highest rates in history and hoarded cash to mitigate the drawn-out repercussions of the COVID-19 pandemic.
As we continue to work toward economic recovery, it’s imperative to expand access to supply-chain finance and revenue management programs to these mid-market corporations — and to thoughtfully incorporate the long tail of their suppliers, too.
To make this happen and improve stability throughout supply chains, we have to rethink these programs in three key ways.
Upgraded supplier experience. Supply-chain finance programs need to focus on the entire supplier experience. Suppliers have been struggling with cash flow and need cash certainty. Marketplace bidding models, common in many supply-chain finance programs, lead to suppliers being uncertain as to when or if they can collect on early payment. A platform with stable fixed price solutions is more reliable and leads to an improved supplier experience.
In addition, suppliers want a supply-chain financing platform that lets them finance receivables outside of participating clients. Ultimately, programs should be easy for suppliers to enroll, with no liens, extensive bank reviews or difficult technology integrations to ensure maximum participation.
Transparent technology. Supply-chain finance solutions need to become more tech focused. Suppliers should be provided with a secure, intuitive platform where they can easily access their money and track the progress of their receivables in real-time with total transparency. Businesses that have access to on-demand credit information about their suppliers and reliable cash flow can continue to thrive in challenging times.
Long-tail liquidity. Most programs focus only on the most profitable or largest 20% of suppliers, ignoring most of the long tail, even though they are the businesses most likely in need of liquidity. Ensuring all suppliers have access to supply-chain finance programs is vital to maintaining the resiliency of your entire supply chain. If any supplier goes out of business or is having production issues due to cash flow it sets the stage for an inconvenient, difficult and expensive proposition to replace them with all but certain disruptions to the supply chain.
America’s finance chiefs are increasingly optimistic in their outlooks for the economy — and the finances of their own firms, according to a recent StrategicCFO Confidence Index survey. They predict a strong rebound from the recession over the next 12 months.
By prioritizing expansion of supply-chain finance and revenue management programs to mid-market and long-tail suppliers, we can ensure greater stability amidst prolonged economic recovery.
Dan Ambrico is CEO of LSQ.
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