Supply chain efficiency, one of the great success stories of the past two decades, is breaking down as liquidity shortages hit the weakest links. "When the credit markets seized up last fall, there was a frenzy, and treasury staffs held onto cash as long as they could, extending [days payable outstanding] and hurting suppliers," says Drew Hofler, senior manager for working capital solutions at Sunnyvale, Calif.-based Ariba. "Now things have stabilized within a tight credit zone, which means greater liquidity risk for the supply chain."
So far, bold, innovative solutions have come from governments, but corporate treasuries, on full risk alert, are cautiously exploring constructive ways to spread available liquidity up and down the supply chain when doing so can keep a critical player in the game and also bring direct benefits to their own companies.
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