Partnerships key to navigating continued supply chain pressures

By Tony Duggan - February, 03 2022

Ngozi Okonjo-Iweala, Director General of the World Trade Organisation (WTO) has warned that pressures on global supply chains are set to last several more months and potentially into 2023. Speaking in Paris, Okonjo-Iweala warns that these pressures are being felt hardest in developing countries (source: Financial Times).

We have heard much noise from various quarters about building back better after the Covid-19 pandemic, combined with a sharpening focus from investors on a corporate’s ESG strategy, an opportunity exists for larger corporates to step up and support their suppliers who may be feeling the squeeze.

Of course, corporates have been feeling the pressure too and, in some cases, this has resulted in them looking to free up extra working capital by extending payment terms with their suppliers. It is important that suppliers, particularly those in developing counties where bank borrowing is often expensive, are not left high and dry trying to bridge funding gaps.

There is an onus on any corporate with an ESG agenda to treat their suppliers well, but aside from being the right thing to do, it is also the most commercially astute. Large corporates are reliant on their network of global suppliers and need to ensure strong relationships to foresee and address any supply challenges.

From an ESG perspective, we can look to the example of Nestlé who, amongst others, are starting to take seriously the use of child labour in the supply of cocoa. According to an article in the FT Nestlé’s move to clean up the chocolate trade the confectionary giant has begun making direct payments to African farmers in a bid to remove child labour from its supply chain. The problem of child labour is sadly nothing new but when ESG is top of mind for investors such as Blackrock and the Government Pensions Fund of Norway, perhaps minds become a little more focused.

Not all supply chain challenges are so complex or evocative and many can be simply alleviated through better access to working capital for projects that expand production capacity, upgrade equipment or build in redundancy. It is however through a true partnership between buyers and suppliers that we can ultimately tackle these challenges and build a more resilient, transparent and sustainable supply chain that is fit for the modern world.

At Crossflow, we have created a marketplace for working capital funding that can transform a supplier’s cash flow as well as benefit the corporates balance sheet and supplier driven engagements. Uniquely, the Crossflow platform through its algorithms automatically selects the lowest cost of funding for suppliers. This means that suppliers can go “hands free” on accessing working capital and instead focus on making great products and delivering great services to their customers.

Please contact us for more information on how we can help you and your suppliers optimise your working capital.

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