April 08, 2021 at 09:02AM

It was a black swan event that caused supply chains to grind to a halt. Buyers and suppliers lost visibility into shipments. Global traders had no control over what would happen next. No, we’re not talking about the pandemic. It was the blockage of the Suez Canal in late March that became the latest rude awakening as to the importance of supply chain agility, as unpredictable events will inevitably occur.

Digitization is a critical step in strengthening the resiliency of global supply chains, according to Craig O’Neill, CEO of Versapay. But there is another factor often overlooked when smoothing out some of the biggest kinks in cross-border trade: cash flow and B2B payments.

In a recent conversation with Karen Webster, O’Neill described the impact that the flow of funds has had on the flow of goods throughout the world and discussed the alignment of supply chain digitization, B2B payments electronification and data-sharing optimization in a convergence of modernization efforts that can ease the next big bottleneck.

Stuck Shipments, Stuck Payments

With the container ship Ever Given now free from the banks of the Suez Canal, waterway traffic is returning to normal. While that’s undoubtedly good news, O’Neill warned that what many people don’t realize is that the consequences of the sudden and massive supply chain disruption will be felt for months to come.

“These things take time to work through the supply chain,” he said. “Depending on what the ship was carrying, some [products] might not show up for nine months or a year.”

The Suez Canal blockage created delays and backlogs at other ports and trade points, creating a slinky effect of disruption that will continue to reverberate. But it wasn’t simply physical goods that were stuck as a result of the event. Indeed, working capital was bottlenecked, too, with successful shipments and delivery often key to unlocking payment from one business to another. And while the Suez Canal may have been a black swan event, supply chain backlogs and payment delays are not.

O’Neill pointed to one scenario in which a client of Versapay, a shipping firm, withheld shipment because the receiver of the goods was delaying payment. Typically, he noted, customers in desperate need of that shipment will reassure the supplier that “the check is in the mail.” It was an ideal scenario for the shipper to lead the digitization charge, onboarding the customer to the Versapay platform, receiving an electronic payment and releasing the shipment, all while still on the phone.

The Oil Or The Sand 

It’s a situation that is not uncommon, as many vendors will delay service or hold up new orders until overdue accounts are made current. It’s also a scenario that clearly illustrates how cash flow can either be the oil that turns the gears of the global supply chain or the sand that can stop them altogether.

“The cash flow aspect of supply chain management is such an inherent part,” said O’Neill. “It’s not directly related to the goods moving between players — but it’s either going to make things flow or make things grind to a halt.”

The kind of agility and resilience global traders need in their supply chain management strategies are similar to what’s needed in their cash management strategies, he added. Luckily, largely due to the pandemic, many enterprises accelerated their supply chain digitization efforts and encouraged clients and partners to digitize payments. Combined, these initiatives can foster the kind of resiliency that supply chains require for smooth sailing.

As more organizations grow aware of the connection between the flow of payments and the delivery of shipments, O’Neill said businesses are accelerating their adoption of tools like Versapay as part of their digitization efforts.

The Drive To Share Data 

When supply chain disruptions occur due to a global pandemic, global trade route blockage or delayed payment, communication between all parties involved in the movement of goods is essential to alleviating the issue. Data sharing is quickly becoming of paramount importance to supply chain managers as they consider the best path forward. But O’Neill emphasized that all of the data sharing in the world won’t result in improved work or capital flows, unless that information can be shared electronically as quickly as possible.

While historically, cash flow management and B2B payments have been managed by finance departments like accounts payable (AP) and accounts receivable (AR), O’Neill said supply chain managers need a seat at the table when it comes to money strategy, allowing for both teams to collaborate and strategize. At the same time, there must be buy-in from everyone within the supply chain ecosystem to encourage data sharing in nimble ways.

Luckily, the upside to disruptive black swan events is a rejuvenated effort among many firms to digitize. For global trade, that means greater visibility into supply chain and payments information that can be shared within and between enterprises.

“I think there will be much more shared information,” O’Neill said. “I think companies will be able to react faster because they’ll have better data, and they’ll have it sooner. And these same principles apply to managing your cash flow, as well as the logistics of the supply chain itself.”

Cash Flow Becomes The Oil — Or The Sand — In Supply Chain’s Gears …

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