The UAE supply chain activity saw trade volumes increase by more than 13% in the fourth quarter of 2020 over a January 2020 baseline and nearly 30% from the lowest point in the second quarter of the year, a report said.
The latest data also shows strong order books among buyers in almost every region, suggesting news of a vaccine roll-out in December prompted organizations to press ahead with purchasing decisions which may have previously been delayed or cancelled.
UK recovery is losing ground
While business confidence appears to be improving, Tradeshift data shows that UK trade activity continued to struggle in Q4. Transaction volumes across the region grew just 7% quarter on quarter and remained well below the levels seen before the pandemic. The combination of a significant drop in activity during Q2 and a weak recovery meant that UK trade activity finished the year 36% below the pre COVID level in March 2020.
China leaves the rest of the world trailing
Trade activity in Western economies has only recently shown signs of returning to growth, but Tradeshift’s data shows businesses in China have been operating at near-normal capacity since April 2020. Cumulative transaction volume growth since Q2 stood at an incredible 118% at the end of 2020 compared to an overall activity shortfall of 3.4% globally during the same period.
“China has significantly outperformed the West by bouncing back quickly,” said Christian Lanng, CEO, Tradeshift. “The consistency we’re seeing in transaction data offers a level of predictability that has yet to return fully in other regions.”
Retail’s roller-coaster end to 2020
Looking at individual sectors at a global level, retail led the way in Q4 reporting transaction growth of 34%. In a roller-coaster year for the sector, transaction activity had dropped by as much 36% in Q2. Technology and manufacturing sectors were up by more than 16% each. The transport and logistics sector, where activity has held relatively steady throughout the pandemic, had more modest gains but still managed a nearly 10% growth in transactions compared to Q3.
“Modern supply chains are built like high-performance vehicles,” said Lanng. “Asking them to navigate the kind of unpredictable environment we saw in 2020 is the equivalent of driving a Formula One car over a series of speed bumps. Conditions are certainly improving, but supply chains are bearing the scars from such a prolonged period of volatility”
Suppliers facing ongoing liquidity challenges
Lack of supplier liquidity was a key theme throughout 2020, and the most recent data suggests this will remain a significant challenge going into 2021. Invoice payments to suppliers failed to recover at the same pace as order volumes in Q4. The resulting delta is making it very hard for suppliers to manage cashflow.
The crunch on liquidity is made worse by the fact that buyers, keen to preserve their own cash flow, are continuing to extend payment terms. According to a report by Frost & Sullivan, the amount of long overdue invoices (still unpaid after 90 days past their due date), rose to 16% of the total in 2020, up from 10% the previous year.
“Covid exposed an imbalance in the relationship between buyers and suppliers,” said Lanng. “As buyers focus on building resilience to future shocks, we need to consider how best to equip suppliers to come with them on that journey. Technology can help to address this challenge, unlocking faster, more predictable cash flow, better access for diverse suppliers and increased optionality in the event of disruption. What’s good for suppliers, will be good for buyers.” - TradeArabia News Service
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