CEO and co-founder, Tradeshift
Economists headed into the summer optimistic about the speed of recovery. Many are now wondering if the engines of growth are losing steam.
Ordering activity on our platform has been rising at a phenomenal rate since the beginning of 2021. In Q3, order volumes on the Tradeshift platform fell back by 24 points. This is the most significant drop we’ve seen since the height of the first lockdown. Some level of correction had always seemed inevitable given the huge spike in ordering activity we saw in Q2. What we’ve seen in Q3 suggests something more significant than a natural cooling-off.
Business surveys from the US, UK and Eurozone suggest that activity has slowed as delivery times lengthen, bottlenecks deepen, and commodity prices rise. With order volumes dropping in every territory, buyers may well be starting to question the wisdom of putting fresh orders into a system that already buckling under the weight of an enormous backlog.
Invoicing volumes on our platform picked up momentum in Q3, but the upward trajectory is flatter than anticipated given the huge spike in orders we’ve seen since the beginning of 2021. Our data suggests it may be some time before order volumes start to align with invoice flows. The longer this gap persists, the more likely it becomes that the cooling off we’ve seen in Q3 could turn into a more prolonged and general slowdown. Such a slowdown could unleash fresh volatility on supply chains already struggling to navigate a very bumpy road.
Businesses have adapted remarkably well to a period of unprecedented challenges, but the systems which underpin the relationships across supply chains have changed very little. Heavily manual and paper-based, there are points of friction baked in at almost every stage, from the antiquated payment processes that govern the flow of working capital, to the mounds of documents required in the movement of physical goods. Individually, these points of friction might seem inconsequential to the problems businesses are facing today. Combined with the kind of velocity we’ve seen in recent quarters however, we should not be surprised when fires start to break out.
The companies that will see the most immediate and long-term improvements will be the ones focused on addressing these points of friction at source. A recent study by Mckinsey showed over half of executives had already accelerated their investment in technology while 75 per cent expect to increase investments over the next three years. Looking at ways to use AI/machine learning, data and more to empower their supply chain processes and teams will pay off handsomely in the long run.
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