April 20, 2021
Tradeshift Editorial Team
Beware the bullwhip as the economy springs back to life
Our latest Index of Global Trade Health presents a broadly optimistic view of the year ahead. Orders are rising at double-digit rates as consumer demand continues to accelerate. Cumulative transaction volumes on our platform are tracking 38% above their pre-COVID levels in March of 2020.
The Eurozone may be struggling with its vaccine roll-out plan but that hasn’t stopped factories there from producing at record rates since the beginning of the year. Total transaction volumes across the region rose 14.5% in Q1. Trade activity in the US is also settling into a high-velocity rhythm. Even the UK, which had appeared stuck in reverse gear at the end of 2020, now appears to be turning a corner.
Economists are predictably becoming bullish about the speed of recovery. Our own research of sentiment among suppliers suggests that roughly two-thirds are more optimistic about their business prospects than they were at the end of 2020. But there are signs that supply chains are beginning to creak under a kind of pressure few were expecting when the virus first hit.
Manufacturing orders on our platform were up more than 80% year-on-year in March but low invoice settlement rates across the sector suggest money is not flowing through to suppliers to support a corresponding ramp-up in production.
The effects of this imbalance are well-publicized, from just-in-time automotive assembly lines forced to lie idle, to delivery companies scrambling to source cardboard packaging. The recent blockage of the Suez Canal provides a further reminder of how susceptible modern supply chains are to a single point of failure. 2021 might well prove to be the curtain-raiser on a golden period of economic growth, but sustaining the current momentum is going to require a far more flexible and collaborative relationship between buyers and suppliers than was evident prior to the pandemic