Manufacturing supply chains have been running on overdrive since the end of the first lockdown.
Order demands returned in full force, overwhelming manufacturing lines that were not prepared for such significant growth. As we rounded the corner into 2021, it seemed that the industry had been run dry and reached its limit. But, as the year continued, manufacturers found a second wind as order volume increased yet again.
By tracking order volumes, experts have been able to better understand the fluctuations in demand levels. We’ve seen that while orders are high, there is a clear gap when it comes to invoicing volumes. While order volumes continue to surge, invoices are simply not getting paid quickly enough for suppliers to meet the level of demand their buyers need.
The outcome is a growing mistrust of suppliers to fulfill orders and a delta between invoices and orders that have slowed down cash flow.
Normally, order volumes track slightly above invoice volumes.
There will always be a varying lead time that spreads order fulfillment out over a long period of time. So, the fact that organizations face a gap between order and invoice volumes is not shocking. The distressing part is the size of the gap that manufacturers are facing.
Without invoices being paid on time, suppliers lack the cash flow to replace and replenish their inventory. This delays their ability to fulfill orders, creating a nasty cycle that ends in diminished value across the supply chain.
The pressure companies face to replenish their inventory is only being magnified by the lack of cash flow. The same pattern is playing out across virtually every major economy in the world. Enterprises need to find ways to mitigate this impact and reverse the decline in invoice volumes.
The longer this gap persists, the more likely it becomes that our global economy will into a prolonged slowdown. Supply chains could use some reprieve, as a slowdown brings more challenges to companies already struggling to navigate the landscape. A short period of reduced ordering activity could give companies the space they need to reset.
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Some businesses have found themselves adapting remarkably well to this latest period of unrest, Others are still trying to find their footing. One thing that seems to remain the same across the board is the systems that organizations use to manage their supply chains.
Much of the current technology enterprises use to manage their relationships and transactions is outdated. Many organizations continue to rely very heavily on manual and paper-based processes, leading to longer processing times and a more error-prone supply chain.
These antiquated systems and payment methods are causing friction at nearly every stage of the supply chain. Manufacturers face mountains of paperwork and lack the insight they need to track the movement of their goods and invoices. While these issues might seem trivial or minuscule compared to the other problems that businesses face today, these challenges combined with the volatile market lead to fires that need to be addressed quickly.
The best way to get ahead and address these challenges is by investing in new, advanced technologies to support your supply chain operations. Businesses that have invested in digitalization and embrace transparent digital tools are more equipped to identify and exploit opportunities to cut costs. Companies need to rely on these tools to streamline their processes gain visibility in their transactions and invoice statuses.
The enterprises that focus on addressing their points of friction now will see a more immediate and long-term payoff. Digitalization is the kind of investment that might seem costly but is only beneficial to you in the long run.
Many companies have started jumping on the trend of embracing new digital technologies. In fact, recent studies have shown that 50% of survey executives have already accelerated or enhanced their spending on advanced technology. Even better, that same study found that nearly 3/4ths of surveyed companies expect to continue increasing their investment in technology over the next few years.
While the gap between orders and invoices in the manufacturing industry might seem daunting, there is reason to be hopeful about the future. As order volumes slow and companies begin investing in updated systems and digital tools, there’s time for supply chains to breathe and get back to base.
Tradeshift is here to help support your shift to a digitized and streamlined supply chain. Our B2B marketplace enables you to automate your processes and focus on growth with advanced AI and a network of sellers and buyers. For the latest insights on trends in the manufacturing industry or to see our digital solutions in action, reach out to our team of experts and start your demo today.