Activity across UK supply chains rose by 6% in the first quarter of 2021, according to Tradeshift’s latest Index of Global Trade Health.
Growth was fuelled by a 28% surge in order volumes from large UK buyers restocking to accommodate the recovery in consumer demand.
UK trade activity has been running at a significant deficit since the pandemic, but the latest data from Tradeshift suggests it may finally be turning a corner. The recent rise in activity brought supply chain activity up to parity with the pre-pandemic level in Q1 2020.
There are however signs that suppliers may be starting to feel the pressure of the acceleration in recovery.
According to Tradeshift, one in five suppliers are concerned about their ability to keep up with demand. The strain on supply chains is particularly acute among the manufacturing sector. Order volumes across the sector were up by 80% year on year in March, but invoice volumes grew by just 20% over the same period.
The emerging delta between orders and invoices suggests order fulfilment issues across supply chains. It also indicates that working capital is failing to flow through to suppliers to support the sudden ramp-up in customer demand. In a survey of suppliers, Tradeshift found that nearly a third of respondents had seen their cash flow position deteriorate over the past six months. Nearly half said that they’ve seen an increase in the number of late customer payments since the beginning of the year.
Christian Lanng, CEO and co-founder, Tradeshift, said: “A lot of suppliers have been left beaten up by events of the past year. Now they’re being asked to run a marathon without any fuel in the tank. It’s no wonder cracks are starting to appear, particularly in the manufacturing sector.”
Recent data suggests factories in the Eurozone’s manufacturing heartlands have been running at a record pace in 2021. Tradeshift’s own analysis shows that total transaction volumes across the region’s supply chains grew by 14.5% in Q1. U.S. transaction volumes, which leapt 29% in Q4, fell back into line with global averages in Q1, rising 10.2% during the period.
Christian Lanng commented: “A year ago, an unprecedented event caused havoc among global supply chains. Today, an unprecedented recovery is creating further disruption. The lack of transparency in supply chains makes them extremely vulnerable to volatility.
“Digitalization is seen as a way of building more resilient, collaborative supply chains. Organizations in every sector are waking up to this and investing accordingly. But we need to take the conversation beyond simply delivering transparency for buyers and look at whether the systems we are deploying are also delivering equivalent value and support to suppliers.”