Inventory funding: The missing link to overcoming a broken supply chain
For decades now, global supply chains have kept e-commerce going like a well-oiled machine. While any brand will tell you that the logistics of getting a product from a manufacturer to a customer are enough to make your head spin, most consumers experience the convenience of online shopping without any delays or mishaps.
So what happens when this Rube Goldberg machine breaks?
For consumers and brands alike, they’re about to find out. Ports across North America are experiencing congestion like never before, with record-breaking numbers of container ships waiting to be processed. Why? For one, the pandemic certainly put a wrench in the global supply chain. But that’s not the entire issue at hand. Supply challenges have been simmering for decades now, and they’ve finally come to a head.
With the surge in demand for imports occurring just as the North American economy opens up, retailers and manufacturers are rushing to restock their inventories -and, simply put, the global shipping system just can’t keep up.
What kinds of supply chain issues are we seeing right now?
With the holidays just around the corner, supply chain issues-from local to global-are making both consumers and brands exceedingly nervous. As the BBC reports, many cargo ships are stuck outside ports in Los Angeles, Long Beach, and Savannah, which handle over 40% of all containers entering the US. This has contributed to shortages in goods ranging from toys to timber to pet food, in turn causing consumer prices to rise. During normal times, this would be worrisome. During the holiday season? Many consumers and brands are in full-on panic-mode.
To give some context, prior to COVID-19 it would have been unlikely to see more than one cargo ship at a given berth in most American and Canadian ports. But with the shipping cycle currently having to handle larger volumes than ever before, ships are waiting days and even weeks to unload their cargo.
According to the BBC:
- In the first eight months of 2021, 25% more cargo was shipped from Asia to the US compared to the same period during 2019.
- Demand for consumer goods is up 22% compared to before the pandemic.
- At the LA port, cargo has increased by 30% compared to 2020 as a whole.
- Industries experiencing an especially large surge in demand include toys, games, sporting goods, ventilation equipment, and household appliances.
- As certain companies begin to encourage employees to return to the office, there’s been a big jump in demand for computers, printers, and servers-equipment that many of us thought we’d never see again.
So, who’s to blame here?
It can be tempting to play the blame game, especially because this crisis will almost certainly have a direct impact on consumers. With the upcoming holiday season, shoppers will very likely struggle to find everything they’re looking for, and brands will very likely struggle to give customers what they’re looking for. But as we mentioned earlier, this supply chain issue isn’t a new one, nor is it a simple one.
Disruptions at every node of the supply chain
The global supply chain has a domino effect: when one part is affected, subsequent parts aren’t able to operate properly. So what happens when there’s a break at nearly every link of the chain?
Unfortunately, even the best forecasters didn’t anticipate this massive uptick in demand. The infrastructure of supply chains in the US has long been criticized, with experts pointing to decades-long logistics capacity problems in American ports. The lack of skilled port workers, truck drivers, and rail crew has simply added more fuel to the fire.
Unfortunately, the heaviest burden will likely fall on the shoulders of small businesses. Established retailers, while likely to suffer, already have working relationships with shippers and the financial capacity to weather the storm. But for small businesses already struggling to secure working capital? Well, they have a big problem on their hands.
But don’t panic quite yet.
Inventory funding is the missing link
You may have already come across the term ‘ inventory financing’ or ‘inventory funding’, particularly if you’re a founder who has done some research into funding options. Also known as accounts receivable financing, this type of funding can help businesses stay on top of any supply chain issues by securing additional working capital at peak seasons-say, during the months leading up to BFCM and the holiday season.
In normal times, a lack of inventory has left consumers frustrated and brands scrambling. But during this unexpected time riddled with unexpected problems, consumers may need to adjust their expectations by not asking too much from retailers. What does this mean for you, dear founder? This is your chance to prove to your customers that you’re there for them, through thick and thin, unlike your competitors who are struggling to stock their shelves.
If you plan ahead and are strategic about how you secure capital, you can stay ahead of these supply chain disasters and come out on top.
Inventory funding with Clearco
Clearco’s full offering includes:
- Easy inventory funding: Receive up to $10 million in stock financing when you connect us with your 3PL management software. You’ll only need to pay it back when the product has been sold with a 6% flat fee.
- Automatic invoicing: Clearco will handle all payments to your suppliers; all you need to do is upload your inventory invoices.
- Better rates with suppliers: Save up to 10% on inventory purchases when you pay upfront with Clearco.
We can’t predict the future, so we can’t say for certain how and when global supply chains return to normal (if ever). But what we do know is that founders now more than ever will need to be agile about how they manage their finances.
Don’t let this supply chain back-log stop your business from growing to the next level. Connect your accounts today to find out whether you qualify for equity-free, no-strings-attached funding.
Originally published at https://clear.co.