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Financing the Supply Chain is Up Next on UPS' Agenda Featured

Financing the Supply Chain is Up Next on UPS' Agenda "Girl holding American Dollar Bills"

Transporting goods from one point to another is now cheaper than ever before due to the advancements that have been in supply chain technology. The innovations in areas such as the Internet of Things and mobile telephony, big data, and weather forecasting tools that are useful in the shipping of goods have enhanced reliability of trade despite many challenges and risks that the industry continues to experience. While technology has significantly advanced, supply chain financing remains stuck in the past as a new decade of maturity beckons. Although buyer-centered plans still dominate, the focus has turned to the need to finance even the lower tiers of suppliers.

For UPS Capital, a subsidiary of UPS, its ability to capitalize on transparency of shipping presents them an opportunity to introduce cargo financing, that is currently not typically available in the shipping market. The unavailability of this kind of financing has restricted importation since importers are required to pay for goods upfront before shipping then wait for the products to arrive. This leads to a waste of time because it takes up to 75 days for the process to be completed. UPS Capital seeks to end this by providing supply chain financing solutions to companies that use its services.

The introduction of this service by UPS Capital will ensure that companies that bring products to the US use the domestic financing services in things such as accounts receivable and inventory and at the same time accelerate shipping of items to warehouse. Through this kind of integration of financing and shipping of goods that are on the move, UPS will be able to accelerate the conversion of cash for importers, reducing the amount of time that the goods take to reach the warehouse.

Tech assist

As seen in top supply chain finance companies, technological innovations are helping banks in financing supply chain companies. For instance, technologies such as application programming interfaces (APIs) and distributed ledger technologies such as blockchain are helping shipping companies put the missing pieces of the puzzle together. This has enabled companies to extend financing to global supply chain companies that were long ignored due to challenges that existed. UPS aims at leveraging technologies such as blockchain and APIs to offer financing faster to the suppliers and provide credit checks within a short time.

Since trade, despite being one of the oldest businesses in banking, has not embraced technology as it ought to have done, the adoption of innovations such as blockchain will speed up operations and allow shipping companies to grow confidence and transport goods faster. It will ease the management of supply chain risks such as natural disasters. Technology can also reduce the disruptions that pandemics, such as coronavirus causes. From trade tariffs to coronavirus pandemic, the disruptions that have taken place in the industry have proven the need for a resilient supply chain that does not depend on one location to source products. The disruption that has occurred in China, Japan, and Vietnam and the entire Asia region has led to the collapse of trade, that has affected the global economy.

From the effects that have been caused by the coronavirus pandemic and other disruptive occurrences, it has emerged that supply chain financing and diversifying the sources of products is the right way to build resilience. Companies such as UPS can use this challenge to rise to the occasion by speeding up shipping, facilitating financing, and helping businesses from cash flow crunches that could lead to slowdown from the affected businesses.  Finding ways to improve cash flow in the supply chain will make the movement of products in the supply chain seamless.

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Scott Koegler

Scott Koegler is Executive Editor for PMG360. He is a technology writer and editor with 20+ years experience delivering high value content to readers and publishers. 

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