Financial services giant Citi has published a report into supply chain finance that says disruption remains top of mind for businesses reliant on global supply chains.
The report -- for which Citi surveyed 2,327 global corporates -- draws insight from Citi Research’s Global Supply Chain Pressure Index, as well as from trade flows and survey responses from multinational corporations and their suppliers globally.
The Index fell on the back of a slowdown in global consumer’s demand for goods, but the report cautions that, while a drop in demand is "an important driver of loosening supply chain pressures", the development is "also a sign of mounting recessionary risks across countries and globally".
By analysing US$4tn of average daily payment flow that Citi’s Treasury and Trade Solutions division processes, the report finds that flows have largely stabilised after multiple disruptions in 2021 and early 2022.
It is against this backdrop of stabilisation, that Clean Energy Transition trade flows grew by 65% through the first three quarters of 2022, as energy prices soared globally.
Supply chain fragility 'all too apparent'
Citi CEO Jane Fraser wrote in her forward to the report: “The pandemic and then the war in Ukraine demonstrated the fragility of supply chains. Many companies and customers experienced the pain of those disruptions and are now looking for resiliency wherever they can get it.
"While reshoring and nearshoring may seem like the next steps, buyers and suppliers alike indicate that the higher priority is resiliency or redundancy deeper into the supply chain.”
Five themes emerged in the report:
- Rising prices and rising interest rates have had impact as corporates take steps to boost financial supply chain resilience
- Corporates and their suppliers want to strengthen relationships and broaden their supplier base to mitigate further disruption
- Pandemic disruption has given way to geopolitical tension as the primary threat to supply chain funding stability
- Despite economic headwinds, respondents remain optimistic about the prospect for export growth
- ESG remains an area of focus, but lack of clarity has impeded meaningful progress.
Chris Cox, Global Head of Trade and Working Capital Solutions at Citi said: “Given the impact from global events businesses have re-evaluated supply chain strategies. Notably, resiliency and continuity is taking centre stage on sourcing through the production cycle.
"Another developing trend is the shift from just-in-time to just-in-case inventory models. Buyers are now building-in more resilience by purchasing earlier and holding more inventory. As a result, financing the end-to-end supply chain remains top priority.
"How this trend plays out long term remains to be seen. Buyers, however, are focused on ensuring their suppliers have access to better and stable working capital solutions. Businesses are also accelerating the digitalisation of supply chains. Digitalisation enables ease of monitoring and management throughout the chain, enabling the robustness for any future disruptions.”