Dive Brief:
- Maersk Line is now offering trade financing options for shippers in Florida, New York, New Jersey, Georgia, South Carolina and Texas, American Shipper reported Wednesday.
- The program follows a pilot program deployed in Europe and Asia, which sough to offer shippers access to capital while sidestepping banks.
- The initiative depends on a shippers' financial history and history with Maersk to establish creditworthiness.
Dive Insight:
Maersk Line's entry into the trade financing space shows an issue prevalent, but often ignored, throughout the supply chain: cash flow.
The reason terms of payment are so important, and why bankruptcies are so disruptive, is that the supply chain depends wholly on a series of linked services. If one customer delays in payment, and downstream service providers depend on that funding to continue operations, the entire chain could be disrupted.
Walking the tightrope of invoicing and payment deadlines is precarious for many companies, sometimes causing temporary shutdowns, or in the worst of cases, layoffs and bankruptcies. Financing along the lines of Maersk's allows customers to retain retain cash to pay vendors, staff and even warehouse mortgages while waiting for payment for the items produced and shipped.
The carrier is not the first company to seek to provide direct financing to partners. Foxconn recently established a subsidiary to help do the same for its suppliers, and sidestep banks. Doing so builds up a company's resilience, by encouraging troubled partners to communicate their risk, rather than being subjected to it. In addition, the perception of help could help Maersk and Foxconn keep their partners.
Lastly, the new service advances two of the carrier's recent initiatives: digital transparency, in the form of payments; and the transition to a UPS- or FedEx-like supply chain solutions provider, as opposed to just a carrier.
