Supply Chains and B2B is about the flow of goods and services across links of the value chain. Three components that make up this flow is the actual good or service, information about demand and supply at various points of the value chain and money that moves from B2B in reverse. The money pays for the variable costs (like direct raw material) and other fixed costs like salaries, rent etc.
Normally payments take 30 days or more to materialize and in the meanwhile businesses work on bank credit for working capital. With payment uncertainty from the customer businesses must be able to borrow if the economy is to move. This is not happening and Banks are acting “once bitten twice shy”. The US Fed is also reluctant to intervene.
Unless Banks loosen up and loosen up fast, this downward spiral will continue.
Note: This post was published on February 18, 2009 and refers to the Great Recession of 2007-9.