How Supply Chain Finance Is Helping Companies Survive Global Disruptions

Global supply chains have been under pressure this decade and worldwide trade facing disruptions from the pandemic, the Russian-Ukraine war as well as terrorists and the still uncertain situation in the Strait of Hormuz.

Now a recent report from Wells Fargo commercial banking detailing how companies and the healthcare as well as technology sectors should utilize supply chain finance.

In the face of long production cycles and also mid rising costs and liquidity pressures now these companies are embracing tools once used by the consumer goods sector to face these challenges that supply chain finances helping these companies shorten the cash conversion cycle as well as counter rising costs and inflation and relieve liquidity pressures without adding debt.

Well joining us this morning to.

And Jeremy Jensen, head of global originations for Wells Fargo supply chain finance.

Jeremy, good morning.

Thank you so much for joining us.

Well on the heels of the report from Wells Fargo commercial banking that we spoke about to your colleague John Crum, can you give us an overview of supply chain finance programs as well as how they work for our viewers?

Sure, Remy, and thanks very much for having me this morning from a traditional supply chain finance program perspective.

Let's think of a bank client that may be a national retailer, that may be a manufacturing company, that's the client on the supply chain finance program, and they have suppliers around the world from whom they are buying goods.

What a supply chain finance program does is it allows that retailer, it allows that manufacturer to stretch out their payment terms and preserve liquidity.

Um, and then what the financing institution does is that they put, put liquidity right into the heart of that supply chain by buying that receivable from the supplier.

So the client, the bank client gets to extend their payables, creating liquidity.

The supplier gets paid early, sometimes as early as 5 to 10 days from that, from that invoice, and, and they receive that liquidity early as well.

And that's, that's traditionally built on the credit rating and the pricing of the bank client.

Yes, so Jeremy, I do want to build on what you just said.

Can you take us through the increased demand from healthcare as well as tech companies when it comes to supply chain finance programs and in particular to increase working capital here.

Yeah, let's, let's start with, with the tech space and the, the data center buildout and wow, what a, what a need for increased liquidity in the world that we see today.

Um, you know, the suppliers that are, are traditional to this industry are being asked to produce more than they ever have before.

So, so buy a data center builder or, or buy a hyper scaler to put a supply chain finance type program in place, not only does it allow them to extend their payment terms and preserve liquidity in a world in which they really need it, but it also gets their suppliers paid much quicker.

And again, these suppliers are building.

More than they have ever had to build before.

Many times holding inventory for many, many months.

All of that eats working capital.

So that, that's a simple example in the, in the tech space.

And in the, in the healthcare space, you know, it's a, um, a multi-dimensional receivables and payables world in healthcare from the drug manufacturers to the distributors, to the hospitals, to the insurance companies, even to the governments who are required to make statutory payments.

So there's a significant amount of delay in getting paid in the healthcare space.

So many of our products, working capital products, supply chain finance products, we can come in and work with any of our clients um that perform any of those services and help them find ways to monetize those receivables or payables.

And Jeremy, here we are on July 1st, uh, reflecting on the first half of this year and looking ahead to the second half of 2026.

So what should businesses be doing right now in order to prepare and also think about contingency planning for the next supply chain disruption?

I think, Remy, you hit the nail on the head with the keyword plan, plan, plan, plan, right?

In 2018, um, during the first round of tariffs, we saw a lot of our clients adjust their supply chain strategy.

Um, not so much from, from disruption, but to be more nimble, to diversify their suppliers away from certain jurisdictions.

So planning really is key.

You Use AI.

You use AI to strategize and to build different scenarios so you can check and ensure that your supply chain is resilient.

In the last 8 years, we have seen our clients significantly diversify their supply chains, have backup plans, have backup plans to those backup plans.

And now with, with AI here, um, it's so much easier and so much quicker to build those different strategies and to really game plan.

Well, Jeremy, this is an important discussion, so I appreciate your time.

Thank you so much for joining us this morning and thank you so much for sharing all of your insights.

Thanks, Remy.

Thanks for having me.