Belated Happy New Year to all.  For the past year I have been reading with interest about the drama of extending payment terms to  suppliers by large companies in the UK.  SUPPLY Management, the purchasing and supply website,   has had numerous articles on this practice  and it’s  consequences. A sampling article titles:

It’s reported  that  Heinz has extended  terms from 45 to 97 days while AB InBev has terms of 120 days. Cash flow is the “mother’s milk” of operating a business,  especially  for a small company. Using payment terms to decrease a firm’s  working capital on the backs of suppliers  is shortsighted and in may opinion borders on being unethical. James Sproule, UK economist said” If large businesses continue to behave this way, they are inviting regulation” Debbie Abrahams, a Labor Party MP states, ” It’s simply a case of big businesses using smaller businesses as a credit line by applying bullying tactics  that are unfair and have the knock-on effect of stifling growth in the economy.”

Across the pond, I have heard similar stories of shippers attempting to extend payment terms to motor carriers, anywhere from 45 to 90 days.  That may have worked during the Great Recession when carriers were desperate to hold onto business but that is a non-starter right now as carriers have choices and will migrate to preferred shippers, those that pay in the contracted time frame.
With payroll occurring  weekly and fuel expenditures happening daily for carriers,  unreasonable payment terms by shippers  only hurts the carrier by forcing smaller ones to factoring companies and larger ones to continually tap into their lines of credit. Pay your carriers on time and look into Supply Chain Finance as a way to improve working capital and still pay carriers on time or even earlier. See my blog post from 09/10/13 on supply chain finance.
Joe Lombardo, NGNF (nice guy no freight)

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