Suppliers reluctant to ship goods without credit insurance

[Eugene]

Source: Associated Press

Suppliers reluctant to ship goods without credit insurance

By ANNE D'INNOCENZIO
September 6, 2020

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Without that insurance, Gold Medal — and thousands of other suppliers facing a similar dilemma — would be on the hook for unpaid bills. But not shipping the goods to retailers means losing sales and big write-downs on inventory. The problem will only get worse if retailers can’t stock their shelves and shoppers can’t find what they want heading into the critical holiday season.

“I got the goods, I made them. I don’t have a liquidity problem,” said Paul Rotstein, who’s been president of New York-based Gold Medal for 30 years. ”But if I can’t ship $12 million worth of orders, guess what? I have a big liquidity problem.”

Before COVID-19, suppliers routinely relied on so-called trade credit insurance to get the reassurance they needed to design products, receive orders, and ship to retailers.

Now, with the pandemic creating so much economic uncertainty, many retailers are struggling and credit insurers are unwilling to take on the risk. In fact, many insurers will only provide protection on orders to big box stores and others that have been able to withstand the pandemic, leaving in the lurch a huge swath of non-essential small and medium retailers that are still trying to claw their way out of months of lockdowns that decimated their businesses.

Trade credit insurance provides a financial backstop for at least $600 billion in annual U.S. sales, according to Robert Litan, an economist and attorney, who published a report in early July on the issue for Econ One, an economic consulting firm. That doesn’t include the estimated $50 billion loss in orders that suppliers will be too reluctant to ship, Litan estimates.

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Read more: https://apnews.com/5298671099cfadcb9896c660d863dc23

[Wellstone ruled]

1. Wondered when one of these stories would pop.

So now the letters of Credit are being abused and one needs to go the Insurance route.

[Newest Reality]

2. Yikes.

The ramifications of our current dilemmas are starting to show more now.

I am expecting cascading system failures of many kinds as we continue into this crisis, especially since little to nothing has been done from the top to forestall some of the problems, other than a paltry, one-time stimulus to consumers, a boost in UI benefits that has expired and lots of shoring up of the markets/corporations.

The reason I expect those failures is that things are complex and interrelated to the point that the effects ripple out and lead to results we don't necessarily expect. An example is that, if a automobile plant were to close down the many suppliers would be impacted as well as supportive services, etc.

Normally, the results can be diverted, re-routed, contained or absorbed, but we are now experiencing a systemic version of that. I imagine that there are more supply-chain disruptions in store that will have a radiating effect, especially considering the JIT system and Neoliberal policies that don't encourage resilience and long-term planning in prevention of potential shortages and such. It is simply not profitable in that economic model from what I understand.