The Tradeshift
Index of Global
Trade Health

Q2 2021

The Tradeshift Index of Global Trade Health | Q2 2021

Treading
water
won’t keep
recoveryon course
Opening remarks from Christian Lanng,
CEO and co-founder, Tradeshift

The post-pandemic economy is taking shapeand our latest Index suggests the US, rather
than China, will set the pace heading into thesecond half of the year. Economists predictthat economic output in the US this year willgrow at the fastest rate since the 1980s.
Our data shows cumulative transaction
volumes across US supply chains haveaccelerated past China which had beenleading the global recovery up to this point.
Global transaction volumes rose by 9%
in Q2, but it recovery is far from smoothsailing. Order volumes across retail andmanufacturing industries are rising at record
rates, but demand-supply imbalances arestill widespread. China’s factory output has
hit rough waters as global supply chain
bottlenecks have weighed on production.
Transaction volumes between Chinese
buyers and suppliers on our platform
dropped by a double-digit margin in Q2.
The squeeze on supply chains is complex
and multifaceted, but lack of cashflow is arecurring theme among suppliers struggling
with increasing demand. Our latest Index
shows the gap between new orders andpayments to suppliers has increased
dramatically over the past quarter.

In a recent article for the Washington Post,
Tufts University professor Daniel Drezner claims
supply chains are far less fragile than wemight think. Supply chain activity has certainly
bounced back strongly since the lows of Q2
2020. What Drezner does not say however,is that very few companies got through thepast year without making changes in order tobuild additional resilience to future shocks.
We might be inching back toward normal,
but any business expecting to come out ofthe pandemic the same way they went in
is likely in for a surprise. Think about thetransformation of working patterns over the
past year: offices may be reopening, but ourdata suggests companies have seen numerous
benefits from enabling employees to connect
and collaborate with one another digitally.
Preparing for future hypotheticals canseem a bit like buying insurance. But if
investment focuses on digitally connecting
people and process across the entire value
chain, it will pay back in multiples over time— not only minimizing future losses but
boosting productivity and transforming therelationship between buyers and suppliers.

p.2

The Tradeshift Index of Global Trade Health | Q2 2021

What
happened
Q2 index highlights at a glance• Global transaction volumes rose 9% in
Q2, a slight slowdown compared to theprevious quarter, suggesting supply chain
activity levels are becoming less volatile.

• The UK recovery appears to be lagging.
Quarterly transaction volumes dropped
15% in Q2, and cumulative growth is 59%
below the pre-COVID level in March 2020.

• Trade activity levels in China appear
to be slowing however. For the second
quarter in a row, transaction volumes
in China dropped by more than 20%• The global liquidity crunch on suppliers
is turning into a chasm. Total ordervolumes on Tradeshift surged 35% in
Q2, but the total volume of supplierinvoices processed rose just 2%.

• The US is now leading the recovery in
trade activity globally having surpassed
China in Q2. Quarterly transaction
volumes in the US have risen 145%,
cumulatively, over the past year,
compared to 125% growth in China.
• In the Eurozone, transaction volumesrose by 21% in Q2, more thandouble the global average.

• Manufacturing and retail transaction
volumes remained unusually high in Q2
amid concern that the current demandspike is putting pressure on suppliers.
• Business travel spend is recovering, but
is still 30% below the pre-COVID level .
Corporate hospitality spending is 81%
lower than it was prior to the pandemic.

p.4

The Tradeshift Index of Global Trade Health | Q2 2021

Global transaction volumes holdmomentum, but China and UK hit trouble

The US is setting the paceheading into Q3

Transaction volumes - Quarter on Quarter Growth

Transaction volumes - shown cumulatively against Q1 2020

40%

150%
31.8%
28.8%
25.6%
22.1%

20%

17.9%

100%

21.4%

17.2%
14.5%

14.2%
10.2%
9.2%

10.5%
7.8% 7.3%

8.9%

50%

6.7%
2.3%

1%

0%

0%
-10.1%-20%-40%-15.9%-15.9%-19.4%

Global-20.5%

UK
Q2'20

Q3'20

-21%
-22%

US

Eurozone

Q4'20

Q1'21

China
Q2'21

-50%

-100%

Q2

Q3
Global

Q4
UK

US

Q1
Eurozone

Q2

China

Total transaction volumes on the Tradeshift network

The opposite appears to be happening in the Eurozone.

Trade activity in the US is running hot. According

behind the US and China, but after two strongrose 9% in Q2. The slight slowdown compared to

Manufacturing outputs across the region hit a new record

to Oxford Economics, the US economy is set to bequarters transaction volumes across supply chainsQ1 follows the pattern which has emerged sincehigh in June and, according to our data, transaction

a bigger contributor to global economic growthappear to have found another gear. The European

the end of 2020 and suggests overall trade activity

volumes grew by more than twice the global average.

than China for the first time since 2005.

Commission predicts a strong second half to the year

is returning to normal, pre-pandemic levels.

across the region, and our data suggests another
The UK remains the outlier across Western economies.

While Tradeshift’s data shows only modest quarter-

strong quarter could see cumulative transaction

However, growth remains uneven, particularly inTransaction volumes dropped by more than 15%

on-quarter transaction volume growth in the US,

growth pass China in the second half of 2021.

China. Our data revealed that trade activity acrossin Q2. Part of this could be the residual impact

a cumulative look at the same data suggests

the region suffered the second successive double-

from the UK’s strict lockdown in Q1 and Brexit

the level of growth in activity across US supply

The UK has been left with a mountain to climb following

digit drop in quarterly transaction volumes; this is

may also be a factor. Thomas Sampson, associate

chains surpassed China in Q2 and is setting thea relatively disappointing Q2. According to the OECD,

likely linked to the high material costs reported byprofessor at the London School of Economics, claims

pace for recovery globally going into Q3.

the UK’s recovery is lagging behind every G20 nation.

China’s National Bureau of Statistics which drove

Brexit has had a -15% effect on UK trade, whicha drop in factory outputs in May and June.

sits very much in line with what we’re seeing.

Data for the first three months of the year suggests
Trade activity across the Eurozone had lagged

economic output was 8.7% below pre-pandemic levels.

p.6

The Tradeshift Index of Global Trade Health | Q2 2021

Momentum in manufacturing and retailindustries remains strong, pressuring suppliers

The cash flow imbalance isreaching dangerous levels

Transaction volumes - QoQ growth across key industry verticals
30.00%

Global invoice and orders - QoQ growth
40%

25.6%

Q1'21

22.50%

Q2'21

35.2%

15.00%
6.1%

7.50%
22.9%

20%

22.1%

-1%

16.9%

-4.2%

-7.50%

13.1%

3.1%

1%

0.00%

16.2%

6%

Manufacturing

Transport & Logistics-4%

RetailTechnology

9.5%

Transaction volumes - quarterly growth shown cumulatively against Q1 2021
1.2%

0%

200%
137.5%
75%-15.2%-20%-16.8%

Q2 '20Q3 '20Orders

Q4 '20Q1' 21Q2 '21

Invoices

12.5%
-50%
Q2'20

Q3'20
Manufacturing

Q4'20
Transport & Logistics

Q1'21
RetailQ2'21

Technology

Order volumes continue to surge on the backAs companies rush to replenish inventory, pressure

Manufacturing transaction volumes grew by a relatively

lockdown restrictions early in the pandemic, this uptickof vaccine rollouts across many major Western

falls squarely on suppliers right across the value

modest margin in Q2 compared to the previous quarter,in activity should be a positive, but sustaining that level

economies, but invoices are simply not getting paid

chain. This pressure is being magnified by a steep

but when the same data is expressed cumulativelyof momentum puts extreme pressure on supply chains.

quickly enough for suppliers to meet demand.

decline in cash flow relative to order volumes, as

it is clear that momentum across the sector remains

evidenced by the alarmingly low level of invoice

extremely high. Data from IHS Markit suggests

In our Q1 Index we reported that one-in-five suppliers

volume growth we saw during the quarter.

that manufacturing output broke records across awere struggling to keep pace with demand. Lack ofmajority of the world’s largest economies in June.

cash flow was one of the major obstacles to an effective

According to the US Federal Reserve the overall
ratio of business inventories to sales fell to 1.23
in March, the lowest level since records began

The same pattern is playing out across virtuallyramp up, and our latest data suggests the ’liquidity

in 1992. Our data suggests rising order volumes

every major economy with the gap widest in the

A similar picture is emerging across the retail sector

crunch’ has deepened as orders outpace payments

are responsible for much of the growth in overall

Eurozone, where order volumes rose 62% in Q2

where transaction volumes rose 6% in Q2. Cumulative

to suppliers by a margin we have not seen before.

transaction volumes throughout the Q2.

while the total number of invoices rose just 8%.

analysis shows a steep and consistent rise in momentum
since the beginning of 2021. Having been hit hard by

p.8

The Tradeshift Index of Global Trade Health | Q2 2021

Remote work isn’t goingaway anytime soon
Transaction volumes - indexed against pre-pandemic baseline
100%

92%

90%
81%

75%

63%

50%
25%
0%
-15%

-25%
-31%
-41%

-50%

-50%

-56%

-75%
-100%

-66%
-77%

-78%

-82%

Travel
Q2'20

-74%
-81%

Hospitality
Q3'20

Q4'20

Telecoms
Q1'21

Q2'21

Trade activity may be inching towards normality, but

in the office, yet still gives options for in-person

there is very little evidence to suggest a return to pre-collaboration, is what companies will aim for.

pandemic working practices will follow. Tradeshift’s datashows a dramatic rise in telecoms spending since theBusiness travel was 30% below pre-pandemic levels

first lockdown. Transaction volumes across the sector

but the volume of transactions processed by Tradeshift

are 89% higher than prior to the pandemic suggestinghas been increasing consistently since the first lockdown

the use of virtual collaboration tools is here to stay.

eased. Corporate hospitality spending dropped 82%

What’snext?
Do the economics of resilience stack up?

in Q2 2020. A year on and it’s tracking at the same
So is working from an office dead? The answer

level suggesting client entertaining and networking

is a little more nuanced. According to one recent

events will remain virtual, at least for the time being.

report 65% of pandemic remote workers said theywanted to keep working from home—but in a

While it’s still too early to make a definitive

separate study 83% said they missed the human

prediction over what the future of work will look like,contact they got from in-person meetings.

businesses that do not have the digital infrastructure
in place to accommodate the transition to a more

Likely, a hybrid solution that significantly decreases

flexible, distributed workforce will struggle.

the amount of time employees physically spend

p.10

The Tradeshift Index of Global Trade Health | Q2 2021

We might
not see a full
pendulum swing,
but digitalmust become
the default for
supply chains

Q&A with
Rob van Ipenburg,
Managing Partner,
Quyntess
What characteristics of modern supply
chains make them vulnerable to the kind ofvolatility we’ve seen over the past year?
Most manufacturers are heavily reliant
on labour, so lockdown restrictions had asignificant impact when many factories
were forced to close. Demand from OEMs
dropped off. On the supply side the samething happened and this made materials
sourcing even more challenging.
Market forces dictate that modern supply
chains are often long and complex. Longer
supply chains tend to magnify the impact
of disruption, but companies with more

distributed supply chains can also absorb
fluctuations more easily. In some cases thatmight mean a company invests in diverse
sourcing options. It’s also increasingly common
for companies to invest in facilities with more
flexibility to produce different products instead of concentrating all volume in one site
for economies of scale. For CPG companies,
where this approach is now fairly common,
fluctuation levels were around 10%, whereas
in the industrial sector where distributed
supply chains are less common, fluctuations
could run up to 80% above typical levels.
The higher the level of fluctuation, the morepressure that exerts on the supply chain.
Lockdowns are easing and economies
seem to be opening up. But the situation
across supply chains still seems volatile.
Is that something you’re seeing?
Demand from OEMs is very strong, withthe possible exception of automotive andaerospace. What we’re seeing right now
is partially a catch-up from missed sales
in 2020 and the first quarter of 2021 andthere are some pretty strong V-shaped
recoveries. On the supply side, instability is
still high with significant shortages of key
parts. And while order volumes are backup are fluctuating at around three times
the normal level, with order volumes being
revised several times from when the order isissued and when the material is shipped.
The shortage of ocean transport is also
causing a lot of unpredictability when it
comes to the physical movement of goods.
Even when materials are dispatched from a
supplier there are no guarantees it will arriveon schedule. That triangle of collaboration
between the supplier, logistics service provider
and buyer is far more important right now
than it might have been previously when
there was plenty of spare logistics capacity.

There are some fairly radical opinions
being shared about how to build
resilience across supply chains. How
dramatic are the changes we’ll see tosupply chains likely to be post-COVID?
Industries like aerospace and automotive
simply would not have room at their sites tomove away from just-in-time manufacturingsystems. A lot of businesses are looking
towards multi-sourcing and distributed supply
chain models however. Transitions like thisare more subtle, but they also demand far
more collaboration across the supply chain asorganizations look to spread demand acrossa number of different suppliers and locations.
Experiences of the past year have flippedthe conversation around resilience. Whereas
before companies based decisions primarily on
cost, they’re beginning to ask questions overwhether low cost is always the best protection
for overall margins and overall revenues.

p.12

The Tradeshift Index of Global Trade Health | Q2 2021

Are there other ways to build
resilience without such a drastic
reconfiguration of business models?
Digital must become the default for every
business. Volatility is not going away.
Keeping a handle on the kind of fluctuations
that come with even minor disruptions is
simply not scalable manually. Even if you
had limitless resources at your disposal
you’d still face enormous issues gaining
a real-time view of the flow of materials
across the supply chain, or collaboratingwith more than a handful of suppliers.
A majority of businesses seem toaccept now the need for digitalization- what has taken them so long?
Businesses have benefited from a very
prolonged period of stability. When you
have low volatility it’s easy enough to rely
on a limited number of people to get thejob done. Now that the level of disruption
has increased, businesses are finding theycannot simply adjust the number of people
they have addressing these issues.
Organizations have not been blind to theserisks, but when times are good, other things
tend to take priority. The investments
businesses have previously sunk into legacy

systems also breeds inertia. A lot of businesses
made significant investments in EDI systems
and supplier portals. That brought them acertain level of digitalization among the top
20% of their supply chains, but that’s still 80%
of supplier relationships that are built aroundmanual processes. Adherence to this oldparadigm has prevented a lot of businesses
from making the next leap. Businesses arerecognizing they won’t get to where theyneed to be by doing a little bit more of what
they’ve been doing over the past ten years.
What are some of the things that businesses
need to consider as they look to digitize?
Businesses have tended to look at risk from a
volume perspective. That means focusing on
the biggest suppliers and building connectivity
with them first for efficiency reasons. Whatthey really need to be analysing is where thehighest level of change might come from.
More often than not that will be a smaller
supplier somewhere further down the chain.
We also need to move beyond the focus on
features and functions. It’s all very well looking
for a product that meets a certain set of
specifications, but that will count for nothing
unless the entire ecosystem is incentivized
and willing to adopt the processes. A lot ofbusinesses are too focused on what a productdoes for them. They need to be zooming out

and considering whether suppliers will see
an equivalent level of value from adopting
the same system and come on board.
Building resilience to unpredictable events
can feel a little like buying insurance - youknow you need it, but it’s not something
you value unless the worst happens.
Is that the right way to look at this?
Organizations in the direct procurement space
are under mounting pressure to provide a
digital footprint that shows they are operatingin compliance with regulatory requirements.
Take the medical device industry, where there
is a very heavy emphasis on traceability
through the supply chain. Digital twinningis also becoming more important tomaintenance and production cycles. Before
we start to talk about these technologies wefirst need to ensure that the full configurationof inbound material is also digital. If you
need to start entering and typing that
information manually then the whole process
will break down very quickly. Resilience ismuch more than an insurance policy, it’s
becoming a license to operate in the future.
Can you give us some examples ofways in which Quyntess is working
with organisations to help them react tochanging environments in real-time?

We’re helping a number of organizations tohandle forecasting and variations within the
supply chain through automation. This means
linking real-time data to production plans andinventory so that businesses have an accurate
understanding of how fluctuations in demand
may impact their ability to continue production.
Shipping is another area where we provide
significant support. Even at the best oftimes the relationship between suppliers,
buyers and logistics providers is a delicate
dance. When you add fluctuating demandand limited logistics capacity into the mix
it becomes very challenging to manage,
particularly if the process is partially paperbased. With a network like Tradeshift wereplace parallel 1:1 exchanges with suppliersand carriers with an orchestrated three party
collaboration which makes the businesses
much more nimble and gets things moving.
Finally, and linked to all of this, is risk
dashboarding. Increasingly we’re seeing anappetite for more metrics that relate specificallyto the vulnerability of a certain supplier toa disruption. The fact that we have thosedashboards available on the Tradeshift platformmakes it much easier for buyers and suppliers
to define and collaborate on contingency plans.

p.14

The Tradeshift Index of Global Trade Health | Q2 2021

Harnessing theresilience dividend

MikkelHippe Brun,co-founder,
Tradeshift
Workers at the Port of Copenhagen areplaying an increasingly precarious game of
Tetris right now as a squeeze on shipping
capacity leaves an ever-increasing numberof containers with nowhere to go. It serves
as a very visual reminder of both the intricate
dance global supply chains perform toprovide us with everyday goods and what
happens when the music suddenly stops.
Supply chain experts predict that the current
disruption could last until 2022 -- and that’s
providing we avoid further disruption along

the way, which is far from certain. Consensus
is forming that a ‘return to normal’ simply
won’t cut it when it comes to supply chains.
According to Mckinsey, 93% of supply chain
operators are planning to take steps to maketheir supply chains more resilient. Interestingly,
respondents were split down the middle overwhether to sacrifice short-term profitability
in order to prioritize resilience planning.
Companies may have underpriced the risk
associated with extreme scenarios, but a move
too far in the opposite direction could be justas devastating to future business models.
COVID exposed the folly of ‘just-in-time’ supply
chains in areas such as healthcare and foodsupply. The economics of building more resilient
supply chains in these areas might not stack

up right now, but governments have calculated of products according to real-time demandthat risk of doing nothing far exceeds the cost of inputs. The same flexibility also makes it far
investing in localised manufacturing capacity.
easier to accommodate specifications from avariety of suppliers into production cycles.
For many businesses however, suchwholesale reconfiguration is neither practical,
Resilience need not end up an extra line item
nor economically viable. Revolution isin the debit column of company balancecoming however, and technology will be thesheets. Thanks to advances in technology,
catalyst. The combination of automation,businesses can look forward to a future
robotics and 3D printing is already having
where supply chains are as cost-efficient as
a profound impact, not merely on where
they are resilient. Make no mistake, however,
manufacturing capacity is located, butrevolution of this magnitude will only bealso what factories are able to produce.
achievable if the foundations we are building
on are fully digital. If that means getting rid ofGone are the days where factories were set
paper-based processes once and for all, thenup to produce a single item at the lowest
frankly that feels like the deal of a century.
possible cost. Instead, a new generationof highly automated facilities can now bereconfigured in hours to produce a broad range

p.16

AboutTradeshift’sIndex ofGlobal Trade
Health

Purpose

Methodology

Many of the world’s largest buyers and their
suppliers use Tradeshift’s trade technology
network to exchange digitized purchasing
and invoicing information. The data thesetransactions yield provide us with a uniqueawareness of trading activity between
businesses.

The Q2 Index shows business-to-business
transaction volumes (orders processed frombuyers and invoices processed from suppliers)
across the Tradeshift network during the periodof April 1, 2021 through June 30, 2021. We’ve
also provided retrospective analysis of data forthe previous 12 months

Tradeshift’s Index of Global Trade Healthanalyzes anonymized data flowing across
our platform to reveal a timely perspective of
how external events are impacting businessto-business commerce around the world.

We looked at quarter on quarter measurements
for total transactions on our platform to provide
a sense of how different regions and industry
sectors are performing against the patterns
we’re seeing globally.
The pandemic has been a key part of thenarrative for our Index. To help visualise
this we looked at cumulative growth intransactions to understand the degree towhich different regions have been successful
in addressing the shortfall in transactions
caused by lockdown restrictions.
We acknowledge that there are limits to how
accurately our view of what is happening on
our network can reflect how complex global
supply chains are reacting to a variety of
external factors. What our data does provide
is a useful snapshot that provides clues as
to what might be happening to the global
economy. The patterns we see in our data
become more valuable as we combine themwith other third-party data and expert insight,
something which you will see us draw on
throughout this report.

p.18

About Tradeshift
Tradeshift is a market leader in e-invoicing and accounts
payable automation and an innovator in B2B marketplaces
and providing access to supplier financing. Its cloudbased platform helps buyers and suppliers digitize invoiceprocessing, automate accounts payable workflows and scale
quickly. Headquartered in San Francisco, Tradeshift’s vision
is to connect every company in the world, creating economic
opportunity for all. Today, the Tradeshift Network is home to a
rapidly growing community of buyers and sellers operating in
more than 190 countries. Find out more at: Tradeshift.com© 2021 Tradeshift Holdings, Inc. or a Tradeshift affiliatecompany. All rights reserved.
The Tradeshift Global Health of Trade Index and this report
are copyrighted works. This document is protected by U.S.
and international copyright and intellectual property laws. It
may be linked to and referenced with the following attribution“Tradeshift © 2021 Tradeshift Holdings, Inc.”
Tradeshift is a registered trademark or trademark ofTradeshift Holdings, Inc. in the United States and/or otherjurisdictions. All other marks and names mentioned in thisarticle may be trademarks of their respective companies.
This report is intended for information purposes only, is basedon a segment of industry data and may not prove to be an
accurate representation of trade volumes. Tradeshift makes
no warranty or representation as to the accuracy of thisinformation.

© 2021 Tradsshift. All rights reserved.