The Tradeshift
Index of Global
Trade Health

Q4 2021

The Tradeshift Index of Global Trade Health | Q4 2021

Global tradepassesthe latest
resiliencetest... for
now at least.

The Omicron variant proved an unwelcome
Christmas gift for global trade in Q4. But
unlike previous waves, supply chains have so
far passed the latest test of their resilience.
Our latest Index of Global Trade Healthshows that cumulative transaction volume
growth across the Tradeshift platformstayed flat in Q4 compared to pre-pandemic
forecasts. Recent history suggests thatthings could have been a lot worse.
Fears that the significant drop in order volumes
we saw in Q3 could be the beginning of
more profound and protracted slowdown
in activity also proved unfounded. Instead,ordering activity appears to be returning
to a more predictable pattern. With recent
data also suggesting that the supply chain
bottlenecks of the past year are beginning toease, we could well be looking at a gradualcalming of the waters heading into 2022.
That doesn’t mean it will necessarily be plain
sailing. US supply chain activity appears tobe pulling away from the pack on the backof a booming economy that seems - so far
at least - largely unaffected by spiking Covid
cases. Supply chains across the UK and theEurozone have had a tougher time however,with activity levels receding in Q4. Low
invoice volumes across almost every region
are also a reminder that while fulfilment
issues may be easing, suppliers are still facing
significant cash flow and capacity pressures.
This will continue to have a knock-on effecton global trade in the quarters to come.
Then there’s China. The country’s toughstance on containing the spread of Covidmeans local supply chains are more vulnerable
to shutdowns than other manufacturing
heavyweights. Our latest data shows Chinese
trade activity has continued to slow, droppingby 10 points in Q4. An Index score of 86
at the end of 2021 means activity acrossChinese supply chains is lower than at any
point since the beginning of the pandemic.
As disruptions caused in the early stagesof the pandemic have shown, pressuresin one country have significant knock-on
effects both up and downstream. A spate oflockdowns in key industrial regions across
China could trigger more shortages of crucial
manufacturing components and extended
order backlogs. Omicron may not have beenquite the Grinch that stole Christmas, but
don’t be surprised if it has a sting in the tail.

p.2

Q3 2021
The Tradeshift Index of Global Trade Health | Q4

1. Cumulative growth in transaction
volumes remained flat against prepandemic forecasts despite early
predictions that the Omicron variant
could trigger a steep fall in activity.

At a glancefindings

2. Order volumes appeared to stabilize
in Q4 after wild fluctuations over theprevious two quarters. Invoice volumes
however remained flat, suggesting
suppliers are still struggling to clear abacklog of orders from earlier in the year.
3. US supply chain activity finished
the year with an overall Index scoreof 97, just 3 points below the level
Tradeshift had forecast for theperiod prior to the pandemic.
4. In China, tough Covid prevention measures,
together with weakening demand triggereda 10 point fall in transaction volumes
against the forecast range. Q4’s Indexscore of 86 puts cumulative growth inChinese supply chain activity at its lowest
level since the beginning of the pandemic
5. The recovery in supply chain activity acrossthe Eurozone stalled in Q4, dropping 8

points compared to the expected range.
A 20 point quarter-on-quarter fall in
invoice volumes indicates fulfilment
issues remain a key concern acrossthe region, though the overall picture isless volatile than in recent quarters.
6. Activity across UK supply chains fell by
9 points in Q4. Demand appears high,with order volume growth remaining
comfortably above the expected range,
but a steep drop in invoice volumes
during the quarter suggests ongoingpressures within the supplier base.
7. Activity across the worldwide transportand logistics sector climbed above theexpected range for the first time in six
months during Q4. The acceleration
supports claims that supply chain
bottlenecks are beginning to ease.
8. Transactions volumes in the manufacturingsector dropped sharply in Q4, finishing theyear well below the expected range. Some
commentators attribute the slowdown to areluctance from customers to place orders
before inventories were worked through.

p.4

The Tradeshift Index of Global Trade Health | Q4 2021

Global trade activity stabilizes
despite COVID spike
Cumulative transaction volume growth (orders + invoices)
indexed against pre-pandemic forecast
120

100

80

Charting
the recovery

60

40
Q1'20

Q2'20
Global

Q3'20

Q4'20
US

Q1'21
UK

Q2'21
EUR

Q3'21

Q4’21

CNY

Surging cases of the Omicron variant tempered

Chinese supply chains had a more challenging Q4.

Cumulative activity growth between

momentum across global supply chains in Q4,

Weakened demand and a strict lockdown policy

buyers and suppliers on the Tradeshift

but Tradeshift’s data suggests supply chains arewhich caused disruption to factory production,

now better prepared to weather disruption.

meant trade activity slipped by 10 points.

Global transaction volume growth across the Tradeshift

Activity across the Eurozone also lost momentum in

platform remained flat in Q4, finishing the year 25

Q4, falling a further 8 points below the forecast range.

points below the pre-pandemic forecast range. The

The imposition of tough new coronavirus containment

data indicates we are still some way from ‘normal,’measures appears to have had an impact on supply

but the fact recent disruptions have not triggered

chain activity across the region. A similar patterna significant fall in momentum is encouraging.

emerged in the UK during Q4 where trade activity

platform since Q1 2020

dropped 9 points, leaving overall activity growth
Supply chains activity in the US is opening up asince the pandemic barely half the forecast range.

gap on rest of the world, and seems to have shedsome of the volatility which characterized activity

This loss of momentum in the UK and Europe isacross the region in previous quarters. Growthsignificant, but underlying activity levels during theremained flat against the pre-pandemic forecast

quarter appear relatively stable (see our section

range in Q4. But an overall index score of 97 puts US

on QoQ performance across territories). If things

supply chains very close to the expected range.

stay as they are (and that’s a big ‘If’), we should
see activity begin to accelerate again in 2022.

p.6

The Tradeshift Index of Global Trade Health | Q4 2021

Demand spikes settle, but low invoice volumes
suggest backlogs could last another year
Cumulative growth in invoices and orders indexed against pre-pandemic levels
110

100

90

80

70

60
Q1'20

Q2'20

Q3'20

Q4'20

Invoices

Q1'21

Q2'21

Q3'21

Q4'21

OrdersOrder volume growth dipped by 0.5 points in Q4,buckling under pressure to accommodate

and appears to be settling after a pronounced spike

spikes in demand through the pandemic.

in activity in Q2. The modest dip in order volumes
suggests news of the Omicron variant did not spook

The fact that invoice volume growth onbuyers in the way that previous waves had done.

Tradeshift’s platform also flattened in Q4 isconcerning however, since it suggests suppliersWith demand appearing to taper, there areare still struggling to accelerate delivery cycles

some early signs that the bottlenecks whichon orders stemming from earlier in the year.

plagued supply chains are starting to ease.
The very worst of the supply chain crisis may be over,
Ocean freight rates have started to fall after reaching

but if invoice volumes continue to follow the current

record highs, while a recent survey of executives

trajectory, then it could be at least a year before we see

by Oxford Economics found that almost all believeorder backlogs fully subside. Breaking this cycle willthat the supply chain crisis may have peaked.

require a far more collaborative relationship between
buyer and supplier including measures to inject

Cooling order volumes are likely to offer somewelcome relief to suppliers who have been

additional working capital into the supplier ecosystem.

Q4
momentumdeep-dive
Quarter on quarter performanceacross key territories

The Tradeshift Index of Global Trade Health | Q4 2021

US: Supply chains head into
2022 on a stable footing

Eurozone: Low invoice volumes put
supply chain activity into the red zone

US trade activity - quarter on quarter index scores

Eurozone trade activity - quarter on quarter index scores

Transactions

Invoices

Orders

+9

+5

+21

Below expected range

Within expected range

Above expected range

Below expected range

Within expected range

Above expected range

US supply chains were the stand out winners

previous quarter. A 21 point swing compared toFears over the spread of the Omicron variant

in the supply chain may also be a factor however.

from Q4, being the only territory to come close

the Q3 is clearly unusual, and a sign that demandacross Continental Europe led analysts at Oxford

Recent data suggests that while logjams have started

to pre-pandemic predictions for trade activity.

cycles remain volatile. Crucially however, ordering

Economics to downgrade their Q4 forecasts

to ease, rising prices and shortages of key components

activity does not appear to be overheating in thefor economic growth across the region

continue to impact suppliers in the industrial heartlands

One of the most encouraging signs from our deeper

same way that it had done in the first half of 2021.

dive into the data is the continued accelerationof Germany and France. Stricter Covid measures
Tradeshift’s data supports this prediction. In

added to the operational challenges facing suppliers.

in invoice numbers from US suppliers. In our

The pandemic continues to cause significant

Q4, total transactions across the Eurozone

Q3 index we saw invoice traffic climb 12 points

difficulties, but the US seems to be ploughing

dropped below the expected range for the first

Ordering activity across the Eurozone climbed backcompared to the previous quarter. A further

through these obstacles, with a booming economy

time since the beginning of the pandemic after

towards the expected range in Q4, but a score of 92

rise of 5 points in Q4 means invoice volumes

no doubt offsetting some of these challenges. Oura 9 point dip from the previous quarter.

means the growth in Q4 is around 12 points lower thanfinished the year comfortably within the expectedlatest data presents a relatively healthy picture

range. The acceleration suggest that suppliersfor US supply chains heading into 2022.

the average quarterly score since the first lockdown. On
Invoice volumes, which had been growing at a healthy

the one hand, this could be a sign that ordering activity israte in Q3, dropped by 20 points in Q4. Ordering volumes

starting stabilize. On the other hand it may suggest thatacross the Eurozone had dropped off alarmingly in Q3,

challenges in the supply chain are causing buyers to think

Order volume growth also climbed sharply inso a corresponding drop in invoice traffic during thetwice about loading their suppliers with fresh orders.

Q4 having tapered off significantly during thefollowing quarter is not unexpected. Ongoing challenges

are starting to clear orders at a faster rate.

p.10

The Tradeshift Index of Global Trade Health | Q4 2021

UK: Robust demand, but supply
issues weigh down activity

Delivery logjams easing, but manufacturingslowdown suggests cautious approach from buyers

UK trade activity - quarter on quarter index scores

Quarter-on-quarter transaction volumes - Index scores by sector

Below expected range

Within expected range

T&L

Manufacturing

Retail

Tech

Q2'20

81

60

49

95

Q3'20

106

112

145

103

Q4'20

102

112

110

114

Q1'21

104

104

86

93

Q2'21

91

92

83

89

Q3'21

97

110

95

105

Q4’21

104

73

95

94

Above expected range
significantly
below expectation

below
expectation

withinexpected range

above
expectation

significantly
above expectation

The UK’s supply chain activity has long be at the

The data mirrors the findings of a recent report

Activity across the Transport and Logistics sector

Retail supply chain activity remained unchanged in Q4

bottom of the international pack in terms of recovery

from the Confederation of British Industry whichrose above the expected range for the first time sincewith growth just below the expected range. A number ofsince the pandemic. And after a relatively strong

revealed that while order books are tracking at

the beginning of 2021. The acceleration in activity

commentators had predicted that the supply chain crisis

Q3, transaction activity fell by 17 points in Q4.

above normal levels, inventory volumes acrossacross the sector suggests goods are once again

and the Omicron variant could have a significant impact

suppliers tumbled to record lows in December.

moving at pace after six months of logjams.

on the sector in the run-up to Christmas. But our data

Much of the slowdown comes from a fall in invoicesuggests that supply chains remained relatively stable.

traffic, which dropped well below the expected range

With recent data suggesting that some of the problems

Manufacturing activity continued to show signs ofin Q4. Conversely, ordering activity, which has been

facing UK supply chains have begun to ease, wevolatility, dipping significantly below expected levels

Spending on software and technology slowed in Q4,

consistently strong since the end of the first lockdown,

could yet see invoicing volumes begin to catch up

in Q4. Dampening demand and caution from buyers

finishing the year just below the expected range. Itrose to slightly above the expected range in Q4.

with orders. New Brexit customs controls, which

over fulfilment issues within their supply chains areis worth noting however that overall spending on

began on January 1, won’t make things any easierlikely contributing factors to the slowdown. Datatechnology has remained remarkably consistent

The pattern observed in our data suggests

however. And with rising inflation threatening tofrom IHS Markit found US manufacturing output

throughout the pandemic. Analyst firm Gartner predicts

that while underlying demand for goods istrigger a cost of living crisis, we may start to see orderdipped to a one-year low at the end of 2021 withthe level of spend on enterprise IT to rise by 5.5% in 2022.

consistently strong, delivery and fulfillment

volumes falter as demand weakens. If this happens

analysts citing a reluctance from customers to place

problems among the supplier base are hampering

then overall activity may not accelerate at the level itorders before inventories were worked through.

the overall integrity of local supply chains.

needs to in order to mount a strong recovery in 2022.

p.12

The Tradeshift Index of Global Trade Health | Q4 2021

Final thoughts from Christian Lanng,
CEO and co-founder, Tradeshift

Two yearsof pain,but manyvaluablelessons

It might seem madness to make predictions in
the middle of a pandemic, but here’s one I will
hang my hat on. At some point in the next 12months an event will unleash disruption thatwill once again test the resilience of global
supply chains. Experts now expect a major
shock to hit supply chains once every 3.7
years. Heading into a third year of a global
pandemic, our index suggests businesses
have learned a number of lessons which areenabling them to become better problem
solvers in the face of fresh challenges.
One of the most important lessons is the needto build slack back into a system that had
become far too lean prior to the pandemic.
The financial advantages of having lessstanding inventory, and only holding enoughto meet the needs of the next operation, areconsiderable. But as the pandemic showed,“just in time” operations leave businesses
incredibly vulnerable to just one major adverse
event. As this realisation has dawned on theworld’s organisations, it’s no surprise that
research by Morgan Stanley found morethan 50% of retailers said they planned toincrease inventory buffers across their supply
chains in first three quarters of 2021.
Such a shift in operating models will require
much greater transparency and closer
collaboration between buyers and suppliers.
Most large organizations have learned it
is in their own interests to build a deeper
understanding of their supply chains, including
getting a handle on their “health” of theirend-to-end operations, all the way to thesource. There is also a growing acceptanceamong buyers that protecting their own
interests requires them to consider theinterests of the entire ecosystem. Applying
pressure to supplier organisations in the
expectation that they will deliver productwon’t work in the new normal. What works
for buyers, also needs to work for suppliers.
Ultimately, the most efficient and resilient
supply chains are, in effect, digitally networked
ecosystems of suppliers, distributors, retailers
and every other partner to the manufacturer.
This is the only model that enables participating
businesses to exchange real-time information,accurately forecast changes in demand,and communicate effectively with partners.
Preparing for future disruptions has a presentday cost. But these investments pay dividends
over time, not only minimizing losses, but also
improving digital capabilities and fostering
healthier, more sustainable relationships thatare capable of flexing to meet future issues..
The coming months could turn out to be criticalfor supply-chain leaders. Some companies willbuild upon the momentum they gained during
the pandemic, with decisive action to adapt
their supply-chain footprint, modernize theirtechnologies, and build their capabilities. Others
may slip back, reverting to old ways of working
that leave them struggling to compete with
their more agile competitors on cost or service,and still vulnerable to shocks and disruptions.

p.14

Purpose

About
Tradeshift’sIndex ofGlobal Trade
HealthMany of the world’s largest buyers andtheir suppliers use Tradeshift’s tradetechnology network to exchange digitizedpurchasing and invoicing information.
The data these transactions yieldprovide us with a unique awareness of
trading activity between businesses.
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.

A reading of 100 indicates growth in line withexpectation against historical trends. Readings
greater than and below 100 indicate abovetrend and below-trend growth.
We consistently strive to improve and evolve
the accuracy of our analysis. As a result it ispossible that from time to time you may see
small revisions to historical numbers reported inprevious versions of the Index.
How to read the charts

On pages 6 and 7 we have expressed theindex scores cumulatively from Q1’20 onwards.
If the index score in Q1’20 is 90 this would
indicate that activity was tracking at 10 points
We acknowledge that there are limits to how
below the baseline for that period. If our index
accurately our view of what is happening on our score for the next quarter is also 90, then the
network can reflect how complex global supply cumulative score in Q2 would appear as 80,
chains are reacting to a variety of externalsuggesting activity is losing momentum against
factors. What our data does provide is a useful
where we would expect it to have reached bysnapshot that provides clues as to what mightthat period.
be happening to the global economy. The
patterns we see in our data become more
Looking at the data in this ways helps show
valuable as we combine them with other thirdhow much momentum transaction volumes lost
party data and expert insight, something which during the early stages of the pandemic. It also
you will see us draw on throughout this report.
gives us some clues as to how long it mighttake before cumulative growth normalizes
against projections we made based ontransaction flows prior to the pandemic.
The new model compares business-to-business
transaction volumes (orders processed fromOn pages 9 to 12, we looked at how index
buyers and invoices processed from suppliers)scores are changing quarter on quarter.
submitted via the Tradeshift platform since Q1
Looking at the data in this way provides a2020 against a ‘baseline’ we have created by
useful indication of how the level of activity
analysing medium-term seasonal trends in theis fluctuating across different sectors andtransaction data that flows across our platform. geographies from one quarter to the next.

Methodology

p.16

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 cloud-based platform helps buyers
and suppliers digitize invoice processing, 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 operatingin more than 190 countries. Find out more at: Tradeshift.com© 2022 Tradeshift Holdings, Inc. or a Tradeshift affiliate company. 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 © 2022
Tradeshift Holdings, Inc.”
Tradeshift is a registered trademark or trademark of Tradeshift Holdings, Inc. in the UnitedStates and/or other jurisdictions. All other marks and names mentioned in this article may
be trademarks of their respective companies.
This report is intended for information purposes only, is based on 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 this information.