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Global advanced payments to protect your industry's supply chain

Cash-rich businesses can protect their industries through advanced payments to cash-poor complements, suppliers, and buyers.

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Nearly all businesses (at least those that are not entirely vertically integrated) rely on other businesses and entities to supply them with goods and services. If suppliers collapse, downstream businesses are left to scramble for alternative sources. 

Widespread economic shocks caused by the COVID-19 pandemic have exposed vulnerabilities in many supply chains - leaving some businesses flush with cash and others struggling to survive. 

One example of this is the healthcare industry: overall healthcare utilization in the US has decreased significantly since the COVID-19 pandemic began. Unable to perform elective surgeries or host patient visits, hospitals are losing significant portions of their revenue, which is normally paid in part by health insurance companies. While demand for these services will likely rise again after stay-at-home orders lift, hospitals need short-term help. 

The commercial health insurance industry has an opportunity and responsibility to help. With fewer healthcare visits to pay for, health insurance companies find themselves more cash-rich than usual (less reductions in income due to a decrease in employer-based insurance as millions lose their jobs). Recognizing that they need hospitals to stay in business in the long term, some insurers are offering advanced payments to hospitals that can be paid off as soon as routine procedures pick up in the coming months. 

Another example of this is Publix, a large supermarket chain in the southern US, buying excess milk from its farmer suppliers who are struggling to sell, and donating surplus supplies to local food banks. 

This model can be replicated elsewhere in the economy. 

What is the need are you focusing on?

Need: add resiliency to supply chains that are unevenly hit by the COVID-19 pandemic. 

Which type of submission are you sharing?

  • Identifying a gap that needs to be addressed

Describe the business pivot or adaptation in 3-4 sentences.

Planning for long-term success, businesses that find themselves cash-rich in the COVID-19 pandemic can ensure future business opportunities by supporting key members of their industry's supply chain through advanced payments or sustained purchasing.

Do you plan to implement this solution?

  • No

Describe the impact that this solution will create in the world.

This type of innovative payment model can be adapted to all industries to proactively allocate resources in a time of need and prevent industry-wide collapse.

What is your profession?

Student

Where are you located (country)?

USA

Where are you located (region)?

  • North America

What industry is your business/company in?

  • Academia/Research

What kind of stakeholders and partnerships are needed to pursue this solution?

  • Stakeholders/Partnerships- Private Sector

What do you think are the main barriers to implementing this solution?

While there are some segments that are cash-rich as a result of the COVID-19 pandemic, they are few and far between. Widespread economic shock has led to contractions in most industries. As such, this is not a silver-bullet solution and is only applicable to certain segments that have seen unusual spikes in revenues or reductions in costs. Furthermore, for this to be appealing, businesses will need legal contracts to ensure they can collect on their advanced payments when repayment is due.

Website URL

Inspired by these articles: https://www.businessinsider.com/publix-buying-milk-produce-farmers-donating-food-banks-2020-4?amp%253B and https://hbr.org/2020/03/hospitals-need-cash-health-insurers-have-it

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