Stephen Schwartz

(Editor’s Note: This interview took place before the U.S. port strikes ended.)

Stephen Schwartz heads underwriting for the Supply Chain, Trade & Channel Solutions group covering Key Accounts Purchase, Supplier Finance, Accounts Receivable Securitization, International Factoring Commercial Services, Inventory Finance, Channel Finance and Equipment and Vendor Finance floor planning. In this role, he oversees the underwriting of each deal, which provides industry-specialized financing solutions in areas such as consumer goods, manufacturing, commercial equipment, tech finance, apparel, home goods & furnishings, government contractors, and staffing services.

A 30-year financing and banking veteran, Schwartz has held various senior management positions in the bank. Prior to his current role, he was COO for Wells Fargo Capital Finance, the bank’s asset-based lending division, leading a large, diverse and global team focused on portfolio services, risk management, credit policy, data oversight and control, predictive analytics, product solutions, offshore processes and various support services. In addition, he has held roles in Independent Risk Management, Originations and other Asset Based Lending portfolio and underwriting positions. 

Throughout his career, he has served on many advisory committees, boards, and industry panels. Schwartz holds an undergraduate degree in economics from the University of California at San Diego and a master’s degree in business from the University of Southern California.

Here, he discusses how companies are navigating supply chain challenges particularly in light of the U.S. port strikes.

(Editor’s note: SFNet will be holding its first Supply Chain Finance Conference on December 3 in New York City.)

What are the most pressing supply chain concerns right now and their possible impact?  Obviously, the port strikes have been making headlines.

If you take a step back, supply chain disruptions are nothing new, and they’ve actually been happening with increased frequency over the last five years, especially since COVID, which was the most dramatic supply chain impact that we’ve seen in recent times. Since COVID, companies have started to implement changes to be able to better absorb short-term supply chain impacts.

They have diversified their supplier base including considering geographical factors. They are diversifying what ports they are using to bring in inventory. They are navigating the inventory balancing act, which is having the right inventory at the right place at the right time. These are all strong lessons that came out of COVID and companies have responded and adjusted well.

So, it feels like companies are a little better prepared today than maybe what we’ve seen in the past.

The concern right now is navigating the International Longshoremen’s Association strike, which impacts the East Coast and Gulf Coast ports. Many are monitoring, as are we, to gauge how long this will continue and what steps need to be taken for each passing day. Companies started bringing in inventory early for the holiday season.  For example, in July and August we saw order volumes up significantly compared to last year in our factoring portfolio. The holiday order volume spike typically occurs a bit later.  Therefore, with a short-term strike, consumers may not feel the impacts because companies have been proactive. When you look at the volumes that have gone through the Los Angeles and Long Beach ports, those volumes are up dramatically compared to last year.

Is there anyone taking guesses on how long the strike could last?

It is hard to predict. We look at historical data and past strikes across various industries to gauge, but there’s not a magic eight ball. All we can do is prepare and adjust as needed.

You spoke a bit about the steps companies can take to help mitigate these risks.  Is there anything lenders can do to prepare for these obstacles being faced by their borrowers?

There are steps lenders can take to help support companies as they are changing their inventory strategies, and I would suggest that companies work with a lender that is very knowledgeable of their industry and inventory levels. There is a cost to bringing in inventory early, but there are things that companies can do to help offset that through different supply chain type programs. A good lender will help advise and counsel companies as the dynamics of their inventory ebbs and flows.

One of the programs that has grown in popularity over the last ten years, and is fairly mainstream at this point, is where a company can extend the payment terms with their suppliers, but a bank will step in to provide a supplier finance program, allowing the suppliers to get paid early.

Another popular option is a receivables purchase program, where companies can convert their receivables quicker, to help with liquidity, which can be used for a variety of options, including bringing in more inventory.

You touched a little bit on the holiday season, but do you foresee any issues for the season coming up?

Not at this time. Companies have been pretty proactive in bringing in inventory earlier and it appears many are well positioned. Certainly, for a shorter duration strike, I would not expect there to be an impact for the holidays.

Is there anything else our readers should be aware of right now?

I would say it’s a very fine balancing act thinking about inventory levels. If you go back in time, when we were coming out of COVID into 2022, companies got stuck holding a little bit too much inventory. To clear out that inventory, they had to offer it at discount, which we saw throughout 2023, in order to get right sized. That took a toll on their margins. Sitting here in 2024, it’s a real balancing act of how to get the inventory in early enough to avoid any known or potential supply chain disruptions.  This means you’re making purchase decisions earlier, but still trying to make sure that you are bringing in enough inventory to meet demand, but not too much so that you don’t have to go back to heavily discounting excess inventory at the end of the holiday season.