The Economy and the Supply Base

With the economy down we all need to look at this effect on our supply base. I know of multiple suppliers that are filing chapter 11, and while I know this is not the normal, we need to take the time to ensure the long term viability of our suppliers.

I have worked with a few teams to start identifying high risk suppliers that have critical components and developing a contingency plan. Since we don’t where the bottom of this downswing is, a little planning now will help if the crisis continues longer than expected. 

What I’ve been encouraging folks to do is schedule meetings with their suppliers and review financials. This meeting should be viewed as just a quick health check, and to give the supplier an opportunity to provide some information on how they are doing and what actions they are taking to stay viable. 

I would also develop a matrix to help you rank how your suppliers in a systematic way: High risk, medium risk and low risk. You can use this matrix to align your next actions and present this to your management. Once you get a good feel for where your suppliers are at, I would take the high risk suppliers and start developing a contingency plan. Hopefully a little planning will help you minimize your headaches going into the future.

On an upside, Merry Christmas and Happy New Year.