A recent CPO Agenda article, on why you should put suppliers and vendors first, in addition to making a few very good points, had some good checklists that you can use for identifying distressed suppliers and, if they are key suppliers, helping them.
Distressed suppliers often do one or more of the following:
- ask for pre-payment, price increases, and contractual relationships (to show to their bank)
- change factory habits upward and/or delay tax payments and VAT returns
- substantially increase their CCC over a short time period
- announce “temporary redundancies”, travel freezes, or both
- suspend capital expenditure programs
- stop paying dividends or buying back shares
- cut bonus payments on a large scale
If a supplier is distressed, the following might help the supplier out:
- pay your invoices on time
- pay your invoices on delivery of goods
- make advance payments
- buy raw materials directly from a tier two supplier and pay only a conversion fee to the tier one supplier
- provide or support financing
- take an equity stake
- merge or acquire
While the current economic and cash crisis will claim many more victims and will not be a “quick win” for anyone , there are things you can do to make sure your key supplier is not one of the victims. If you’re on the ball, you can foresee the disaster before it happens and take steps to prevent it. It’s up to you.