I’m hearing a lot of anxiety from our customers about the possibility that their factories might fold. This anxiety is justified. The economic slowdown is causing lots of buyers to reduce and delay orders. For suppliers with high fixed costs, this behavior could prove fatal. How do you find out if your supplier falls into this category — before the supplier goes under and leaves you hanging? Some ideas:
1) Buy a credit report on your supplier
Credit reports will tell you if your supplier is paying *its* suppliers on time. If it’s not, chances are good that your supplier is in trouble. D&B is a good place to start for this kind of information.
2) Look at your supplier’s export activity
Is your supplier’s export activity dropping precipitously? Definitely a sign that you should be preparing a back-up plan. (Full disclosure — Panjiva sells this kind of data, so obviously I think this is a particularly effective approach.)
3) Ask your supplier contact
Simple enough, but most people overlook this approach. Ask your supplier contact if he or she is worried. Chances are good that your contact will put a positive spin on trouble at the supplier — but you never know what you might learn until you ask.
Figuring out if your suppliers are about to fold is really important… Gives you a bit of time to come up with a back-up plan, and minimize the disruption to your business. Have other ideas on how to figure out if your suppliers are about to fold? I’d love to read about your ideas here — and of course via email (email@example.com).