Michael Gonnerman had some great advice for business owners in his “Ask Mike” newsletter this week.
Question: "We depend on a lot of companies in our supply
chain, from vendors who supply components to several retail chains who sell our
finished goods. I'd love to get an early warning about companies that might be
in trouble so a failure won't catch us by surprise. Suggestions?"
Mike: In my experience, there are always warning
signs whenever a big manufacturer or distributor begins to have financial
problems. Industry rumors, news reports, SEC filings, layoffs, an uptick in
"lost" paperwork, declining stock prices, negative opinions by
auditors, high turnover among key executives--it's all evidence that you're dealing
with a supply chain partner with problems. Especially during tough economic
times, you should make a serious effort to track information about all the
companies you rely on.
And if you depend on a company that's public, buy a few shares of their stock
and attend their annual shareholder meeting. Chances are, you'll be the only
customer or creditor there, and you'll have plenty of face-to-face access to
the directors, the CEO, and the CFO. Feel free to ask questions like, "Why
aren't you paying your bills on time?" or "What are you doing about
the defective goods your Oshkosh factory is shipping?" Believe me, you'll
get attention.
Bear in mind that your warnings may ruffle some feathers inside your own
company. Your purchasing department may be sending too much business to a
single vulnerable supplier, or your sales reps may be happily writing big
orders to a distributor who can't pay his bills. Make sure your have a
company-wide buy-in on reducing supply-chain risk, or the information you
collect won't do any good.
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Michael Gonnerman is the Founder and CEO of Michael Gonnerman, Inc. (http://www.gonnerman.com) in Sudbury, Mass. He may be reached at 978/443-1340 or through email at michael@gonnerman.com .
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