Always Have a Backup Supplier Ready
Harry Hough, PhD, founder of the American Purchasing Society
Editor’s note: Dr. Hough is a frequent contributor to this blog. This story first appeared in Professional Purchasing, a publication of the American Purchasing Society.
If you wait until your single source supplier goes out of business before looking for a second source it is usually too late to prevent a costly problem. Today more than ever, be prepared to change suppliers if necessary. Both personal and business bankruptcies rise during economic downturns and this recession has proved no exception.
Even if you are lucky enough to quickly find a new supplier to deliver what you need, there is a likelihood that either the shipment will be delayed or you will pay more than what you were paying with the old supplier. It is also probable that there will be other problems, such as quality below what you need and have been receiving.
The new supplier may be able to deliver exactly what you want, when you want it, and at a reasonable price, but it may take time to get all the bugs worked out and to get the supplier to understand your unique requirements. You will need to be patient.
In-house corporate training
You can minimize being surprised by continually questioning supplier salespeople about the state of their business. Salespeople are naturally optimistic and prone to usually paint a rosy picture, but careful questioning may give you clues that call for digging deeper. For example, asking about lead time and the percent of unused capacity will usually let you know if the business is prospering. Short lead time and idle equipment may be a cause for concern. Booming companies will be looking for ways to add to capacity. If they are expanding their facilities there is a good probability that they are making money and will be around for a while.
Make sure you let your suppliers know that you want to be kept informed. Put a clause in your contract requiring thirty or sixty days or more notice before any closure.