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.

******

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 .


Link to original post