Most MIA members rely on third parties to deliver goods or services – but with insolvencies soaring, many members face being left high and dry if a supplier goes under and they have not arranged contingency plans.
These notes make valuable reading….
- Insolvencies were up nearly 50% in 2008 compared to 2007 and now some 100 small firms are closing every day.
- Members should assess the strategic value and importance of the services or goods that suppliers offer – not just the largest (as these could possibly be replaced). For example, IT services are key to keeping businesses alive so it is important to have a back up as an alternative supplier.
- Keep a close eye on suppliers, speak with the key ones regularly watch how they are currently operating to spot problems early. Keep open several contacts within a supplier or provider, don’t rely on just one person for a view.
- Be particularly careful about your Intellectual Property (IP) rights currently. For example, if you design an item but use a supplier to make it, it is vital that you make sure you legally own the rights to your designs and that this is made clear in the contract. If not, then it could be expensive to buy the designs back should the supplier get into difficulties.
- It is best to talk with your financial supporter / bank if you have a problem with a significant supplier. If, for example, the bank sees a fall in sales (and this may have occurred due to a failure of a supplier) then they could well draw the wrong conclusion and take negative action.
- It can be a good idea to carry out credit checks before signing contracts with important suppliers – in particularly those that ask for some finance in advance. However, it may be worthwhile offering some financial or product support to strategically help suppliers who are struggling – particularly if this prevents them closing down.
- It maybe worth considering bringing “in house” the manufacturer of any strategically important products - reducing exposure and possibly increasing margins.
