It can and does happen, usually without warning, and often when least expected. So, what to do? Those around you may be pressing for immediate and miraculous solutions, but the first step is to keep calm and assess the situation quickly and thoroughly.
In making the initial assessment and taking first actions, consider the following:
Each situation is unique and, in each case, there will be further questions to consider, but just from the list above, it is clear that good planning and communication is essential for organising the work to address a supplier bankruptcy.
I faced a supplier going into administration just as I was appointed into a new role as Procurement Director. In this case, the supplier was a sole source of a particular varnish for which they owned the formula. Collecting the data as described above was crucial for being able to properly understand the situation, the risks and the actions necessary to secure a new supply and deliver the projects dependent on this varnish. We solved this situation by:
We had stock to satisfy the demand for 3-4 months, but needed 5-6 months to find and qualify new suppliers. In this race against time, the engagement of all the stakeholders proved critical, as it was the Material Laboratory Manager, who was able to identify (and verify) that the varnish stock (those which were not close to shelf life expiry) could be diluted in order to extend the usage while still meeting the functional specification of the product.
With a good initial assessment, quick actions, and a well-coordinated project plan, we were able to find and successfully qualify an alternative before the stock ran out.
Prevention / Mitigation
It might not always work out so well, and it would be best to avoid such situations if at all possible in the first place. Therefore, when considering prevention, the list of possible mitigations is endless, but here are a few points to consider:
©2019 Amy Jones
I have over 20 years’ experience in Procurement/Supply Chain and Finance, I work full time in my own business as a Supply Chain / Procurement Consultant and Trainer and Executive Coach.