Choosing which suppliers you work with is one of the most important business decisions you can make. Choose the right ones and your clients will be happy, your business will be profitable and your reputation solid. Choose the wrong ones and, ultimately, you might just end up out of business.
With that in mind, what factors should you consider?
Service? Absolutely!
Reputation? Absolutely!
Sharing of product knowledge? Absolutely!
Graphic art support? Possibly.
Competitive pricing? For sure!
But do you even consider the financial wherewithal of your supplier? If not, you should. If your supplier is having financial difficulties, those difficulties can have a big impact on both you and your clients.
What are some signs of possible financial problems that you should be aware of?
• Noticeably absent at trade shows, especially ones they typically attend.
• Frequent and unexpected shipping delays.
• Higher than usual staff turnover.
• Shortage of staff (for example, not answering the phone or responding to inquiries in a timely manner).
What happens to you when a supplier suddenly “disappears?" And disappear can take on a variety of applications. Maybe the former owners sold to a new buyer. Does the buyer know and understand our industry? Do you even know who the current owner of your supplier is? Should it matter to you? Ultimately they call the shots. “He who has the gold makes the rules.”
Will there be new procedures in place? Will the old ones change? How will that impact your open and future orders?
What about reorders? You have invested time and money into existing jobs. Will there be any disruption? The most critical aspect of a reorder is the tooling or screen used to reproduce the item exactly in the decorating process. When they change or are replaced, your product may be slightly different.
And if the supplier in question just goes out of business? What happens then – not just for reorders, but current orders in house.
Our Promotional Product Professional FB page is littered with panic messages – “Has anyone heard from Supplier X? I can’t get in contact with them.” With the ever present risk of litigation, people may not be willing to share information publicly, or in a public forum. However, you need to dig deeper.
What if the supplier requested upfront payments from you? Regardless of the reason, you become an (unwilling) unsecured creditor if it goes out of business. For large dollar exposure, maybe a Letter of Credit is a better solution than a deposit.
I have seen these scenarios play out both in our industry as well as during my 20+ years in commercial banking. Chaos is an apt description. In my product category alone, I can identify two household names that have fallen into this category.
What can you or should you do?
Did you consider performing the same credit checking that suppliers supposedly do before they extend credit to you? Do you know how to run a credit report on the supplier? For example, you can run a free UPIC on the supplier. If you participate in D&B reports when checking your customers, you can do the same with your supplier.
Would you consider speaking with the supplier’s banker? I do know that suppliers speak to your banker when appropriate. It may not hurt to ask if you have a concern.
There are other signs that might set off a red flag.
Has anything changed in their delivery commitments? Yes, they can claim production delays, but maybe they are on credit holds with their suppliers. Can you speak candidly (off the record) with some of your competitors, particularly if you know that they utilize the same supplier? (Be very careful, as you do not want to spread unfounded rumors.)
Have there been wholesale changes in customer service personnel? What types of answers are you getting to your questions?
Another indicator is out of stock responses that never happened to them in the past.
As we all know, it is not just price. There are a number of intangibles that can rear their ugly heads and become tangible, and then it is too late.
After graduating from the Wharton School at the University of Pennsylvania, Harvey Mackler enjoyed a 20-plus year career in commercial banking, exercising his “golden parachute” in 1996. He was executive vice president and COO of a commercial finance subsidiary in Manhattan and chairman of the Small Business Banking Unit of the American Banker’s Association. He has served on the board of the acclaimed George Street Playhouse in New Jersey and chair of the Easter Seal Society of New Jersey for two years, as well as a captain on his local emergency rescue squad. He acquired GWI Corp in February, 1997 and transformed it to focus on the supplier/distributor/end-user model, growing the company's sales by 500 percent. He is past chair of the SAAGNY Foundation, current Co-Chair of the PPAF EXPO and past Chair of the Supplier Committee of PPAI.