A capital-equipment manufacturer that was diligent about auditing suppliers on a number of criteria found a weak link in the supply base. The weak link was a sole-source supplier of a critical component. Normally, such a discovery would be hailed as an example of the benefits of rigorous supply-chain-finance risk management.
Not this time.
The manufacturer didn't discover the problem until the supplier--facing severe cash-flow problems--closed shop, without warning, in the middle of an important project. It took the manufacturer eight weeks to find and qualify an alternate supplier and get the needed component. Luckily, the manufacturer was still able to deliver on time.
If the manufacturer's buyers had discovered the supplier's financial problems earlier, they could have deployed several strategies, including helping the supplier get needed financing. One option could have been working with financial markets to enable the supplier to borrow at the lower credit rates the manufacturer enjoyed.
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