I hope that you have enjoyed the article “How To Spot a Poorly Managed Supplier.”

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Life works in strange ways when odd coincidences happen. I had the above-linked article queued up for a few months, yet just today, one of our SPSM alumni contacted me asking for some guidance about a situation he was experiencing with an apparently troubled supplier.

It seems like our SPSM had his finger on the pulse on a supplier who was showing some signs of financial distress, yet had some challenges convincing his company’s senior management that trouble was a-brewin’. With this supplier being privately-held, he didn’t have much objective data to reference in making his case. Then, his supplier turned his company over to a factoring agency (a collection agency that tries to collect pennies-on-the-dollar for immediate payment), giving further evidence of financial desperation.

While the reporting requirements of publicly-held companies help give you early warning of financial distress, you can still obtain financial risk-related data for your privately-held suppliers. Many services exist and, personally, I’ve extensively used the services of Dun & Bradstreet (affectionately known as D&B). I have found occasional inaccuracies in D&B’s data, but their supplier reporting capabilities definitely do a procurement department more good than harm. There are other services that I have less personal experience with – Bureau Van Dijk and Cortera are a couple of examples – but that can help in a similar way.

Look, no supplier is going to say “Hey Mr. Procurement Manager. We’re going to be running into some financial troubles in about eight months. Just thought you should be prepared for that.” Therefore, you should look for the warning signs of supplier distress, which means routinely applying smart purchasing best practices like the ones described in the article and gathering the information that is out there from third-party services, when needed.