Wednesday night, President Bush warned of the possibility of a \u201clong and painful recession\u201d if government doesn\u2019t step in to save the US financial system. While many observers wrote off this threat as another of Bush\u2019s \u201cweapons of mass destruction\u201d scare tactics, yesterday\u2019s failure of Washington Mutual \u2013 the largest bank failure in US history \u2013 underscores the fact that these are serious times.<\/p>\n
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Now, what does that have to do with purchasing?<\/p>\n
A lot.<\/p>\n
You see, your suppliers have a significant portion of their cash in banks. So what happens if the banks fail?<\/p>\n
The FDIC insures only $100,000 per depositor (including corporations) per insured bank.<\/p>\n
What if a supplier of yours had all of its cash in one bank and that bank failed?<\/p>\n
Yep, your supplier would only be guaranteed to recover $100,000 of it.<\/p>\n
Could your most strategic suppliers stay in business with only $100,000 left? How long would that last them? How many employees \u2013 including employees that work on producing goods for, or providing services to, you \u2013 would be laid off immediately?<\/p>\n
Nervous yet?<\/p>\n
You should be.<\/p>\n
I suggest getting on the phone today with the top management of your strategic suppliers to understand how diversified their deposits are. If all their banks failed today, what percentage of their cash would be preserved?<\/p>\n
What is your plan if more Washington Mutual-type failures occur and impact your suppliers?<\/p>\n
You should be thinking about it.<\/p>\n
I have the feeling that the government legislators will agree on a rescue package before the stock market closes today. But there is a chance they may not.<\/p>\n
Supply risk management is all about being prepared for such chances.<\/p>\n
Recommended Reading<\/strong><\/p>\n The Economy In Fall 2008 & It\u2019s Effect On Procurement<\/a> Wednesday night, President Bush warned of the possibility of a […]<\/p>\n","protected":false},"author":12,"featured_media":4043,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2537","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"\n
\nThe Supply Risk You Need To Address Before Leaving The Office Today<\/a>
\nLCCS and Cultural Considerations<\/a>
\nGetting Started With A Procurement Transformation<\/a>
\nTurn The Other Cheek? Not When It\u2019s A Supplier Slapping You!<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"