Credit Matters — And Your Suppliers Know It

Over on Supply Excellence, Drew Hofler penned a column earlier in the month that examined the impact of the credit crunch on suppliers. According to Drew, "suppliers -- especially relatively small ones -- are being hit hard by the credit crunch. In fact over half of small businesses in a recent online poll claimed the credit crunch had already impacted their business ... [some are] struggling with liquidity problems caused by late payments from their buyers." While such companies as Ariba, Prime Revenue, Xign (Chase), and Harbor Payments (Amex) are more than happy to sell you EIPP solutions which allow the better management of payables and even early dynamic, early discounting options for suppliers that need cash quickly, I'd argue that neither of these types of efforts are replacements for supplier development programs which help suppliers free-up working capital on a permanent basis. If you're worried about your suppliers ability to survive the credit crunch, do yourself a favor and tier your suppliers and consider supplier development teams for those which fall into the more strategic buckets (but are most at risk). Lean and Six Sigma programs can do wonders to cut the working capital requirements for suppliers and to free them from mortgaging the future of their business.

- Jason Busch

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