In many industries, the supply chain includes multiple companies providing production material. At the same time, it is not unusual for a supplier within the supply chain to encounter financial distress or even declare insolvency. This can have a significant impact on the company if its business depends on a distressed supplier.
If the company relying on deliveries cannot replace the distressed supplier with an alternative one that is able to supply the company in a timely manner with products of the same quality and quantity, this can cause interruption of the company’s ongoing production and longer delivery lead times. This is likely to be the case when the relevant products are not commodities but rather customized products. Especially in just-in-time industries, such as the automotive industry, supply interruptions can dramatically affect business operations within a very short time.
Our White Paper summarizes efficient approaches to reduce these risks if the agreement is properly tailored in advance.