SUPPLY CHAIN
When Suppliers
Go Out-of-Business
By KENNETH MUDGE, SKIP SKIVINGTON, & CHERYL LATOUCHE, CBCP
The headlines are impossible to miss as havoc in the financial markets and the spiraling economic mess have unfolded. Daily, we hear of Fortune 500 compa- nies that are strug- gling to stay afloat and many on Main Street that have
already succumbed.
In a recent Fortune Small Business/
Zogby International poll of business
owners, many respondents said their
businesses had gone downhill in the past
four years. So how does this economic
crisis threaten the stability of your organization’s supply chain? What happens
when your stable corporation depends on
a single essential supplier to keep your
operations running?
And how do you best prepare for future
supplier disruptions?
Oakland, in Northern California, is
the headquarters of Kaiser Permanente.
More than 60 years ago, Henry J. Kaiser
and Dr. Sidney R. Garfield first articulated
their commitment to total health and their
vision for high-quality, affordable health
care for working men, women, and their
families.
Today, Kaiser Permanente is the
nation’s largest not-for-profit integrated healthcare delivery system with
159,766 employees and 14,087 physicians.
One day during a casual conversa-
tion, a Kaiser Permanente employee
learned of the deteriorating finan-
cial situation of a company we’ll call
ABC Linen. Tightening market condi-
tions had put pressure on ABC, and it
was struggling to maintain cash-flow
and remain liquid and viable. ABC
was embroiled in bankruptcy proceed-
ings within about 10 days of Kaiser
Permanente learning of ABC’s financial
situation.
The Timeline
Oct. 6 to Oct. 13
n;Kaiser;Permanente;employee
gets;tip-off;about;ABC’s;financial
status.;Kaiser;Permanente;requests
auditors’;financial;statements;to
independently;verify;suppliers’
status.;This;request;was;not;fulfilled.
Sourcing;team;contacts;materials
management;and;informs;them;of
situation.
n;ABC;attempts;to;redirect;Kaiser
Permanente;payments;from;bank.
Kaiser;Permanente;procurement
and;supply;contacts;legal.
n;Kaiser;Permanente;contacts;a;new
linen;services;provider;to;review
options.
n;ABC;financials;received.
Oct. 13 to Oct. 20
n;Kaiser;Permanente;procurement
and;supply;meets;with;ABC
leadership;and;are;reassured;of
ABC’s;financial;health.
n;ABC;files;Chapter;11;in;bankruptcy
court.
n;Kaiser;Permanente;immediately
engages;outside;bankruptcy;counsel
to;help;it;to;navigate;through;the
complex;bankruptcy;issues.
n;Kaiser;Permanente;begins
discussion;with;ABC’s;creditors;and
Kaiser;Permanente;counsel.
n;Kaiser;Permanente;discusses
transition;plans;with;new;provider.
n;Kaiser;Permanente;files;paperwork
in;bankruptcy;court;and;makes
appearances.;Judge;gives;Kaiser
Permanente;permission;to;pursue
options.
n;Procurement;and;supply;and;legal
negotiate;an;agreement;with;new
provider.
Oct. 20 to Oct. 27
n;Linens;ordered,;shipped,;and
laundered;by;new;provider.
n;Kaiser;Permanente;soiled;linens
begins;to;arrive;at;new;provider.
n;Kaiser;Permanente;and;new
provider;complete;90-day;contract.
n;ABC;ceases;operation.
Luck is not a Strategy
A lucky tip-off immediately acted on
allowed Kaiser Permanente to successfully respond and put a plan in motion.
Oct. 27 to Nov. 3
n;Kaiser;Permanente;cuts;over;to
laundry;processing;to;new;provider’s
plants.
