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Reuters Aug 25, 2009
"Zombie Suppliers" Haunt Manufacturing Sector...
Seems that the FIRE economy is not the only sector in real trouble. In the past years of the outsourcing craze, many manufacturers will be left holding the bag as many of their smaller suppliers go belly up. Part of the article reads:
Call them zombie suppliers. Analysts say the speed with which major manufacturers cut output in this recession put unprecedented strain on thousands of small manufacturers that supply the industry with critical parts.
That has left the supply chain with an unknown number of suppliers who are dead but do not know it -- companies so undercapitalized and overleveraged they will never raise the money they need to get their idle plants running again.
Oops. And this leads to (drum roll, please)...
And that, of course, would be a horror show for the publicly traded manufacturers that rely on these suppliers. It could leave them scrambling to secure components once the recovery starts -- and missing some of the rebound's benefits.
While outsourcing looks good on paper, I wonder the about the number of companies that actually do true due diligence and risk assessments in making these decisions. (Answer: I'll bet that the answer is somewhere between zero and none). The real fun is going to begin when geopolitical disruptions start throwing the ole monkey wrench into the global supply chain. I guess that decision to outsource/offshore operations to Chindia doesn't look so good now does it?
I have only one question. And your back up plan is?
"Zombie Suppliers" Haunt Manufacturing Sector...
Seems that the FIRE economy is not the only sector in real trouble. In the past years of the outsourcing craze, many manufacturers will be left holding the bag as many of their smaller suppliers go belly up. Part of the article reads:
Call them zombie suppliers. Analysts say the speed with which major manufacturers cut output in this recession put unprecedented strain on thousands of small manufacturers that supply the industry with critical parts.
That has left the supply chain with an unknown number of suppliers who are dead but do not know it -- companies so undercapitalized and overleveraged they will never raise the money they need to get their idle plants running again.
Oops. And this leads to (drum roll, please)...
And that, of course, would be a horror show for the publicly traded manufacturers that rely on these suppliers. It could leave them scrambling to secure components once the recovery starts -- and missing some of the rebound's benefits.
While outsourcing looks good on paper, I wonder the about the number of companies that actually do true due diligence and risk assessments in making these decisions. (Answer: I'll bet that the answer is somewhere between zero and none). The real fun is going to begin when geopolitical disruptions start throwing the ole monkey wrench into the global supply chain. I guess that decision to outsource/offshore operations to Chindia doesn't look so good now does it?
I have only one question. And your back up plan is?