At CMA, we often hear stories about how credit group membership can save your company THOUSANDS of dollars by providing critical information that helps you avoid extending too much credit on high-risk accounts. Here’s a real example of how a multi-national company avoided a costly disruption when a long-standing critical supplier filed for bankruptcy.
The member regularly attends credit group meetings, and at a recent meeting, he was surprised to learn that one of his company’s critical suppliers had recently filed for bankruptcy. He was surprised by the news because his company subscribes to various monitoring services that should have alerted him and his department to the bankruptcy filing. When he contacted his procurement department, he was further surprised to learn that the department responsible for the relationship with the supplier was not even aware of the bankruptcy filing. The member had sufficient time take the necessary steps to source the critical supplies from a different supplier so that production was not interrupted. Supply chain disruptions potentially can cause more damage to a company’s business model and reputation than the failure of customers to pay their bills, so this was a big deal.
Once the member had mitigated the risks of the potential supply chain disruption for his company, he contacted his supervisor, the Director of Corporate Credit, and let him know that the critical piece of information came from a discussion at a CMA credit group meeting. He gave CMA credit for providing the information that potentially saved his company millions of dollars in lost production time and goods.
We hear these stories all the time at credit group meetings. The real value of regular participation in credit groups is the money and time you save in getting the critical information you need in order to get out in front of situations that could cause significant losses to your company. The member whose story I highlighted above feels confident that the time and money his company spends to have him participate in credit groups is well worth the investment.
Supplier Risk Credit Group to provide tools to help companies avoid business disruption.
Credit Management Association recently announced that credit professionals will now have access to tools that will help them assess the riskiness of a vendor with the formation of the association’s new Supplier Risk Credit Group. Comprised of credit and risk-management professionals from medium to large-sized businesses, the group offers resources and provides best practices to help companies manage their vendor relationships.
“We’ve had a number of responses from our members asking for a resource like this one, as many of our member companies have expanded the credit departments’ risk management role to include key suppliers,” said CMA president Mike Mitchell. “There has been a tremendous increase in the number of companies evaluating the risk and cost of business disruption when vendors are unable to deliver goods for reasons ranging from economic to political. Credit Managers deal in risk evaluation daily. They have the skill set necessary to transition from customer analysis to vendor. This new group will help companies assess their exposure to vendor failure, develop, implement and maintain a process to evaluate risk and gather business intelligence more efficiently and cost effectively,” he added.
“During my time in credit management, I’ve often heard the following: ‘We can survive if a customer relationship goes bad, but we cannot survive if one of our primary or secondary vendors has an interruption in delivering product, raw materials or services to us. For that reason, we invest an equal amount of resources investigating our vendors,'” said CMA lead group facilitator Larry Convoy, who will be CMA’s liaison for the new group. “I’m very excited to add this service for our members, as these relationships can make or break their businesses.”
Chaired by volunteer Alvin Moreno of Nestle, the Supplier Risk Credit Group held its initial information session in January, and the response was overwhelmingly well received by member companies who attended. “Moreno will do a great job with this group, especially since he just received his MBA with a focus on this topic. The existence of this group is a huge advantage for our members that can provide information that they cannot efficiently get any place else,” Mitchell added. The first official meeting is slated to take place at the CMA Annual Meeting, which will be held April 22, 2015 in Burbank, CA.