The recent recall of 5.45 million
Second, once a fix has been identified, it must be engineered tested, and put into full scale manufacturing. When you look at the very small part that has been engineered to fix the
When you are part of a supply chain like
If you are a 3rd or 4th tier supplier to
If you are one of these lower tier suppliers, how do you protect yourself from loosing valuable revenues and profits as well as keeping your doors open for business.
1. Concentration of sales. Keep your concentration of sales as low as possible. Try to find markets for things you can make outside of the auto industry. The auto industry has been hard hit by the recession but
2. Keep your days sales outstanding (DSO) as low as possible. The faster your collection of money owed you is collected, the lower your overall exposure is.
3. Keep plenty of safety cash for events just like this. The amount of safety cash you keep is going to go up and down but as a good rule of thumb, make sure you have at least 2-3 payrolls, enough money to repay a payment or two of long term debt, and enough for a month’s worth of short term obligations. That sounds like a lot of money and it is, but if you decide you are going to keep safety cash, you can plan for storing it away for just such an emergency.
4. Consider using temporary employees for lower level manufacturing. This is a practice used by most large manufacturing operations. If the job is assembly, and doesn’t take a lot of learning to become proficient at it, you can transform many of your manufacturing labor costs from fixed to variable costs and realize a meaningful savings.
Many companies that are part of supply chains start out filling an outsourced niche for a particular large vendor. That is a great way to build a business. At some point in the company’s growth, consider ways to lessen your risk by finding other avenues of revenue and industries to serve.
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