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Supplier Financial Health Improving, But Risk Remains

July 18, 2011

North American manufacturing suppliers are generally healthier than they were in 2009.

But, we’re not out of the woods, yet.

BBK, a business advisory and performance improvement firm, says that among the private companies it analyzes, 65 percent now rate as financially stable, compared to only 46 percent that earned that rating back in 2009.

However, nearly one-quarter (24 percent) of those in the latest BBK ratings are still showing signs of financial distress. As a result, many manufacturers remain concerned that their suppliers’ financial health can deteriorate quickly and potentially disrupt their operations.

“BBK Ratings requests are up this year, indicating there’s still a lot of uncertainty about the economy and that more companies want to proactively evaluate their suppliers to eliminate surprises,” said Michael Wagner, BBK director of proactive services.

According to a press release, BBK completes its ratings by gathering and evaluating suppliers’ financial data at the request of the suppliers’ original equipment manufacturers (OEMs), Tier One and Tier Two customers. BBK Ratings provide them with current, objective, comprehensive, confidential evaluations of their suppliers’ financial status and the factors influencing it. Rated companies represent several industrial sectors: manufacturing, services, agricultural and retail.

There’s no doubt that forward-looking supplier risk analytics are becoming increasingly critical in today’s complex, global business environment. For several months now, we’ve seen some economic indicators indicate we’re in an economic rebound, while others suggest a recovery that has plateaued (or worse, is paused for a second dip).

Whichever way you decide to slice it, only one thing is clear: There’s still quite a remarkable level of instability out there — and that means companies need to continue to develop and fine-tune strategies to mitigate supplier financial risk.

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