David Dragich Supply Chain Article Published by CFO.com
There has likely never been a time when the term "supply chain" has been so ubiquitous in headlines and our collective consciousness—for good reason. Supply chain problems have led to shortages in goods and have contributed to surging inflation.
And the near-term forecasts aren’t optimistic. Tim Uy of Moody’s Analytics has stated that supply chain problems “will get worse before they get better.”
The effects can be particularly painful for manufacturers that rely on sole-source suppliers. In response, many manufacturers are trying to diversify their supply chains. But that’s a long-term solution to a problem that will persist over the near term.
Manufacturers who count on a sole-source supplier will be forced to ride out the storm. And the storm may get even more destructive to the extent that more suppliers begin to experience financial distress on top of operational challenges.
What is a manufacturer to do? One option, as David Dragich argues in a recent article he contributed to CFO.com, is to adopt an approach used by automotive suppliers and manufacturers for decades. In certain situations, some of the key elements of accommodation agreements—forbearance, financial support, limiting setoff rights—can be used to keep supply chains across industries flowing.
Click here to read: What to Do When a Key Supplier Is in Trouble