“No Impact” Bankruptcy?

April 9, 2008 at 8:00 pm 1 comment

U.S. bankruptcy laws are an international anamoly.   Here you can declare bankruptcy, cease operations, and liquidate (Chapter 7) or you can declare bankruptcy and continue to operate (Chapter 11 or Chapter 13).  The U.S. may be the only country in the world that operates under the concept that an enterprise that can’t pay its bills should be allowed to continue to operate.  

From a greater good aspect, reorganizing bankrupt companies is an appealing concept to many.   A struggling company is given the chance to catch its breath, salvage the livelihoods of employees, and find a way to continue to contribute to the economy.  

Sure as a shareholder, you may get nothing.   And if you loaned the company money in the form of goods or services not yet paid for, you may be out of luck, too.  

But as a supply chain manager, bankruptcy of any type almost certainly means a disruption.   You know that.   That’s why you check credit worthiness before signing contracts.   Why you continue to watch for signs of shakiness, either directly or through monitoring agents.  

I know a guy who cites airlines as a reason that supply chain manager’s don’t need to concern themselves with bankruptcies.   At one time, something like 50% of the US airline seats were served by airlines in bankruptcy.  

Sure, travellers adjusted and eventually bought tickets on bankrupt airlines.  But those first weeks were ugly.   Cancelled flights.  Stranded travellers.   

And we saw it all again in the last few weeks of airline bankruptcies — ATA, SkyBus, Aloha.   Cancelled flights.  Stranded travellers.   And there’s no reason to worry about a supplier going bankrupt?   I sure hope there weren’t any Igloo chests with transplant organs waiting for a flight on one of those carriers.   

Entry filed under: risk management.

2008 Georgia Technology Summit 42,000 Reasons for Vendor Credentialing

1 Comment Add your own

  • 1. Garry Kyle  |  June 3, 2008 at 3:53 pm

    Andy,

    When I read that article that the Reptrax’s “Aspen” guy posted in HC Purchasign News (ghost written by Peter Sheehan most likely), about “bankruptcy,” I was taken back by his obvious biases and that it was actually posted in the magazine. he clearly does not get it. The point here is that I am glad to see this response!

    Garry Kyle
    VCS

    Reply

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