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Old 12-10-2009, 04:23 PM
machine it
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Default Risk assessment, new for suppliers

Besides running a D&B report and getting three or more references
for new sources does anyone have a good procedure or check list
that you use when considering using a new supplier?
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Old 03-04-2010, 03:53 AM
jmborch
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I just recently learned of a tool called Z-Score analysis. It is a weighted formula that is a leading indicator for determining the likelihood of a company declaring bankrupcy. You can Google the formula. It is suppose to be 90% accurate for for predicting bankruptcy to occur within 1 year and 75% accurate for predicting bankruptcy within 2 years. Still I believe one should look at the industry average and consider the economic times when trying to determine how at risk you are. I ran the calculation on a supplier that did declare bankruptcy a few years ago and looked at their financial statements 2 years prior to the event. The result was well within range of declaring bankruptcy. However, even though this company did declare bankrupcy, we did not have a supply issue with them.

Regards,
Jan
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