The effects of brand reputation on supply chain risk

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saab-move-your-mind The financial crisis has left the world in turmoil. Slowly but surely, the effects of one bankruptcy here and one insolvency there ripples through the system. Suddenly, what used to be solid businesses lose their long-term suppliers or customers. The latest to be hit is the Swedish automobile maker SAAB, who in the wake of the GM/Detroit crisis filed for restructuring in order to avoid full foreclosure. SAAB owes money to some 1400 debtors, and rumors have it that some suppliers have stopped deliveries because of delinquent payments, prompting others to do the same, causing production to stall…

Brand reputation at risk

The story first came to my attention on the IBXEurope blog in their post Supply chain rumors stall production at SAAB.

Swedish media claimed that the Swedish Customs had stopped SAAB from using certain parts (as SAAB had not paid customs for these) due to SAAB’s credit rating. Media also reported that Schenker logistics had stopped all current deliveries while renegotiating contracts with the ailing car maker. While some of these claims were played down by all parties as time passed; the damage to the brand has already been done.

One of the major fallouts from the current finical crisis is the loss of brand reputation, and it may not even be the company’s fault, but it is sucked in as parts of the supply chain go bust, with the media frenzy adding even more calamity to it.

A supply chain nightmare

It is a potential supply chain nightmare with pressure from all sides.

…media, suppliers, regulators and logistics providers all pour extra pressure on industries already in a state of meltdown…

In the literature, delinquent payments are not an unknown supply chain risk. However, they are usually confined to one supply chain or one supplier, and not raging on a large scale like this. The banking crisis may be over for the time being, but the aftermaths will be with us for a looong time.

Small communities, who rely on one cornerstone business supplying a major corporation are likely to be hardest hit. Update 2009/12/18: SAAB is no more…