Tuesday, May 3, 2016

Preparing for Your Factory to Go Out of Business

A reprint of an article from June 25, 2013

In today’s volatile economy, you need to be concerned about more than your own company’s health. You also have to pay attention to the state of your modular home factory’s affairs. If you bought homes from ProBuilt, Taylored Homes or any of the other factories prior to their run into financial problems, you know how hard it is on both you and your customer.

When a struggling factory goes out of business, you might find yourself scrambling to fulfill your own orders. And, of course, even a solvent supplier can experience a major disruption due to flooding, a fire or another calamity.

What! You're closing your factory. What am I going to do now?

The consequences for your business, however, can be dire—anything from lost sales to a more substantial threat to your bottom line. Losing a factory potentially is a very, very serious problem, and it can make or break a company.

Have a back-up plan

Sure, it’s tempting to streamline operations by only using one factory. But you’re better off spreading the wealth and having at least two factories in your arsenal. That way, you hedge your bets in case your primary factory can’t come through.  This doesn't mean you have to buy from your back-up factory. It does mean that you've done your due diligence and found one the meshes well with your operating style.

It's best to evaluate how important a specific factory is to your company. If you determine that losing it would result in lost profits, hurt cash flow and future business potential, then it’s vital you look for a back-up factory.

If your factory suddenly closes and you haven’t already found a substitute, then your only choice is to find factory—quickly. Finding a factory that fits your needs may take longer than you think.

Another major problem you could face if your factory goes bankrupt is if your customer has paid either an engineering deposit or a production deposit. They may never see it again and you will get sued.

Understand your factory's financials

If a factory’s problems are financial in nature, there usually will be warning signs well before a crisis occurs. For that reason, you should monitor the health of your factory so you have plenty of warning and time to find a replacement.

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