Managing financially distressed suppliers in supplier development programmes : a case study in the South African retail industry

Abstract

An increased dependence of firms on their supply base contributes to the mitigation of supply chain disruptions and the significance of investment decisions towards current suppliers. Through the lens of information processing theory (IPT), the study aimed to determine how a large South African retailer identifies and manages financially distressed suppliers who participate in supplier development programmes. A single case study approach was followed. Ten semi-structured interviews were conducted with twelve senior managers to obtain a deep understanding of the processes used by the South African general retailer. The findings indicate that the retailer screens its supply base by leveraging its close relationships with suppliers to collect information on various early warning signals of financial distress. Corrective action, such as training suppliers, offering preferential payment terms and providing financial assistance to suppliers, is used to ensure supply continuity and the sustainability of suppliers. The findings show that supplier development programmes mitigate supply disruptions. The study contributes to supplier development literature in a South African context, by showing that a supplier’s BBBEE-level does not guarantee supplier development support. The study provides managerial insight into the importance of maintaining a close relationship with suppliers and regularly communicating and visiting suppliers who participate in the supplier development programme.