How to secure your supply chain against the rise in business failure?

The recent growth in business failures in Europe is putting supply chains under significant strain. Between liquidations , collective proceedings, and businesses in difficulty, the domino effect is very real: Stock shortages, delays, financial losses… In this context, procurement departments must rethink their strategy to guarantee business continuity and secure partnerships. What levers can be activated to limit the impact of failures on the supply chain? Risk analysis, diversification, financial anticipation: An overview of best practices to preserve the resilience of your supplier network.

Understand the impact of rising business failures on the supply chain

Supply chains are currently experiencing major disruptions. Each business failure triggers a domino effect impacting trade, production, and logistics. It has become essential for companies to understand these dynamics to anticipate risks and secure their activities.

A sharp increase in business failures

The number of business failures is experiencing a worrying increase in Europe. According to recent studies, collective proceedings are multiplying, particularly in the industrial, construction, and wholesale trade sectors. This phenomenon is explained by an uncertain economic context, marked by rising raw material costs, geopolitical tensions, and inflation.

As Jean-François Cledel, HR Vice President of the ETI Club of New Aquitaine[1], explains: "Models lack resilience because for decades, we have pushed them to the extreme, to the point of making them fragile. We have hunted down all reserves in the company to optimise each resource to improve performance. As a consequence, our businesses and organisations have become brittle: They no longer have any buffer."

The domino effect of failures on trade and industry

Any business failure leads to cascading  disruptions. When a major supplier liquidation , their clients are confronted with delivery delays or even total supply interruption. In the automotive industry, for example, a subcontractor’s failure can block an entire production chain, impacting thousands of jobs.

Financial failures also weaken customer businesses. A payment delay or an unrecoverable receivable can, in turn, jeopardise another company’s financial health, triggering a spiral of difficulties.

Collective proceedings with direct consequences on the supply chain

Collective proceedings (safeguard, judicial restructuring, liquidation) often create uncertainties about supplier reliability. To avoid suffering these harmful effects, businesses must closely monitor their partners’ financial situation and implement proactive strategies to manage risks.

Some large business owners integrate specific clauses in their contracts to protect against failure risks. Others diversify their sources of procurement to limit dependence on a single supplier. These approaches help mitigate the impact of struggling businesses on the logistics chain and secure activities in an uncertain economic context.

Strategies to secure your supply chain against supplier risks

In a context of rising business failures, it becomes imperative to adopt effective securing strategies to protect business continuity.

Identifying and evaluating supplier risks

Anticipation is key to preventing a business failure from disrupting the entire supply chain. It is essential to continuously monitor the financial situation of strategic suppliers to anticipate difficulties before they become critical.

Key indicators to track:

• Cash flow and profitability: A supplier with tight cash flow is more exposed to liquidation risks.
• Commercial dependence: A partner whose activity relies on a single client or a struggling market is more vulnerable.
• Governance and internal management: A company with excessive debt or ongoing litigation can represent a major risk.

Digital tools play a crucial role in this monitoring. Thanks to real-time financial surveillance solutions, it is possible to obtain early alerts in case of account deterioration of a supplier. Some platforms even use artificial intelligence to cross-reference different data and anticipate potential failures.

Diversifying and securing procurement sources

Facing a business failure, having a diversified supplier network helps limit disruptions. Multi-supplier sourcing guarantees better resilience by reducing dependence on a single actor.

However, opting for local suppliers is not enough. As Natacha Tréhan, lecturer at Grenoble IAE[2], points out: "Proximity does not necessarily mean traceability. The two are not connected. You can have traceability with a supply chain across the entire planet. And on this point, blockchain is developing, with very interesting results."

Integrating new technologies helps strengthen transparency and ensure better monitoring of exchanges, regardless of suppliers’ locations.

Negotiating guarantees and resilient contracts

Supplier contracts must integrate specific clauses to protect against potential failure. It is possible to include:

• Penalties in case of delay or supply interruption;
• Substitution clauses allowing quick mobilisation of another supplier;
• Credit insurances to limit financial impact in case of collective proceedings.

A concrete case illustrates the effectiveness of these measures: An industrial company, faced with the liquidation of its main subcontractor, was able to maintain production thanks to a flexible contract allowing immediate activation of a backup supplier.

Anticipating developments for a more resilient supply chain

Facing an unstable economic situation, it is essential to strengthen supply chain resilience to limit the impact of struggling businesses on procurement flows.

Integrating a proactive approach in risk management

Rather than suffering the effects of a business failure, procurement departments must adopt a preventive strategy. A reactive crisis management exposes businesses to supply interruptions and significant financial losses. The objective is to identify vulnerabilities upstream and act before a supplier finds itself in collective proceedings.

To achieve this, establishing a supplier risk management committee is an effective approach. This committee monitors:

• Financial indicators of strategic partners (debt, profitability, solvency);
• Critical dependencies within the supply chain (single supplier, fragile sector);
• Weak signals indicating potential liquidation  (payment delays, restructurings, client losses).

An example illustrating the effectiveness of such anticipation is an industrial group that detected financial difficulties with one of its critical suppliers. Thanks to a proactive analysis, they could readjust their orders and secure an alternative supplier, thus avoiding a production stoppage.

Investing in monitoring and predictive analysis technologies

Artificial intelligence and data analytics now allow real-time detection of precursor signs of business failure. These solutions analyse thousands of data points (financial statements, economic news, supplier transactions) to anticipate potential failures.

Blockchain also plays a key role in guaranteeing better traceability and ensuring transparency of exchanges, even with international suppliers. Thanks to these tools, companies can better assess risks related to their partners and react quickly in case of alert signals.

Relying on trusted partners to stabilise your supply chain

The solidity of commercial partners is a determining factor in limiting the impact of business failures. Working with ethical and financially stable suppliers helps secure activities and avoid unpleasant surprises.

Manutan, for example, supports businesses by offering solutions adapted to procurement risks. By relying on specialists in flow securitisation, it is possible to strengthen supply chain resilience and guarantee operational continuity in the face of market uncertainties.

By combining anticipation, diversification, and advanced technologies, businesses can strengthen their supply chain resilience against business failure risks. Adopting a proactive approach and surrounding yourself with reliable partners are essential levers to ensure business continuity and maintain a competitive advantage in an uncertain economic context.