When non-payment to a supplier of a critical piece of production equipment or vital raw material causes a delay or shutdown of your production line, you may not have developed a strong enough due diligence process for verifying financial stability. Having the financial strength to manage procurement surprises can avoid cost overruns and delivery delays.
Not only should you do your financial due-diligence through the normal credit checks, but you should also talk to recognized suppliers about the CMO’s procurement policies. Do they pay their suppliers on time, thereby receiving the best pricing and on-time delivery? Alternatively, are suppliers delayed until invoices are paid? If it is the latter, and you still choose to use this CMO, you may choose to write the contract differently, putting in language that requires the CMO to pay suppliers under terms more acceptable to you.
