posted on Oct, 5 2009 @ 09:41 AM
A poster earlier hit the nail on the head: It's not the Albertson's, Krogers, Targets or Wal-Marts of the world that are having the short-term
credit issues. It's the suppliers.
I've been hearing about this for some time and I believe it's getting worse. The regular supplier of, say, Kroger fish. I'm making this up, but
it illustrates a point (and protects the person who told me the real story). Let's say that supplier has relationships with five different fishing
fleets. They take a percentage guaranteed each week of the total catch, package it by weight and type and sell it in bulk to Krogers.
That supplier's risk is banking on just how much Kroger will buy. If it buys them out, terrific! If slightly under, the supplier takes a small hit
but not enough to really feel much pain. If orders are really under, the supplier panics, and is forced to sell its fish at extreme discount to other
stores. This happens once or twice a year, it's a write-offable loss. If it happens a lot - then the real problems begin.
You see, since the supplier uses short-term credit, it's going to do anything it can to pay the bank off. So the pain then rolls down hill. The
supplier then takes its time to pay the fishermen, perhaps even delaying payment more than 90 days. If this happens enough, then the fishing fleet
can't buy the fuel it needs to trow for more fish because their credit is even shakier.
Suddenly, we have a supply problem. Even when Krogers is willing to buy, if the fishing fleet is unable to go out or out of business, there may be a
delay as the supplier renegotiates with new fishing fleets, or even worse, Kroger has to negotiate with a new supplier because the other broker went
out of business.
This all bleeds into delays - and empty shelves.