All kidding aside, California is in a peculiar paper predicament. The state is scrambling to find a new paper supplier after Sekuworks, an Ohio company that produces highly specialized paper for vital records, closed without warning. California is legally required to print all vital statistic certificates using a unique type of printing known as "intaglio." With intaglio the design is etched into the printing plate—typically made from copper, zinc, aluminum, or coated paper—and the incised lines in the plate hold the ink. Although many feel that intaglio printing is old-fashioned and unnecessary, it offers an exceptional way to prevent counterfeits.
The closure of Sekuworks has forced several California counties to begin limiting residents to one copy of a birth, marriage, or death certificate. The restrictions are becoming a major nuisance for people who are trying to handle funeral arrangements, get a driver’s license, or enroll in schools.
So where did California go wrong? What could it have done differently? The first challenge the state should have addressed was the risk of supplier insolvency—a big issue that causes 68% of supply chain disruptions. As a buyer, understanding your suppliers’ ability to fulfill your requirements is essential to supporting business operations. This is especially crucial for tier 1 suppliers like Sekuworks, but it’s equally important to have visibility into your suppliers’ suppliers (tier 2), their suppliers (tier 3), and so on. California could have monitored the stability of Sekuworks by running regular credit reports on the company—a simple tactic that any buyer can use to verify suppliers’ business identity, identify potential fraud, assess payment habits, and determine likelihood of business failure.
The second mistake California made was relying on Sekuworks as its only source of supply. The biggest risk associated with this is exactly what happened: the company failed and shut down, leaving California high and dry. But depending on one supplier also gives that supplier all of the power in the business relationship. As Sean Baumgartner, Director of Purchasing at Caesars Entertainment, explains, “Our main goal is increasing our supplier base in categories where we only have a small number of suppliers. There’s nothing more valuable than a large, qualified supplier base.”
Caesars Entertainment uses Ariba Discovery to quickly find and qualify additional suppliers. The tool allows them to easily evaluate, compare, and respond to proposals by receiving responses in a single location, with the exact details needed. Sean adds, “Ariba Discovery is a quick and easy way to find and vet additional suppliers to meet our unique needs.” Strategies like this enable Caesars to avoid the predicament California now faces, giving the company a healthy depth of supply resources so it can stay up and running at all times.
Check out the Caesars Entertainment case study to learn more, and stay tuned for part 2 of the “Supplier Risk Management” series.