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Supplier Financial Stability: Protecting Your Lab’s Operations

Supplier Financial Stability: Protecting Your Lab’s Operations

Develop relationships between labs and suppliers

by Richard Parke
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As a lab manager, a critical task for you to protect your operations is creating relationships with the suppliers of key services—and these suppliers must be thoroughly vetted for reliability and financial stability. In fact, validating and maintaining oversight of these two essential qualities may be one of the most critical undertakings to predict both business growth and safety from a regulatory perspective.

The symbiotic relationships between a lab and its suppliers carry risk for both parties. And, of course, your suppliers value knowing they are a trusted partner in your supply chain, just like a lab manager needs to know that suppliers are trustworthy. Going through a specified process to vet suppliers can create stronger, more reliable relationships between your suppliers and your lab. 

For example, with most labs today dedicating about 30 percent of net space to technology, having appropriately vetted suppliers for reliability and financial stability could mean the difference between having the ability to quickly upgrade new technologies into the lab and being left behind other labs. 

Reliable, financially secure suppliers are a requirement for any lab, especially with the overall growth in the healthcare and lab markets. With the clinical lab market expected to grow to $330 billion by 2026, a new installation or lab addition project can quickly fail if even a single critical supplier is suddenly bankrupt or unable to respond because of cash flow issues. Requirements for lab supplies such as reagents, chemicals, tools, and hardware must be met in a timely fashion to keep the business going. Multiplying a single supplier failure by the number of projects and supplies required by your lab makes it easy to understand the importance of annual financial stability assessments.

Because many outside forces can impact your suppliers—such as weather, shipping time requirements, and labor issues—verifying financial stability is a weapon against risk. Supply chain operations are most affected by skill set and expertise (31 percent) and more than 60 percent of businesses see decreases in financial performance that result from supply chain disruptions, according to a recent MIT/PwC study.

If you carefully vet your lab suppliers—including gathering/monitoring financial information on mission-critical suppliers and maintaining a vigilant eye on your supplier’s financial stability—you can diminish the inherent risk in business/supplier relationships. If you think about what it takes to replace a key supplier, you’ll understand why financial stability is so vital to your lab's success.

Important steps to take

Understanding the appropriate steps to take in verifying financial stability helps to mitigate risk for the lab. Here is an outline of these steps as a guideline:

  • Assess risk and then do the appropriate research—different organizations have different levels of “risk comfort” depending on the importance of the supplier to the lab’s success. Carefully determine where the most significant risk lies for your business.
  • Gather data—once you know where your business is most vulnerable, begin gathering data to determine the supplier’s financial health. Here are some places to start in the information-gathering process:
  • Annual revenue: D&B scores
  • Third party financial ratings: Legal searches (judgments/liens)
  • Debarment searches: Business continuity plans
  • Financial references: Merger/acquisition activity
  • Research and consider third-party “tracking” solutions—not every business has the internal resources required to handle several supplier assessments. Organizations are available to help laboratories gather the data required, as well as track supplier information and compliance data.


One of the best ways to minimize and mitigate the inherent risk in supplier relationships is to determine the financial stability of each and every key supplier. You can protect the continuity and integrity of your lab's business by taking the time to find robust and reliable supplier partners.  

Richard Parke is senior vice president, supplier services, for Avetta. Richard has spent more than 20 years in senior leadership roles providing business process outsourcing to Fortune 500 companies in a variety of industries.