On January 10, 2012, during lunch with the CFO/COO of Kodak’s digital business, Kodak Gallery, he informed me that the company’s number one packaging supplier ended its long-time partnership with Kodak out of fear that they would not be paid if they continued to do business with the company.
This news instantaneously grabbed my attention, as I had spent years developing the relationship with this vendor while I was employed as the Purchasing Manager at Kodak Gallery. Over time, that supplier had become more deeply rooted in our digital business than any other supplier, providing the highest volume and widest array of packaging. They also earned the distinction of becoming the “go to” supplier because of their responsiveness and creative approach in assisting Kodak Gallery design and develop custom packaging for our products, including deadline-driven new product launches.
They spent years defending their top supplier position from competitors by offering high quality service, competitive pricing, eco-friendly package designs, and stronger but lighter packaging, which not only assured product protection during shipping, but also reduced our shipping costs.
Although the news that the supplier decided to end its business relationship was significant, I can’t say that it came as a complete surprise to me, nor should it have to Kodak.
Only a few months prior to them pulling out, we reached out to that supplier and others, requesting that they lower pricing on materials that we had already negotiated. As if that wasn’t desperate enough, we also asked if we could return and receive credit for materials that we purchased from them that were sitting in our inventory. These were not just slow moving or obsolete materials in our inventory; they included materials that were vital to maintaining normal operations.
We tried to justify the returns by stating to suppliers that it was a move to a leaner, or just-in-time (JIT), procurement model. But these packaging returns were tied to product lines that Kodak had stopped selling and new product launches that flopped. Some vendors were well aware of that. You didn’t have to be a genius to recognize that this was a big red flag that Kodak was in deep financial trouble, and suppliers didn’t waste any time abandoning the sinking ship.
In earlier years the relationship between our top packaging supplier and Kodak was extremely prosperous for both companies--and for any Account Manager who managed the Kodak account, there were other benefits as well.
Prospective employers were particularly interested in them, not only because of their experience managing a major account, but also, their potential to bring the Kodak business with them if they were hired.
This actually happened with the manager who was working the Kodak account. While being considered by his soon-to-be new employer, he assured them that he could bring the Kodak business with him if he was hired. Keep in mind that this was when Kodak was still a highly sought-after account.
That promise likely sealed the deal for him, as he was later hired, and after only a few mutually successful years managing the Kodak account at the new company, he was rewarded with a promotion to VP of Sales. The relationship with Kodak was a major part of that. In short, it had been a model partnership between company and supplier.
However, just like Kodak, this company couldn’t live in the past. And suppliers weren’t the only ones keeping their eyes on Kodak’s financial problems. On January 3, 2012 the New York Stock Exchange warned Kodak that it might be delisted unless it could boost its stock price over the next six months. The stock had been trading below $1 for more than a month, which is against stock market rules. Only a couple of weeks after the warning, on January 19, 2012, Kodak announced that it had filed for protection from its creditors under Chapter 11 of the U.S. bankruptcy code.
That packaging supplier saw these clear warning signs and acted in timely and swift fashion. In spite of all of the hard work that they poured into the account, eventually claiming Kodak as the crown jewel of their client portfolio, in the end, they made a prudent business decision based not on sentiment, but on current conditions. They made the decision to let go of the past and move on.
Kodak, on the other hand, struggled with prudent and timely decisions. And while its competitors moved quickly and aggressively and made decisions based on consumer demand and economic conditions, Kodak did not. Instead, they attempted and failed to resuscitate an entity that had been lost to antiquity.