Saks Global’s Failure

Financial failure rarely arrives as a single event. More often, it unfolds through a series of small decisions made under pressure, noticed first by those closest to the operational edge. The recent difficulties at Saks Global are a good example, particularly in how suppliers reacted once confidence began to slip.

What started as a liquidity problem became something more dangerous. Suppliers stopped assuming they would be paid.

Retail has always depended on a delicate timing gap. Inventory is committed long before it is sold. Cash comes in later. The space in between is usually bridged by trade credit and bank facilities, but also by something less explicit. Suppliers continue to ship because they believe the buyer remains viable and in control. When that belief is shared widely enough, it functions much like working capital.

When it weakens, the maths changes quickly.

When delay turns into doubt

Late payment, on its own, is not unusual. In tough conditions, many suppliers will tolerate short slippage if they believe the buyer understands the situation and is managing it. The problem is not delay; it is ambiguity.

As payment issues at Saks became harder to interpret, suppliers began to reassess their exposure. Some tightened terms. Others paused shipments. A few looked for legal protection. None of these responses were irrational. Taken together, they proved fatal.

Retail is unforgiving of interruption. Missed seasonal stock is rarely recoverable. Gaps on rails reduce sales, weaker sales worsen cash flow, and strained cash flow makes reassurance harder. The decline accelerates not because the numbers collapse, but because behaviour changes.

A behavioural tipping point

At a certain point, financial stress stops being a balance-sheet issue and becomes a behavioural one. Suppliers act on expectations, not statements. Fear of non-payment leads to withheld supply. Withheld supply leads to lost sales. Lost sales make non-payment more likely.

The spiral feeds itself.

What is often missed is how little deterioration is required to trigger this shift. Bankruptcy is not the threshold. Belief is. Once enough suppliers decide caution is sensible, recovery becomes extremely difficult. Confidence cannot be refinanced.

Trust as an operational asset

Seen this way, supplier trust behaves like an off-balance-sheet asset. It buys time. It absorbs shocks. It allows organisations to trade through volatility that would otherwise overwhelm them.

Lose it, and implicit credit has to be replaced with cash, usually at the worst possible moment. Banks may still be negotiating. Investors may still be patient. Suppliers, closer to daily reality, move first.

Many organisations model liquidity without modelling supplier behaviour. They assume continuity where only consent exists. Suppliers are not passive creditors. They are decision-makers managing their own risk, governance, and reputation.

Silence is a signal

One of the clearest lessons from this episode is the cost of opacity. In periods of stress, silence is rarely interpreted neutrally. Suppliers do not expect perfection, but they do expect candour, prioritisation, and visible control. In the absence of those signals, rumour fills the gap.

This is where governance shows up in practice. Not in strategy decks, but in what suppliers hear, how early they hear it, and whether it sounds credible.

Not just a retail problem

Retail makes the dynamic visible, but it is not unique. Any organisation reliant on extended supply chains and trade credit is exposed in the same way. Under pressure, finance focuses on cash. Procurement focuses on contracts. Suppliers watch behaviour.

They notice who communicates early, who explains trade-offs, and who goes quiet.

The narrowing path back

Cash gaps can sometimes be bridged. Demand can recover. Markets can turn. Supplier trust, once spent, is much harder to rebuild. Defensive actions taken by suppliers may be sensible individually, but together they can lock in the very outcome everyone is trying to avoid.

At that point, trust stops being a relational concept. It becomes working capital. And it has already been used.

What this means for CPOs

If you are a Chief Procurement Officer, three things matter here.

First, trust does not automatically hold in a crisis. If you do not know how suppliers view your organisation before pressure hits, you are flying blind. In stressed conditions, trust has to be reinforced deliberately through communication, prioritisation, and credible signals of control.

Second, liquidity models that ignore supplier behaviour are incomplete. Supplier reaction is a leading indicator, not a lagging one. Treating it as secondary creates false confidence.

Third, customer impact shows up upstream. When suppliers withdraw discretionary effort, customers feel it quickly. Empty shelves, service failures, and stalled innovation are not operational glitches. They are relationship failures.

This is not about being generous or conciliatory. It is about protecting continuity, resilience, and customer outcomes when the system is under strain.

Being a Customer of Choice is not something proved in stable conditions. It is tested when payments slow, priorities tighten, and difficult trade-offs are made. Suppliers remember who explains, who is honest, and who disappears.

Those behaviours decide whether suppliers simply fulfil contracts, or step in to protect the business when it matters.

State of Flux research consistently shows that organisations which embed SRM into governance, decision-making, and leadership behaviour are far better positioned to convert goodwill into discretionary effort. That effort sustains availability, service quality, and innovation.

Trust only functions as working capital if the groundwork was laid long before it was needed.