In this industry, we often talk about the "supply chain" in general terms. But we don't often talk about how our delivery performance affects the entire supply chain.

I can tell you from experience the importance of supply chain performance in how we serve our distributors. The reaction of our supply chain to two severe shocks this year has been crucial in the performance of our company.

Kennedy Manufacturing Co. sells solely through industrial distributors. We are both a supplier to industrial distributors and a customer. We know how critical it is for us to supply our distributors on time.

In February, 2004, Kennedy filed for Chapter 11 bankruptcy protection unrelated to our order book. As you can imagine, the filing put a strain on our supply chain in some unforeseen ways.

At first, we spent a lot of time communicating to our customers and our vendors. We wanted to assure them we had a sound business model and were still operating.

However, some of our suppliers dropped us before we could provide them with these assurances. Some of this reaction was to be expected, but what was not expected was the time it took those suppliers to get back in synch.

As it became clear that we were able to continue to operate, almost all of our suppliers agreed to continue to supply us. But we had to wait until their orders were filled, or there was another opening in their production schedule.

Of course, it was difficult to operate this way. Normally, supplies come in, they are soon used in our production, and we ship the finished products to our distributors. When all the parts arrive on time, we are consistent in our schedule and shipping. But when all but a few parts arrive on time, we struggle to meet our production schedule. If our suppliers don't deliver reliably, then we can't deliver on the dates promised.

Our distributors were then forced to substitute other products. As our performance improved, and we could more reliably fulfill our promises, our distributors were more confident about offering our products.

But just as our supply chain started to become more reliable, the rapid increase in steel prices and its poor availability threw our supply chain off again. This time the suppliers of our suppliers had a problem getting materials to meet their commitments to us. Again, their unreliable shipments caused us to miss our promise dates. This forced our distributors to try alternative suppliers.

Now that the steel market is getting less volatile, our suppliers are more reliable in meeting their promises. Thus, we are more reliable, and our distributors are more confident in meeting the needs of their customers.

There are many challenges to working through a Chapter 11 bankruptcy. As we work to make sure the reliability of our supply chain continues to improve, we know our reliability to our distributors will also improve.

After all, we are both a customer of, and a supplier to, industrial distribution.