Your supplier went out of business: the 48-hour salvage plan

The email lands on a Tuesday: "Effective immediately, our company has ceased operations." If your supplier just closed, three moves in the next 48 hours decide what this costs you: establish what you can still get, size a final buy against your bridge timeline, and start sourcing the replacement that carries you past it. Everything else — customer announcements, repricing, writing anything off — comes after those three. Here's the sequence, with the arithmetic for each move.

A scope note before the plan: this is the company-closing event, where every SKU goes dark at once and the salvage decisions are company-wide. If your supplier is alive and merely killed one product — your best-seller discontinued while the rest of their catalog ships — that's a different problem with different mechanics, and the discontinued-product substitution playbook owns it. Closed doors versus one dead SKU: pick the right article before you spend a single hour.

Hours 0–2: establish facts before you spend anything

Closure news arrives as rumor as often as notice. Before acting, pin down four things:

• What kind of closure. In US terms (basics as of November 2026): a Chapter 7 liquidation sells the assets and stops operations — orders in the pipeline are usually dead; a Chapter 11 reorganization keeps operating and may or may not honor open orders. Outside the US the labels differ; the practical question is identical: is anyone still fulfilling?
• Where your money stands. Don't wire new deposits to a company in distress. Cash paid to an insolvent business is hard to recover and worse after a filing — prepaid deposits in a liquidation rank behind secured creditors, which for a small buyer usually means at the end of a very short line.
• What inventory exists. Finished goods in their warehouse may be available now at list price, or later through a liquidator at a discount with quality and assortment risk. Ask directly, in writing, what's on the shelf and at what price. If you paid tooling on custom products, ask whether your molds are physically intact and who controls them right now — whether you can pull tooling out of a dying factory depends entirely on what your contract says about tooling and mold ownership.
• Who told you. A rep's farewell text is not an official notice. Confirm before you replan a quarter around it.

Day 1: size the last buy — the arithmetic

This is the decision with the most money attached, and it has a formula:

Last buy = (bridge days × daily velocity) + safety stock − units on hand − units in transit you trust

Two inputs deserve honesty. Bridge days is how long until a replacement supplier puts sellable goods on your floor — not how long until you find one. Velocity is per-SKU, in-stock-only sales rate, summed across the affected styles.

Worked example, all figures illustrative. Say Cascade Knitworks, your hiking-sock mill, closes. You buy three styles from them, combined velocity 7.5 pairs/day (estimated from your Shopify history). A domestic mill quotes 30 days to first delivery (estimated), and you want 20 days of buffer for slippage, so the bridge is 50 days. On hand: 140 pairs. In transit: zero — the last PO died with the company.

• Demand over the bridge: 7.5 × 50 = 375 pairs
• Safety stock: 7.5 × 12 = 90 pairs
• Last buy: 375 + 90 − 140 = 325 pairs
• Cost: 325 × $6.20 wholesale = $2,015 (estimated)

Now the guardrail, because "stock up while it lasts" is how a salvage becomes a hoard. Test the buy against total failure of the bridge: if the replacement falls through and you end the line entirely, how fast can you exit 325 pairs? At a clearance pace of 30 pairs/week (estimated), that's about 11 weeks — acceptable. If the same math produced 1,200 pairs, you'd be carrying a dead supplier's stock into next winter, and the right move is a smaller buy plus an earlier switch to the bridge supplier's version. The last buy is sized by the bridge, never by sentiment.

The inputs here are per-SKU velocity and days of cover. Whether you compute them in a spreadsheet or in the Monday Buying List we build in InventoryX — which returns per-SKU days of cover and an order-by date from your Shopify history — the arithmetic is identical. What matters is that velocity comes from in-stock days only: a sock style that was dark for three weeks looks artificially slow on calendar numbers, and that distortion gets expensive when you're sizing a one-time buy.

Day 1–2: start the bridge while you still have cover

The last buy and the bridge are one decision made in two places — the bridge length is the last-buy input — so sourcing starts the same day, on two tracks:

• Domestic short-run. Two- to four-week cycles at a higher unit cost (estimated 20–40% more, varies by category). This buys time, not margin. Place it first; it's the track most likely to deliver inside your bridge window.
• Overseas factory, done properly. Realistic first delivery runs 45–60 days including sampling (estimated, varies). Start samples immediately — this track is the long pole, and it's where your permanent replacement will likely come from.
• Retail-ready interim stock. Wholesale marketplaces can fill retail-ready gaps while production ramps. The terms differ from distributor buying in ways that change your cash math — buying wholesale on Faire covers how net-60 terms and brand minimums change that math. Useful for bridge; not a sourcing strategy.

One caution on speed: don't award your full volume to the first available factory before samples pass. Your best sellers are the SKUs a desperate switch can damage worst, and the structure for avoiding that — a qualified backup, not a panic hire — is what dual sourcing is for in calm times. A closure is the reason it exists; the next closure is the reason to build it now.

Day 2: plan the sell-down for what the bridge can't absorb

The last buy plus bridge stock will not match demand perfectly — size residuals, style gaps, the color nobody wanted. Plan the exit ladder the same week, while you're unemotional about it:

1. Straight markdown on the slowest residual, early enough to matter.
2. Bundle residuals with fast movers once markdowns stall.
3. Liquidate the remainder in lots when bundles stop moving.
4. Write off what's left — and where that loss lands on your books, versus a write-down, is its own decision with timing consequences (inventory write-off vs write-down covers the entries).

Put dates on the rungs. A sell-down without an end date becomes the dead stock you were trying to avoid — the salvage plan's last job is making sure the supplier's exit doesn't become your permanent inventory problem.

Telling customers — and when

The rule: announce when you have a date or a substitute, not before. "We're out — more soon!" without a date trains buyers to shop elsewhere and doesn't bring them back. The cost of dark shelves is real and immediate: an empty peg doesn't park demand until you restock — a shopper who needed the item this week bought it wherever it was in stock, so an empty shelf mostly exports your demand to a competitor rather than postponing it.

So the sequence is: bridge secured → announcement with a date → back-in-stock message the day goods land. If the bridge stretches past 45 days, capture demand in the meantime — a waitlist or preorder converts the gap into a buying signal instead of a defection.

The 48-hour checklist

• Hour 0–2: confirm closure type (liquidation vs reorganization); stop new deposits; ask in writing what finished stock exists and at what price; ask about in-transit orders and your tooling.
• Day 1: compute the last buy (bridge days × velocity + safety − on hand − trusted in-transit); place it if confirmed available; open both bridge tracks — domestic short-run and overseas samples.
• Day 2: calendar the bridge end date; draft the sell-down ladder with trigger dates; set the customer announcement for when you have a date.

Common questions

What do I do first when my supplier goes out of business? Confirm what's true: closure type, whether anyone is still fulfilling, and what finished stock exists. Then size and place a last buy — bridge days × daily velocity, plus safety stock, minus stock on hand. Everything else, including customer messaging, waits until that's done.

Should I place a big last order when a supplier closes? Size it to the bridge, not to nostalgia: enough to cover demand until a replacement delivers, plus a slippage buffer. A big "while it lasts" order becomes dead stock the moment you switch designs. Cap the spend at what you could clear in 8–10 weeks if the bridge fails.

Will I get my deposit back if the supplier declared bankruptcy? Usually no. In a liquidation, unsecured creditors — including small buyers holding prepaid deposits — are paid after secured lenders, which often means cents on the dollar or nothing. Money wired after insolvency fares worse. Shift spend toward goods you can receive immediately; treat the deposit as gone.

How do I find a replacement supplier fast? Run two tracks in parallel: a domestic short-run source — two- to four-week cycles, higher unit cost — to keep shelves alive, and proper samples from an overseas factory for the permanent fix. Wholesale marketplaces can fill retail-ready gaps meanwhile. Don't award full volume until samples pass.

How is a supplier closing different from a product being discontinued? A closure kills every SKU at once; the salvage decisions — last-buy sizing, bridge sourcing, sell-down — are company-wide. A discontinued product is one SKU going end-of-life while the supplier lives: you're substituting a product, not rebuilding a supply line, and the answer may be a different item entirely.

Next step

Before you ever need this article: score your top five suppliers for single-source exposure — which SKUs have no second source, no recent sample on file, and no lead-time check in the last two quarters. The answer is usually ten to twenty SKUs, and that list is your de-risking queue for this quarter. A closure email turns the queue into a crisis; you'd rather it stay a checklist.