Lessons from the Harvest Sherwood Bankruptcy
How to Spot a Company on the Brink: Lessons from the Harvest Sherwood Bankruptcy
The recent Harvest Sherwood bankruptcy shocked the food distribution industry, but for those paying close attention, the warning signs had been flashing for years. A company doesn’t collapse overnight—it unravels slowly, often masked by a rotating series of excuses, supply chain disruptions, and leadership missteps. If you work with suppliers, distributors, or any company relying on logistics, recognizing these red flags could help you avoid getting caught in the next major business failure.
The Biggest Red Flag: Constantly Changing Excuses for Supply Chain Failures
The most reliable indicator of deep mismanagement is repeated supply chain disruptions, each blamed on a different cause. One week, it's weather delays. The next, it’s a truck shortage. Then, it's a supplier dispute or labor issues. While all these problems are legitimate in isolation, a well-managed company builds resilience into its operations. When a business repeatedly fails to deliver on time and every excuse shifts responsibility elsewhere, it’s a clear sign that leadership is scrambling rather than solving problems.
Harvest Sherwood was notorious for this pattern. Customers and suppliers frequently complained about late shipments, damaged goods, and inconsistent inventory levels. The company cycled through reasons: port congestion, trucking problems, supplier delays, and even blaming customers for changing demand patterns. While each explanation might have had merit, the pattern suggested deeper dysfunction—poor forecasting, inadequate contingency planning, and financial instability.
Financial Instability Masquerading as Growth
From the outside, Harvest Sherwood looked like a thriving company, boasting over $4 billion in revenue. But revenue alone doesn’t equal financial health. Insiders have since revealed that the company was propped up by thin margins, risky inventory bets, and a growing inability to pay suppliers on time.
Signs of financial stress in a supplier or distributor include:
Delayed payments to vendors: If suppliers suddenly start complaining about late payments or demanding upfront cash, something is wrong.
Deep discounting of inventory: When companies rapidly slash prices to move product, it often means they need cash fast.
Unusual shifts in leadership: Frequent executive turnover suggests internal conflict and failed attempts to fix systemic issues.
Reliance on a single major customer: Losing a key client shouldn’t collapse a company overnight, but Harvest Sherwood’s downfall was accelerated by Sprouts terminating a major contract—exposing just how dependent they had become.
The Operational Breakdown
A strong business is built on consistent execution and operational discipline. Harvest Sherwood lacked both. A post-mortem of their collapse points to multiple operational failures:
Inability to Adapt to Changing Demand – Their demand planning was outdated and often miscalculated inventory needs. There were numerous reports of short-dated inventory being unloaded at large discounts and with no warning. This is a huge red flag as a customer that your supplier is very poor at demand forecasting. Us at Mangrove have written previously about the value of accurate demand forecasting.
Technology Failures – They spent millions on ERP and demand-planning software but failed to implement them properly, leading to continued reliance on spreadsheets and disconnected systems. When you have a supplier or customer who complains for years about new system upgrades being a pain point and behind schedule, think of how Harvest Sherwood fumbled repeatedly.
Decentralized Decision-Making – Different branches operated almost independently, leading to inefficiencies in pricing, procurement, and logistics. Buyers in different regions were paying different prices for the same products, missing out on bulk-purchasing efficiencies. A common way to see this as a customer is the same item coming with multiple internal SKUs from your supplier or often from multiple locations or multiple split pallets to fulfill your order.
High Consultant Turnover – They hired consultants repeatedly, yet their recommendations were rarely fully implemented, leading to cycles of wasted resources.
These patterns are not unique to Harvest Sherwood. Many companies, particularly in distribution-heavy industries, face similar internal battles between centralized control and local autonomy. The key difference is that well-managed firms enforce operational standards, while struggling companies let individual divisions operate as silos.
Supply Chain Management Done Right
For businesses concerned about their supply chain partners, due diligence is critical. Here’s how to spot a well-run operation versus one in decline:
Resilient supply chains have redundancy. Strong companies have alternative suppliers and logistics partners ready to go. If a distributor always has just one plan and panics when it falls through, that’s a bad sign.
Clear, proactive communication matters. A reliable supplier informs you about potential disruptions in advance, not after the fact. Companies that constantly react instead of planning ahead are trouble.
Financial transparency is a must. If your distributor is private, you won’t see their financials—but you can monitor their payment patterns, credit terms, and supplier relationships. Vendors suddenly tightening credit terms indicate financial strain.
Investment in technology actually works when implemented properly. The best companies aren’t just buying the latest software—they’re integrating it into decision-making. If you hear about a company spending millions on a new system but employees say they’re still using outdated methods, expect inefficiencies.
Lessons for Managing Supply Chain Disruptions
Many businesses working with Harvest Sherwood found themselves scrambling for alternatives once the company announced it was shutting down. If you rely on any major distributor, protect yourself by planning for disruption before it happens.
Diversify Your Suppliers – Never let a single partner control too much of your supply chain. Even reliable partners can falter.
Monitor Performance Over Time – If you notice an increasing pattern of delayed shipments, damaged goods, or shifting excuses, take it seriously.
Conduct Financial Health Checks – Stay in touch with suppliers’ financial conditions. Pay attention to industry chatter and red flags like sudden staff layoffs or leadership shakeups.
Have a Backup Plan – Always know your alternatives. If your main distributor goes under, who can take over quickly?
Hold Partners Accountable – Insist on detailed reporting, demand transparency, and push back on inconsistent excuses.
Conclusion
The Harvest Sherwood bankruptcy isn’t just a one-off failure—it’s a case study in how mismanagement can silently erode a business long before it collapses. If you’re working with suppliers, distributors, or logistics firms, pay attention to the warning signs: continual supply chain disruptions, rotating excuses, financial instability, and a failure to modernize operations.
By learning from Harvest Sherwood’s mistakes, businesses can protect themselves from getting caught in a similar collapse. The next time you hear a distributor blaming “unforeseen challenges” for late shipments—ask yourself: is this just bad luck, or is this a pattern? If it’s the latter, it might be time to find a new partner before it’s too late.