Kodak outsources a significant portion of its overall worldwide manufacturing, logistics, customer
support and administrative operations to third parties. Due to its high reliance on third party suppliers,
the company may face difficulties including developing manufacturing methods appropriate for
Kodak’s products; maintaining an adequate control environment; responding to changes in customer
demand for the company’s products; quickly respond to changes in customer demand; and obtaining
supplies and materials necessary for the manufacturing process. Further, key suppliers of products,
components and services, may choose to unilaterally withhold products, components or services,
or demand changes in payment terms. As a result of such risks, Kodak may be unable to meet the
customer commitments and such situation will also result in higher costs. Other supplier problems
that the company may face include electronic component shortages, excess supply, risks related to
favorable terms, the duration of the company’s contracts with suppliers for components and materials
and risks related to dependency on single source suppliers on favorable terms or at all.
Further, the company obtains its raw materials from third party suppliers.Though the company does
not rely on a single supplier, the increasing prices of the raw materials may hinder the timely supply
to the company affecting its manufacturing process. It also leads to the increase in the costs for
procurement of raw materials. If any of these risks were to be realized, the company could experience
interruptions in supply or increases in costs that may result in Kodak’s inability to meet customer
demand for the company’s products, damaging the company’s relationships with its customers, and
reducing its market share. Therefore, high dependence on third party suppliers may negatively
impact the company’s results of operations and financial condition.