As businesses look to recover from a disrupted two years, it is becoming increasingly apparent that one thing could continue to provide a barrier to future success: supply lines. Whilst there may have been certain issues in the past which came as a surprise, now delays in receiving some goods and services are almost becoming a trend and not one which is welcomed by suppliers or customers. But failing to deliver on a supply contract can lead to legal disputes. Here, Meta Penchamia, deputy head of civil litigation at Taylor Rose MW Solicitors, provides her advice on how to deal with supply chain disputes as and when they arrive.
Communication is key
A surge in economic demand as the country returns to normal life after Covid could mean challenging times to come due to disruption to supply chains. There have been strains since the start of the pandemic, with a shortage of computer chips impacting on vehicle manufacturers and low stocks of some building materials being key indicators. The difficulties are likely to worsen in the near-term as delayed post-Brexit customs red tape finally came into force at the start of the year, and that is likely to be accentuated by surging demand due to the easing of Covid restrictions and a growing economy. The positive economic signs means great news for businesses but with supply chain disruption comes risk.
A key consideration for any business is to ensure that these risks are communicated internally and that contracts are analysed to identify weakneses that might result from supply chain disruption. Claims can involve significant loss of profits which can, unfortunately, bring your own business to its knees.
Five steps to success
The five key steps you need to take to protect against a potential disaster are:
Map out your supply chain and identify risk
Ensure risk is allocated
Keep it simple and automate where possible
Strengthen relationships with suppliers
Ensure proposed changes are implemented
Map out the risks
A supply chain map shows the connections between entities and analysing those means highlighting the points where likely bottlenecks might be expected and can be fixed in advance. You may also want to consider diversifying the supply pool so that your business is not overly reliant on sole suppliers at critical nodes. It’s easy in everyday business to forget potentially risky terms of contracts that were agreed a long time ago or a commitment which was included in the small print of your website, even.
Importing and exporting throws up different challenges
Importing and exporting can mean dealing with a myriad of different contracts and keeping contracts with overseas suppliers simple is another way to help head off impacts unforeseeable problems in the future – where would the blame lie? If, for example, a delivery is not on time and your client complains then you will have to refund your client and pay potentially significant losses if those have been incurred by your client. The client will of course sue you and that is irrespective of whether it is your fault that the contract with your supplier has not been fulfilled.
Under this scenario you will then be left to sue your supplier and possibly even the haulage company. Simplification could mean incorporating machine learning and AI in your supply chain which can have the twin benefit of reducing costs and identifying repetitive tasks that are prone to errors and therefore risk.
Protect yourself
It is vital you get legal advice if you are unsure. They could help and assist you to ensure your contract will protect you and who can also assist you to ensure your supply chain contract is safe for you. If you do encounter issues then they can also help to try to amicably resolve. and reassurance on how things can be resolved or your position made safer.
