Top tips for maintaining your supply chain

10th May 2022

Your supply chain is fundamental to your business. Even so, it’s something you may feel you have little or no control over, and it can often seem as if too much is left to chance.

These suggestions will help you to keep everything as on-track as possible, both up and down the chain.

Review your contractual terms

Businesses often trade without terms or on standard terms that haven’t been reviewed for years. These may not reflect the requirements you have of your suppliers. Leave nothing to chance. Check your basic rights, such as your ability to take back goods which haven’t been paid for, termination rights and limitation of liability. This applies to both your supply and customer contracts.

If your business is subject to strict contractual provisions, which is often the case in technology or defence contracts, you may need to ensure these flow down to your own suppliers.

Avoid ‘scope creep’

In the interests of keeping everyone happy, it can be tempting to agree to do more ‘just as a one-off’. If you have offered something as a one-off, you need to make this clear.

Otherwise, you might pave the way for your customer to argue they are entitled to more at a future point. On the other hand, if your supplier has given you something for nothing, watch for future attempts to do the same and then charge you for it.

Manage change

The nature or cost of goods and services provided can change considerably in a short space of time. In an ideal world, any change would be documented and signed off as your contract states.

If changes become more frequent, and is considered common practice by your customers, it is more likely it will be considered a change of contractual terms, which could leave you in breach of contract or out of pocket.

Be able to address what you can’t control

If there’s one thing we are all acutely aware of after the last two years, it’s that supply chains are at the mercy of everything. Where possible, try and negotiate extended times for delivery or payment (ahead of time where possible) if pressure points arise.

If you don’t yet have a shortlist of potential alternative suppliers, make one now. During the pandemic, many made the mistake of thinking they had a way out of their obligations where Covid prevented delivery as against contractual obligations. In fact, the law on this is complex – and doesn’t always result in  what might seem like the fairest or most logical outcome.

Don’t be daunted by red tape

This year has seen a shake-up in export controls. If you are exporting to the EU you will need to understand new import and export declarations and, where applicable, be able to produce documentation that supports proof of origin and opens up the lowest possible tariff.

Exporting to countries outside the EU can be more complex still. In either scenario you are likely to benefit from help offered by trade associations and legal advisors.

Don’t miss opportunities to supply to public bodies

Don’t be daunted the process of bidding for potentially lucrative contracts with government or other public bodies. Not all such contracts are bound by strict regulations, particularly lower value opportunities. Where regulations do apply, they are complex and procedures are strict, but with some groundwork and early advice you can demystify the process and open up possibilities.

Do your due diligence

Time spent getting familiar with your suppliers and your customers is time spent well.  Finances are obviously critical, but don’t overlook wider issues such as environmental and ethical credentials, or reputational issues.

Stay on top of the detail

Supply chain fraud is an unpalatable but very real risk. If you deal regularly with specific suppliers or receive bulk orders you might find you aren’t getting what you’re paying for – or aren’t supplying everything you think you are supplying.

Invoices can be ‘tweaked’ and goods and materials delivered can go astray. Ensure your business and the businesses you deal with have robust anti-bribery policies in place. If you have any suspicions, seek immediate legal advice.

Revisit your insurance policies

From a practical standpoint you will need to  check that your insurance policies adequately cover you for your normal business risks. These include storage or transportation of goods and product liability amongst other risks.

From a contractual standpoint, ensure you aren’t signing up to any limitation of liability clauses that exceed your potential policy cover. Anything over the limit will come from your own pocket. Watch for exclusions/excesses and take advice about policy coverage if necessary.

Although not specific to the supply chain, consider the need for policies covering cyber risks, legal expenses and directors’ and officers’ liability.

Address conflict calmly but effectively

Having clauses that set out what should happen if there is a dispute are vital. Other practical suggestions include making use of “without prejudice” discussions to try and find a compromise solution or considering informal procedures such as mediation.

If a dispute can’t be resolved quickly and amicably, you may need advice to find the most effective route to recover your debt or defend a claim. If you are on the receiving end of a formal legal claim the worst thing you can do is delay. Once any legal procedures are started, very strict timelines apply. Missing these might result in a judgment or winding up order being made which will impact your ability to trade.

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