BUSINESS INSIGHT: SUPPLY CHAIN PREVENTING A SUPPLY CHAIN GRIDLOCK


As supply chains become stretched due to the many challenges posed by the coronavirus pandemic, keeping them running smoothly is more important than ever. Here, Peter Worrall & Benjamin Millward, specialists in commercial debt recovery at Moore Barlow provide advice on supply chain management and how to prevent their impact on cash-flow.


Covid-19. Online sales of DIY and gardening tools


U rocketed during


the coronavirus outbreak, however interruptions caused by Covid-19 to the usual smooth running of the sector still posed many problems. Even the most prepared companies have struggled with the uncertainties of the Covid-19 pandemic, and the pandemic has created a multitude of complications for consumers and businesses across the UK. Supply chains


have become


inundated by creditors who are reluctant to provide credit and debtors that don’t have the cash flow to pay on account. However, despite the unpredictable nature of the outbreak, there are still measures that can be put in place to support the needs of all parties and ultimately prevent a supply chain gridlock.


24 DIY WEEK NOVEMBER 2020


nlike many industries, the home improvement sector


is one


Government guidance The Covid-19 pandemic prompted the Government to


of


the few that has boomed during


introduce


a number of measures to assist businesses so that they could continue to trade without the threat of recovery action being taken. One such measure was the Corporate Insolvency and Governance Act 2020 which limits the ability of indebted parties to obtain winding-up orders and has made termination clauses relating to insolvency unenforceable. This means that businesses can no longer threaten insolvent companies with termination to force payment of all arrears as the price for continued supply and/or to change the terms, perhaps by increasing prices for the goods or services.


As for the latest Government (non-


binding) guidance on responsible contractual behaviour, it includes being reasonable and proportionate over performance issues and the enforcement of contracts, and acting in a spirit of co-operation. How, therefore, can professionals in the DIY and home


improvement industry


“The Covid-19 pandemic prompted the Government to introduce a number of measures to assist businesses so that they could continue to trade.”


prevent supply chains from becoming gridlocked in these extreme times? Suppliers should certainly review their terms for termination clauses, especially their force majeure clause (which in effect frees both parties from liability or obligation in an extraordinary event).


Know Your Customer Arguably the most important attitude worth adopting if you’re involved in managing a supply chain is to be upfront and honest with your suppliers and customers. But perhaps of equal weight is the necessity to get to know your suppliers and customers


and their businesses as well as you possibly can. There are a number of ways this can be done, not least of which is ensuring that you undertake KYC (Know Your Customer) checks. Don’t be afraid, either, to delve into Companies House and take a good look at them and who they are. Some of your suppliers may also have a track on credit-checking sites. It might also be worth considering setting up a ‘traffic-light’ system – which tells you where performance is on track and where not – depending on the health of your customer. Credit-control systems such as the one we at Moore Barlow use – a cloud-based software system from RSM called Tracker – allow you to ‘monitor’ the financial performance of a company, meaning you get alerted if the credit score declines or if there’s an adverse record registered, such as a CCJ (County Court


Judgement). This allows


creditors and debtors to act swiftly and engage with their customers. As for measures to offset problems with payment, it’s worth exploring changes in payment and credit terms for new customers, such as introducing larger deposits or payment up-front. Maybe creditors and suppliers can offer extended payment terms in return for a payment on account. Additionally, you should check your insurance policies as you may well find you have suitable cover here. You could agree special repayment terms with struggling customers if cash-flow is a concern, and in the spirit of co-operation between parties, if things ‘go south’ in the goodwill department, consider the early use of ADR (Alternative Dispute Resolution – solving disagreements without legal proceedings). Equally, consider earlier legal intervention to prevent delays, as this may well help focus the parties’ minds in order to agree a suitable arrangement.


Special arrangements Measures that include revolving supplier agreements and invoice- factoring


agreements (funding


cash-flow by selling invoices at a discount to third-parties) certainly also have their place, but sometimes such arrangements could be seen to do more harm than good. Cases exist, for example, in which a personal guarantee is attached to such agreements, which means the directors become personally liable. Despite following the above advice and finding that the supply chain situation becomes more stable, if a supplier or creditor is struggling financially then they should always consider seeking advice from an Insolvency Practitioner.


www.diyweek.net


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36