supply chains
milkshakes, chicken & chips
supply issues in the post-pandemic world By Tim Carter, partner and Michael Stocks, managing associate at Stevens & Bolton
milkshakes. This is not a new phenomenon though as global automotive production has been suffering from a lack of semi-conductor chips for a considerable time. Supply chain disruption is being attributed
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to a number of factors: shor tage of delivery drivers due to fewer drivers entering the UK post-Brexit, increased border controls and customs regulations causing longer wait times, the rise of the COVID “pingdemic” requiring drivers and production line staff to isolate and (in the case of the automotive sector), demand for semi-conductors outstripping supply, coupled with an increase in raw material prices. For a manufacturer facing these challenges,
it is impor tant to remember what it has agreed to supply, and by when, by reviewing its customer contract. However, in times of
upply chain problems have been hitting the headlines in recent weeks with food chain Nando’s running out of chicken and McDonalds running out of
adversity, is there any “wriggle room” regarding this manufacturing commitment? Earlier this year, in the much-publicised supply dispute involving the European Commission and Astra Zeneca, the European Cour t addressed this issue in deciding what was meant by “best reasonable endeavours” to supply COVID vaccines to the EU; and ultimately accepting Astra Zeneca’s arguments that its delivery commitments were somewhat flexible. A manufacturer may want to see if any
“force majeure” clause in its agreement may be of assistance. Such clauses allow a par ty to suspend or extinguish their obligations due to events out of their control, perhaps due to fire, flood, a natural disaster, war, a strike or, if specifically drafted, epidemic or pandemic. A commercial approach to dealing with
supply chain issues is encouraged and a manufacturer is often better-off being upfront with its customer as to likely supply issues. This may be through a contract “re-set”, or if this is not an option and there remains a tension between the par ties, through the engagement
Tim Carter
Michael Stocks
of a third par ty (such as a mediator) to explore potential for a commercial solution. A formal dispute process should be a last
resor t as it can irreparably damage business relationships not to mention be a costly exercise – financially and reputationally - whatever the outcome. The European Commission/Astra Zeneca dispute is an example of how a supply dispute can quickly escalate. Yet the decision of the European Cour t to order a staged vaccine delivery programme, with the “sting” of penalties if deadlines were missed, is helpful in showing how cour ts can adopt a commercial approach. For suppliers able to meet their supply
commitments but faced with customers who are experiencing cashflow problems, a supplier
24 Autumn 2021 UKManufacturing
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