Disruptions in the supply chain affect all parties downstream

Disruptions in the supply chain affect all parties downstream

| Jun 10, 2020 | Contracts |

Your business likely relies on manufacturers and distributors for a variety of needs. Whether you count on your supplier for equipment, ingredients or product inventory, you depend on it to honor your agreement.

When a supplier fails to meet their obligations in a timely manner, the business could face a variety of problems. Your customers might not receive timely fulfillment of their orders, leading to cancellations, revenue loss and reputation damage. Therefore, it is important to face supplier disputes head-on.

Communication could reveal a solution

Whether there are market factors or problems within the supplier company itself, the first step is to assess the situation. Understanding the reason for supply chain problems can help you determine the next step for your business.

You may ask the supplier when it expects fulfillment of its contractual obligations. Depending on the answer, the best option could be to cooperate with the supplier as it overcomes internal or external challenges. Your attorney can help you create a temporary agreement to set expectations during this period.

Consider terminating the contract

If there are other manufacturers or distributors who may be better positioned to support your business, you may have the power to end your current arrangement. However, it is critical to review the terms of your contract beforehand. The overall impact to your business upon terminating the contract is worthy of evaluation.

Contracts typically outline scenarios and penalties regarding early termination. If the supplier has breached the terms of your agreement, your contract may provide specific remedies. Your lawyer can examine the details of the contract to give you advice regarding short-term and long-term consequences.