Gordons retail update – Managing your supply chain

Thursday 28th May 2009

Any business that relies on supplies from others needs effective supply chain management.  In a global economy retailers are dependant on suppliers of goods and services from around the world, and global price fluctuations, lapses in quality standards, and breach of delivery schedules can have a significant impact on a retail business.

In today’s economic climate the risk of a supplier experiencing financial difficulties, and therefore being unable to supply according to demand, is perhaps higher than ever before.  This presents a real problem for retailers whose main focus is getting products on their shelves.

The potential cost of a major failure in the supply chain is huge, and can include financial loss, damage to reputation and wasted management time. It is therefore imperative that retailers protect themselves as far as possible through the use of legal terms and conditions, and operational standards which they can impose on suppliers.

What a retailer should do:

  • audit its supply chain contracts to identify any weaknesses, and ensure that it has in place robust contractual arrangements with suppliers which set out clear obligations on price and payment, quality, delivery and liability, and clear remedies for any breach of these obligations
  • adopt a clear process to ensure that its terms and conditions prevail over any terms and conditions which a supplier purports to introduce
  • avoid exclusivity of supply, so that it can seek supplies from elsewhere if these obligations are not met
  • have contingencies in place for managed exits to a new supplier
  • resist so far as possible demands from suppliers for payment up front, to avoid the risk of losing the money if the supplier becomes insolvent prior to the delivery of the goods or services which have been paid for
  • ensure that its staff are well trained in managing crisis situations.

Observing these basic tips will reduce some of the risks associated with the supply chain. For assistance and more detailed advice on these issues please contact Peter Barton on 0113 227 0371 or peter.barton@gordonsllp.com .