LEGAL
Legal
Supply chains servicing the
engineering and manufacturing
sectors are among the most
complex in the world, often involving
several layers of relationships that
change and evolve during the term
of the contract. The contract that
actually governs the process is often
forgotten once it has been signed – until
something goes wrong. A collaborative
approach between the parties in the
chain where the contract takes centre
stage will mean that potential supply
glitches will be more visible and thus
more easily resolvable. A well-drafted
and negotiated contract is the bedrock
that supports the stability of the
relationships constituting the supply
chain.
The current Covid-19 pandemic
has demonstrated that supply chain
resilience is critical in a world where they
stretch over continents. Although this
article will not dwell on Covid-speci c
issues, the pandemic has provided
a timely reminder that planning for
supply chain disruption is an imperative
in a closely connected world where a
major incident could occur at any time,
whether it be war, plague or natural
disaster.
The rst step to understanding your
exposure to potential disruption is to map
the supply chain of your existing services
to identify potential vulnerabilities.
With this in mind, there are a number
of overarching practical and legal
considerations that you should consider
when making risk-based decisions.
Contracts: the unsung LEGAL ISSUES
These practical issues need to be o set
against the legal considerations. Generally,
you should review:
The exibility of your contracts with
other parties
If your operations are easily scalable (up
or down)
Whether your contracts enable you to
make radical changes
Your rights to cancel, terminate,
suspend, vary, take control of
subcontracts, break exclusivity provisions
and demand information as required.
Companies will almost certainly need
to review their obligations in the event of
PRACTICAL ISSUES
First, decide which contracts might cause
you problems. If one of your suppliers
breached their agreements with you, how
would that impact your other obligations?
For instance, you need to know where
your suppliers source their goods as,
in the event of a major disruption,
geography may be critical to the delivery
of supplies. An e cient supply chain
relies on good communication between
the parties involved. It is imperative that
customers understand their suppliers’
dynamics in order to produce detailed
contingency planning. Indeed, the move
to multi-sourcing within a supply chain
helps to build in additional resilience if one
part of the chain fails.
Second, regulatory compliance
is central to supply chains, as most
engineering and precision manufacturing
industries, such as the aerospace
sector, require traceability of individual
components. Muddying traceability by
seeking alternative suppliers without
engaging in the proper process could
be more damaging than waiting out the
existing delays.
Lastly, it would be wise to review the
security of your systems to ensure that
they are su ciently resilient in light of
a signi cant disruption. A global crisis
creates perfect conditions for criminal
operations to thrive. That threat was
underlined by GCHQ issuing a public
statement through the National Cyber
Security Centre about the increased
ferocity of cyber-attacks in the wake of
Covid-19 (www.is.gd/buvuxi).
94 www.operationsengineer.org.uk Autumn 2020
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REPORT
Pete Maguire, head of outsourcing, technology and commercial
at solicitors Wright Hassall LLP, makes the case for actively
managing contracts, and highlights their role in building supply
chain resilience
/buvuxi)
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