In the two years since COVID has disrupted businesses in virtually every way, “supply chain” has become the phrase of the day, and new and unexpected supply chain disruptions seem to be the order of the day. In this new world of the unpredictable becoming reality, businesses can use their contracts and business practices to protect themselves and provide some predictability in their future business planning.
Most recently, a group of truck drivers from Canada engaged in a protest over COVID restrictions and blocked transit through the Ambassador Bridge for an entire week. The bridge is the crossing for an estimated 10,000 trucks per day, which deliver products back and forth between the U.S. and Canada for various industries. The protest led to shutdowns at automotive OEM facilities in both the U.S. and Canada, and otherwise disrupted business for automotive and other suppliers throughout North America. The effects from such disruptions are likely to continue for weeks. Here are some steps you can take to prepare for the disruptions that may come knocking at your door.
First, review your contracts. More often than not, your contracts fall into the background as you conduct your day-to-day business. With disruptions potentially heading your way, review your contracts to determine what your obligations are and what you may be required to do to meet them. Understanding these obligations will help you determine the best strategy for dealing with disruptions and how to address your customers when they reach out to you.
Second, take another look at your force majeure provisions. For many years, and even decades, force majeure provisions were ignored and rarely used. But in the past two years, force majeure has become a go-to provision. The bridge closure will likely result in force majeure notices/claims issued to you, and you may need to consider declaring force majeure for your own obligations. You should review your provisions to see what is covered, how notice must be provided and what happens once force majeure is declared.
Third, check your contracts with your suppliers. Just as your business with your customers may be disrupted directly, your suppliers’ business with you may also be disrupted. Know your rights and your suppliers’ obligations. And use this opportunity to assure that your obligations to your customers are being passed on to your suppliers. For example, if your customer pauses orders with you, can you pause your orders with your suppliers? Know what you can and should do with your suppliers before you must do it.
With so many unanticipated events becoming the norm, it is more important than ever to use your contracts to provide predictability where possible, and risk allocation where predictability is difficult. Contact Warner’s supply chain and automotive attorneys to assist you in building that bridge over these choppy waters.