SUPPLY CHAIN ISSUES: PRACTICAL, CREATIVE AND TRANSACTION-ORIENTED SOLUTIONS
The much-publicised disruptions to global supply chains, which commenced with the onset of the coronavirus (COVID-19) pandemic, have proven hard to shake. On the purchaser’s side, it is critical to the success of the business that the delivery of necessary supplies, and assurance that orders for raw materials and finished inputs to the business, will be fulfilled.
Supply chain woes have been exacerbated by an expanding set of factors contributing to supply side dislocation, including rising inflation throughout the global economy, energy shortages (dramatically affecting shipping costs), and the war in Ukraine. Global sanctions are further jeopardising access to products and raw materials, depriving both suppliers and purchasers of operational capabilities. In the face of increased costs of labour and other inputs, suppliers are experiencing reduced profit margins and diminished cash flows and liquidity, which further constrains their ability to timely fill orders.
Against this backdrop of systemic dislocation, and with ever increasing financial and liquidity pressures on businesses in the current economic environment, purchasers and suppliers alike should be alert to various measures that may be available to ameliorate supply chain disruption. While litigation is always an option, it may be unattractive when the immediate objective is to secure adequate supply of raw materials and product, as opposed to seeking damages for failure to deliver.
Parties to supply contract disputes may not need to resort to litigation, as transactional solutions may be available and, in some cases, may facilitate the restoration of the supply chain and achieve both parties’ objectives.
Jan-Mar 2023 issue
Freshfields Bruckhaus Deringer US LLP