Navigating supplier

relationships in the COVID-19

era
Coronavirus-related ruptures in the supply
chain are leading to canceled, invalidated
or ignored contracts, emphasizing the
importance of buyer-supplier relations.
Rich Weissman

A battle is brewing in procurement.

Contract language is facing off against the strength of

supplier relationships.

Who's winning the day? Relationships, said Erin McFarlane,

head of strategy and execution for Fairmarkit.

Historically, long-term agreements have allowed the seller

to gain a level of commitment for ongoing business and the
buyer to maintain a reliable source of supply. Both sides feel
protected.

But circumstances have changed. The COVID-19 pandemic

is wreaking havoc on the workplace. Ruptures in the supply
chain are leading to canceled, invalidated or ignored
contracts, even those adorned with a bevy of terms and
conditions ensuring a steady stream of deliveries. And it
doesn’t look to get better anytime soon.

That's why in this day and age, the relationship supersedes

the written contract. But there's a caveat: The foundations
built in the past work to support ongoing operations now. In
this emergency, it’s too late to make friends.

For procurement professionals, this plays right to their

strengths. Often a series of phone calls or emails to
company leadership or the right operations contact gets the
supply lines running again. Call it the relationship dividend.

"At the end of the day, contracts are just pieces of paper
and hard to enforce and we must rely on the depth of our
strategic relationships with suppliers and customers to get
through this crisis," McFarlane told Supply Chain Dive,
noting that even the courts are closed during this
emergency.

"At the end of the day, contracts are

just pieces of paper."

Erin McFarlane
 Head of strategy and execution, Fairmarkit

Even so, McFarlane advises buyers to immediately look at

key supplier contracts and analyze the terms and conditions
thoroughly, paying careful attention to their force majeure
clauses so they're not caught off guard.

"Force majeure is no longer just an ambiguous and

meaningless term, often ignored or dropped from contracts
and agreements," she said, noting that sellers and buyers
need to catch up on this clause and get some legal advice
as well.

Some clauses are more restrictive than others, with some

suppliers able to invoke the clause if a state of emergency is
declared while others are limited to war time issues or
natural disasters. She sees suppliers now invoking the term
as a reason for late or missed deliveries to the surprise of
buyers who thought the sanctity of the contract would win
out.

The foundations built in the past work

to support ongoing operations now.
In this emergency, it's too late to
make friends.
Yet not every contract situation is dire. Tom Connelly, the
international trade buyer for electrical power and advanced
materials supplier Mersen, sees little changes in his
contracts these days short of some additional expending.

He’s working to change transportation methods from ocean

to air to better control his inventory and to meet anticipated
customer demand. Connelly told Supply Chain Dive
business is strong, and he sees some customers stockpiling
low-cost commodity supplies in what he calls "the toilet
paper effect," buying additional inventory while it was still
available.

Moving forward, a new normal is developing in business,

McFarlane said, and waiting for things to return to the way
things were before the pandemic is not an effective or
realistic strategy.

But she sees a silver lining in all of this turmoil. "Never again
will anyone question the importance of procurement and
supply chain management."

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